Baloney de USDA
You knew that the agency that approves genetically modified organisms ("francenfoods" to people with any wit) and dispenses farm subsidies that aren't called farm subsidies would lie about the number of jobs its Rural Development loan program produces. The incomparable Gretchen Morgenson (Reckless Endangerment: How outsized ambition, greed and corruption led to economic Armageddon) outlines discrepancies between USDA "public information" and the facts.--blj
8-24-13
New York Times
FAIR GAME
New Jobs! If Only It Were True
By GRETCHEN MORGENSON
CREATING jobs is an essential goal today, given our high unemployment rate. But when job programs rely on taxpayer backing, their success or failure should be clearly disclosed.
For example, the United States Department of Agriculture has called its $1.6 billion business and industry loan program a rousing success. Not surprisingly, the department often trumpets the number of jobs that are expected to result from these loans — figures that it gets from the borrowers themselves. Whether these jobs are actually created, however, is another story.
The loan guarantee program is overseen by the Rural Development unit of the Agriculture Department and is part of the American Recovery and Reinvestment Act of 2009. Rural Development provides loan guarantees of as much as 90 percent to banks or other approved lenders that finance the improvement or development of businesses in rural and high-unemployment areas.
How many jobs were added or saved through the loans is also a crucial measure of the program’s success or failure.
A current success story on the agency’s Web site is that of Carolina AAC, a company that received $10.4 million in late 2010 to build a concrete manufacturing plant in Bennettsville, S.C.
“This project will create approximately 197 new jobs in Marlboro County,” the Agriculture Department’s Web site says. Such a figure would make Carolina AAC the program’s third-largest borrower in terms of jobs created.
But Carolina AAC said in a January 2011 news release that only 36 jobs would be created at the project. And even that has not come to pass. Currently, 10 people work at the company, according to Charles Paterno, its managing member. Troubling for taxpayers is that the government backs 90 percent of the loans and they are in liquidation.
The manufacturing facility is behind schedule, Mr. Paterno said, because a contractor in charge of building it died midway through the project. “We’re three months from producing but we’re still on target to create 36 jobs and will ramp up to 50,” Mr. Paterno said in an interview. Asked about the 197 job number, he said he was unfamiliar with it. The figure might reflect indirect job creation, he said, such as workers at a local sand quarry or crews that would install the cement once it’s manufactured.
Singleteary Food Solutions is another borrower under the program. Its $4.36 million inU.S.D.A.-guaranteed loans was expected to create 220 jobs in Wells, Minn., population 2,300. Singleteary was expected to be the second-largest job creator in the program; it also received a Small Business Administration loan for about $4 million.
But the Wells plant never opened. The Agriculture Department loans are in default, and the bank that wrote the guaranteed loan and sold it to investors took back the property in May.
Singleteary Food Solutions, a food processor, employed 30 people at most, according toa news report in The Faribault County Register.
Stephen B. Singleteary, a lawyer from Chicago, is the president of the company. In an interview on Friday, he said he was seeking an additional $5 million in capital so he could restructure the debt and start up production. He said the facility needed far more renovation than he had anticipated.
“Once we got in, we found the infrastructure would not accommodate our process and we had to replace most of the basic things,” Mr. Singleteary said. “In a 100,000-square-foot facility, it adds up pretty quick.”
He has until November to come up with the money so he can get the property back, and he remains hopeful. “When we’re fully operational it will exceed 200 jobs,” he said.
The company that was expected to be the largest job creator under the program was the Peninsula Plywood Group of Port Angeles, Wash. The roughly $2 million loan for its lumber mill was guaranteed by the Agriculture Department in January 2010 and expected to create 334 jobs. The facility opened for production later that year but ran into financial trouble and closed in late 2011. Local news reports said it employed 130 people at most.
The loan has been liquidated and the Agriculture Department paid a loss claim of $958,000.
It’s not uncommon for small businesses to fail, and capital nowadays is hard to come by. So some defaults are to be expected.
Asked about the rosy job-creation figures, Lillian Salerno, the administrator in charge of the program, provided this statement: “Since 2009, the U.S.D.A. Business and Industry Loan Guarantee program has supported more than 3,500 small businesses that have helped bolster the rural economy in communities across the country. The program’s success rate is the highest it has been since 2000, and it continues to improve. U.S.D.A., through 47 state offices, continuously works with approved lenders to ensure that each small business has every opportunity to succeed.”
THE agency also provided five success stories where companies tapping into the program created more jobs than anticipated. One is Salm Partners, a food manufacturer in Denmark, Wis. The company received a $16 million loan guarantee to expand its facility and projected in 2010 that it would save 147 jobs and add 25 new ones. Today, the company employs 300 full-time workers and has paid back its loan.
Agency documents indicate that others are concerned with its job-creation numbers. A letter on Jan. 18 from the agency to business program directors of the Rural Development unit noted that the Office of Management and Budget wanted agency performance measures to be rigorously evaluated to improve programs’ efficiencies. It is essential that the jobs data reported by the Agriculture Department “is accurate, consistent, and verifiable,” the letter said.
The Agriculture Department’s office of the inspector general recently questioned the accuracy of the agency’s job figures. In a March audit, it identified one borrower that had estimated its loan would create and save 400 jobs. After visiting the borrower, investigators found that the borrower saved two jobs. “The agency’s success in meeting its established performance goals may be overstated,” the report said.
Jim Brickman, a real estate investor in Dallas and a whistle-blower on problematic S.B.A. loans said, “The willingness of the U.S.D.A. to tout false job numbers to Congress and the public is absurd and a case study of why the public has lost confidence in government.”
The Agriculture Department’s program is certainly well-intentioned, and accentuating its positives is only natural. But with taxpayers backing this $1.6 billion effort, reliable job counts would be preferable.