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ICYMI Cost of $10 Billion Stimulus Easier to Tally Than New Jobs

- February 24, 2012

Excerpts from The Wall Street Journal

By: Ianthe Jeanne Dugan and Justin Scheck

February 24, 2012

"Alfredo Garcia was among the residents of Webb County, Texas, banking on a windfall from federal stimulus money.

"Mr. Garcia expanded his Mexican restaurant from 80 to 120 seats, anticipating a rush of new patrons springing from the nearby Cedro Hill wind farm, a project built with the help of $108 million from U.S. taxpayers.

"When construction ended, Cedro Hill had just three employees and Mr. Garcia's restaurant, Aimee's, filed for bankruptcy protection. 'Nobody came,' said Mr. Garcia, a county judge who closed Aimee's last year, putting 18 people out of work.

"Companies have received more than $10 billion to create jobs and renewable energy by building wind farms, solar projects and other alternatives to oil and natural gas under section 1603 of the American Recovery and Reinvestment Act of 2009. The program expired in December, and President Barack Obama proposed last week that Congress revive it in the 2013 budget.

"On federal applications, companies said they created more than 100,000 direct jobs at 1603-funded projects. But a Wall Street Journal investigation found evidence of far fewer. Some plants laid off workers. Others closed.

"The discrepancies highlight broader challenges calculating the economic benefits of stimulus spending. Jobs have been an important measure influencing distribution of more than $800 billion in stimulus money, which also has included tax breaks and spending on roads, sewers, schools, health and public assistance. Yet the number of jobs created or saved is largely based on formulas, mathematical models and reports by recipients, rather than actual tallies...

"Jobs figures reported by grant recipients were full of errors, the Congressional Research Service said in a report last year: 'Thus it is recommended that any job creation estimate be viewed with skepticism'...

"Some communities expecting a flood of new hires from 1603 grant spending have so far found little to celebrate.

"Raser Technologies Inc., for example, filed for bankruptcy protection last April, after receiving a $33 million grant for a geothermal plant in Beaver County, Utah.

"Lecia Langston, a Utah state economist, said the plant now has fewer than 10 employees. Regulatory filings show that in the year after receiving its 1603 grant, the total number of company employees fell from 42 to 27.

"When it went bankrupt, Raser owed $1.5 million in state and local taxes, bankruptcy documents show. Neil Glassman, a bankruptcy lawyer for Raser, declined to comment...

"The 1603 program gave $10.7 billion to 5,098 businesses for 31,540 projects, according to the Treasury Department. Recipients were generally reimbursed 30% of their costs after projects were finished.

"Those businesses claimed on federal applications that they created 102,883 jobs directly. But the Journal found evidence of far fewer.

"About 40% of the funding, $4.3 billion, went to 36 wind farms. During the peak of construction, they employed an average of 200 workers apiece-a total of roughly 7,200 jobs.

"Now, those projects employ about 300 people, according to the companies and economic development officials. Their parent companies employ many more, both in the U.S. and abroad.

"In Texas, the state comptroller estimated the Cedro Hill wind farm would create 531 jobs directly and indirectly during construction in 2010 and taper down to 44 jobs this year, according to computer models and information from developers...

"'I'm so disappointed,' said Rosaura Tijerina, a Webb County commissioner who supported tax subsidies for Cedro Hill, which is owned by California-based Edison International. 'I expected a lot more jobs'...

"The American Wind Energy Association lobbied successfully in late 2010 to extend the 1603 program through 2011, predicting it would create thousands of jobs. Wind companies wound up with more than $7 billion of the 1603 money, yet industry payrolls declined to 75,000 last year from a peak of 85,000 in 2009, according to the association.

"Iberdrola Renewables Inc., the U.S. arm of a Spanish energy giant, received more than $1.5 billion for its wind and solar projects. In January, it laid off 50 people, leaving about 850 U.S. employees, according to spokeswoman Jan Johnson...

"Another wood-burning plant, Blue Lake Power in Northern California, received more than $5.3 million in October 2010. The plant had a number of temporary shutdowns around that time, said Chief Executive Kevin Leary. About a year ago, it laid off most of its staff and stopped producing power. Mr. Leary said the plant is now scheduled to start operating again on March 15. If the plant doesn't work, he said, it may face bankruptcy...

"How so few jobs came out of a stimulus program mystified Joseph Mendiola, acting director of Laredo Development Foundation in Webb County.

"'Green energy is a future for all communities we should embrace,' he said. 'But they shouldn't tell us it is for jobs.'"

Click Here To Read The Full Article: http://on.wsj.com/wh2Bv1

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