Audit finds oversight lacking in $600 million Utah business-incentive program

Economic Indicators Associated Press

Utah economic development officials aren't doing enough to make sure companies who get tax credits are keeping their promises to create new, high-paying jobs, a state audit released Tuesday found.

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The Governor's Office of Economic Development has committed to tax credits worth $600 million over the last five years through its corporate incentives program. But auditors say oversight is lacking, and the agency has misled people by overstating the quality of jobs the tax credits have brought to the state.

"We are concerned the executive director has more unchecked power to commit new tax revenue than perhaps any other authority in state government," auditor Chris Otto told state lawmakers Tuesday.

But the executive director of the agency argued the program has helped attract companies like computer software designer Adobe and investment banker Goldman Sachs and created nearly 12,000 jobs.

"The Utah model is working, and it's working incredibly well," said Val Hale, adding that companies only get tax credits after they bring new revenue to the state.

Lawmakers, though, said they were concerned about the audit's findings.

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"It seems like companies were favored one way or the other and workers were used as pawns to get that money," said Sen. Karen Mayne, a Democrat from West Valley City. The agency has failed to verify companies' job-creation claims, auditors said. For example, state officials gave $2.8 million in tax credits to two companies that promised to create more than 200 jobs, but the agency could only verify a handful of them.

The audit also found the office made it look like a company created better-paying jobs by dropping lower-wage jobs from its calculations. During the recession, the office also started allowing companies to qualify for tax credits by using salary figures that counted health benefits.

Those adjustments could mean that companies could qualify for tax benefits even if they created jobs that paid lower than average, the audit stated.

Not all companies were treated the same, which could put the state at risk for lawsuits, auditors said.

But Hale said economic development officials need flexibility to compete with other states to attract companies and jobs to Utah. He took issue with auditors' definition of a high-paying job, saying wages only must compare favorably with other jobs in a local area.

Lawmakers said they weren't fully convinced.

"I understand there needs to be some nimbleness, but nimbleness on the backs of the taxpayers is something that some of us are not very comfortable with," said Rep. Rebecca Chavez-Houck, a Democrat from Salt Lake City.

Auditors recommended that lawmakers set more clear definitions for what is considered a high-paying job, and that the agency regularly give in-depth reports that clearly set out how the incentives have benefited the state.

Lawmakers voted Tuesday to study the audit further before acting on any of its recommendations.