The News Journal | by Karl Baker
State economic development battles aren’t just about Amazon and its HQ2s.
A perpetual shoving match among governments for the attention of business executives has Delaware’s new economic development regime pledging millions of dollars to prosperous companies as well as promising startups — in hope of retaining or creating jobs.
Last month, the state finalized a $3.9-million deal with the chemical company Solenis, nearly $2 million of which is to preserve 323 jobs at its Delaware headquarters on U.S. 202 just south of the Pennsylvania line.
The remainder is to encourage new construction and the addition of 92 relatively high-wage jobs. Solenis manufactures chemicals for a variety of industrial markets, including pulp, paper, oil and gas, chemical processing, mining and energy.
Bringing the deal to the state was the new Delaware Prosperity Partnership, a privately run organization that through an opaque process recommends grant recipients that all but guarantees a deal.
Asked if there was evidence that Solenis would leave Delaware without a state subsidy, Prosperity Partnership president and CEO Kurt Foreman said, “Maybe, but it’s hard to disprove a negative.”
“We could have said, ‘Nah, let’s see what happens,” he said. “And, then, they go to Navy Yard or they go to Center City, Philadelphia, or they go to wherever.”
Up next for taxpayers is $2.7 million for the online lender Marlette Funding, as well as $1.1 million for a grocery warehouse, $418,000 for a high-tech manufacturer, and $170,000 for a dog food startup.
“We are proud to be the first East Coast kitchen and we’re excited that their presence will create new jobs in New Castle County,” Governor John Carney said in a statement last month about Just Food For Dogs LLC.
Such transfers of taxpayer dollars to private companies are necessary because one never knows for sure what enticing package other states might be pitching to steal businesses away, said Damian DeStefano, director of the Delaware Division of Small Business, the other half of the state’s new economic development regime.
“If it’s a good company, a growing company, then it’s very likely that they’re getting some very competitive offers from other states,” he said.
DeStefano rejected any notion that the practice amounts to government officials picking winners and losers in the economy, arguing that Delaware Strategic Fund grants have successfully encouraged new jobs.
Taxpayer dollars have flowed to companies that fulfilled promises of new jobs in the past, but there also have been high profile failures. In 2010, Delaware gave $20 million to the electric car maker Fisker Automotive, which went bankrupt three years later, without hiring the thousands it had promised.
A difference today, DeStefano said, is that dollars for performance grants are distributed only after a company meets hiring benchmarks.
DeStefano did not provide the specific policy guidelines or calculations his office uses to determine the terms of a deal, but did say that his team seeks a positive return on investment, “usually on personal income tax revenue.”
The office also considers the likelihood that a company might leave Delaware, he said.
In the case of Marlette Funding, an expansion in Delaware was likely even before dollars from a state performance grant came into the picture, CEO Jeffrey Meiler said in March.
Marlette is pursuing them, he said, because they are an available option.
“Money always helps,” Meiler said.
Marlette, which offers fixed-rate, lump-sum consumer loans online, currently is housed in an office on U.S. 202, just outside of Wilmington’s city limits and wage tax.
With the right terms, Meiler said in March, a taxpayer grant could nudge his forthcoming expansion into the city, where state and local officials for years have been searching for new companies to anchor a revitalization.
Few details of the deals with Marlette and others will be publicly available until they are finalized. Still, some form of deals “are very likely” because the Prosperity Partnership, which does not hold public meetings, gave their recommendation.
Last year, the state’s creation of the entity came under fire from open government advocates who feared that details about economic development deals would be kept from the public until they were done.
When asked about transparency, Foreman said, “We’re a private non-private, we’re not a government agency.”
He also said the Prosperity Partnership does not control the state grant process. Asked who he reports to, Foreman said, “My boss is the governor and (CSC CEO) Rod Ward and the board.”
In addition to Carney and Ward, the current board of directors includes 10 members from the private sector, two from higher education, four legislators and a former Secretary of Agriculture.
Asked why a private executive would want to work on the board, Foreman said it could be out of a sense of pride in Delaware or a desire to see the overall workforce grow.
In addition to grants to Marlette, the state is considering the terms of a $1.1 million award to Dot Foods, a $170,000 award for Just Food For Dogs, a $418,000 award for Colfax Corporation, and a $50,000 award for Composites Automation.