Tuesday, October 14, 2014

Angie's Wish: Give Me Another $25 Million And I'll Really Create 1,000 New Jobs This Time

The crony capitalism in Indianapolis is reaching epic proportions even as city leaders plead poverty every time a request is made to adequately fund basic city services. Gov. Mike Pence and Mayor Greg Ballard, who both have received large campaign contributions from Angie's List executives, stood with the company's co-founders, Angie Hicks and Bill Oesterle, to announce another $25 million taxpayer giveaway to the company that has yet to make a dime in its nearly two decades of existence. The company is pledging to invest $40 million to expand its corporate presence to a former Ford plant on East Washington Street near downtown currently owned by IPS and add an additional 1,000 jobs if the state and city fork over another $25 million in taxpayer subsidies to the company. Two years ago, the state and city kicked in a combined $14 million in public subsidies to the company in exchange for a promise by the company to hire an additional 850 employees. Instead, the company has been laying off hundreds of workers at its downtown offices in recent months. But this time they really mean it when they say they'll create new jobs.

Mayor Ballard plans to spend $9.6 million from the downtown TIF to build a new parking garage for Angie's List's employees in addition to the $7.1 million the city gave the company two years ago for infrastructure improvements. Mayor Ballard plans to donate another $6.75 million to IPS to offset its relocation costs from the former Ford plant. Gov. Pence will make an outright grant of $2 million to the company from the IEDC for infrastructure improvements. The state will also provide the company another $7 million in tax credit and job training grants based on the same job-creation claims it made two years ago but never delivered upon. The company's stock had been in a free-fall due to continued financial reports showing the company bleeding cash badly as it continues its perfect record of losing money every year that it has been in business. An insider recently leaked to a financial publication a claim that the company was considering a sale, which sparked interest in its stock, leading to an artificial bump in its stock price. Nonetheless, the company's stock continues to trade around $8 a share, a fraction of where it was trading more than a year ago when its stock traded for more than $25 a share near its peak.

Today's announcement raises serious questions about whether our elected officials should have discretion to award such large public subsidies to private companies. It's inexcusable for state and city officials to offer such lucrative public subsidies to a company that has to date failed to deliver on the promised job creations that accompanied the incentives offered to it only two years ago. The original deal was brokered by the Daniels administration. Angie's List's CEO, Bill Oesterle, formerly served as Mitch Daniels campaign manager. Oesterle has also made generous campaign contributions to the campaign committees of Gov. Pence and Mayor Ballard. Many objective business observers question the Angie's List business model, which now relies on the service providers for whom it supposedly provides objective consumer reports to consumers for nearly three-fourths of its revenues. Critics accuse the company of letting service providers buy good ratings. The company has only been able to remain afloat all of these years by continuing to swap out one group of investors for another group of duped investors. That's the classic definition of a Ponzi scheme. Despite the lack of profits during the company's nearly two decades of existence, both Hicks and Oesterle have become multi-millionaires from their hefty executive pay and generous stock incentives provided to them.

6 comments:

local landlord said...

I will support any plan that results in the revitalization of the E Washington St corridor.

amyr76 said...

If we can't afford to make necessary repairs to our infrastructure and fund schools and police, HOW IN THE HELL DO WE HAVE MONEY TO GIVE ANGIE'S LIST??

Anonymous said...

Gary this was an awesome article and I also really liked your comment to the IBJ Article. Keep on truckin brother!

Anonymous said...

I agree that this company's performance is pathetic and their model is downright dumb, but I can tell you from personal experience that these types of tax credits/incentives are not awarded until after the company delivers on their part of the obligation. So, I think that all of the hype is a waste of time on both sides. Angie's list likely won't deliver so the economic hype by Pence and Ballard is a waste of ink and everyone getting upset over the taxpayers being fleeced is a waste of energy.

Just my two pennies.

Gary R. Welsh said...

That's not the case with the $9.6 million paid from the City's TIF to construct the parking garage or the $2 million infrastructure grant from the state. Those incentives are made based on the investment in the corporate center at the former Ford assembling plant by the company. I agree that the state's job training and tax credits are contingent upon the promised job creation goals being met.

Anonymous said...

The last two posts are very interesting. Can someone clarify for me if Angie's list has to put out money along with the TIF and state money before they get those dollars or do is the local and state government just mailing them a check in the hopes that Angie's list will actually deliver on its commitments?