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IEDC board members’ companies benefit from millions of dollars worth of tax breaks and incentives
Editor’s note: This article is part one in a State Affairs and Fox59/CBS4 series looking at how decisions get made at the Indiana Economic Development Corp. and how it impacts economic development in the state. The IEDC has faced increased scrutiny due to its involvement with Boone County’s LEAP Lebanon Innovation District and because two gubernatorial candidates are former IEDC leaders.
State leaders celebrated when they announced Eli Lilly and Company’s expanded plans for research and manufacturing facilities in Boone County’s LEAP Lebanon Innovation District, expected to generate 700 jobs and $3.7 billion worth of capital investment.
But the unprecedented investment also came with an unprecedented price tag for the state.
The Indiana Economic Development Corp., the state agency tasked with luring businesses to Indiana, agreed to supply Eli Lilly with up to an estimated $378 million-worth of tax credits, rebates and site readiness assistance for the LEAP District project. To put that into context: That’s more than what the state will spend on new public and mental health initiatives for all Hoosiers over the next two years.
So who approves these massive deals? In this case, it was a committee of the IEDC’s appointed governing board that gave the final OK on the state’s largest incentive package to date. The IEDC’s 14-member governing board has deep ties to the business community, and one of its members was chairman of Eli Lilly’s board of directors as recently as 2017. (The IEDC says he did not have a financial conflict of interest, nor was he on the committee that voted.)
The Indiana Economic Development Corp. has doled out tens of millions of dollars worth of tax incentives and grants to companies linked to its governing board members, a State Affairs and Fox59 analysis found. While individual board members appear to have recused themselves from voting on those contracts, their peers on the board do.
That’s the challenge of a state economic development agency: Those with the most expertise to lead such an agency are typically people still in the business world.
The reliance on business industry leaders to decide which companies should receive state dollars and tax breaks is problematic, said Julia Vaughn, executive director of the government accountability group Common Cause Indiana.
“I think the structure creates a real problem in terms of ethics and board member involvement in key decision making,” Vaughn said. “You’re creating conflicts of interest if you have board members who are going to be eligible for state dollars.”
New Secretary of Commerce David Rosenberg declined an interview request through a spokesperson, but the IEDC — which Rosenberg heads — answered multiple questions about how its leaders avoid conflicts of interests among board members.
“Because the IEDC is tasked with growing the state’s economy, the governor appoints board members who have significant private sector experience and are experts in their respective industries,” Erin Sweitzer, an IEDC spokeswoman, said in an emailed statement. “There is nothing that prohibits the companies with which our board members are associated from applying for and receiving performance-based incentives from the state, following the state process as any other business, provided that they have no role in the IEDC’s decision-making process regarding that contract.”
Impact on taxpayers
Money for some incentives come from the state’s general fund, the same taxpayer-funded bucket of cash that pays for schools, public safety or other services for Hoosiers. The rest of the incentives come in the form of tax breaks given to companies, meaning those companies relinquish a smaller portion of their earnings to the state.
That’s why Sen. Fady Qaddoura, a Democratic member of the State Budget Committee, thinks it should matter to Hoosiers how tax credits and grants are distributed.
“[The IEDC is] spending taxpayer dollars cutting deals day in, day out with very little level of transparency or oversight,” Qaddoura said. “That billion plus dollars that the taxpayers have funded could have gone to their local schools, could have expanded child care or pre-K, could have paved our streets, could have reduced their taxes or fees imposed by government.”
Qaddora emphasized that economic development initiatives aren’t inherently bad if they’re done right.
To that point, proponents of economic development incentives say the tax credits doled out to companies generate economic development and more high-wage job opportunities for Hoosiers. In fact, a report on 2021 job creation numbers from the IEDC shows that the state collected more in income taxes from the new jobs than the state spent on tax credits and grants.
In Gov. Eric Holcomb’s opinion, the state is winning because of the IEDC.
“I think what separates IEDC from some of our competition … is that our board is members of the private sector who are scattered across the whole state of Indiana,” Holcomb said following the IEDC’s quarterly meeting in Goshen in September. “They represent regions, ecosystems, industries, sectors, and they come from the private sector. They get it.”
Rules surrounding disclosures
Before the IEDC economic development deals were handled internally by employees at the Department of Commerce. That changed in 2005 when then Gov. Mitch Daniels created the IEDC and a board to govern it.
Typically low-dollar projects don’t need approval by the board, while those with a higher price tag are approved at the committee level. But when a potential conflict of interest is present, the deal is supposed to go to the full board for approval, according to IEDC rules.
Indiana law requires nearly every state employee and appointee to abstain from participating in any decision or vote if that person has a financial interest in the outcome. They also are required to publicly notify the Ethics Commission of potential conflicts of interest each time one arises before contracts are awarded.
But, since at least 2013, IEDC board members haven’t had to completely follow those disclosure rules. They’re allowed to disclose potential conflicts long after contracts have been awarded, in order to avoid disclosing information on not-yet-public projects. Projects instead are assigned vague names when they’re voted on, such as “Project Grasslands” or “Project Amuse Bouches.” Vaughn said that type of notification is “a little too late.”
“The decisions have already been made,” she said.
Whatsmore, even when the beneficiaries of contracts have already been publicized, the IEDC appears to file conflict of interest disclosures well after the board votes.
At its September 2023 meeting, the IEDC board approved a $1 million tax break for Indianapolis-based Scale Computing. Thompson recused himself, sharing that he’s an investor but more than a month later there’s still no disclosure posted on the inspector general’s website.
“Conflict of interest disclosures are filed with the inspector general in due course, and the John Thompson disclosure you referenced will be reflected in our next filing,” Sweitzer said in an email.
Attempts to reach Thompson directly were unsuccessful.
State Affairs and Fox59 found multiple projects since the IEDC’s 2005 creation in which there was no conflict of interest form or formal opinion from the Ethics Commission posted on the state’s website.
Most of those projects were under previous administrations or occurred prior to a 2016 ethics policy change in which the IEDC tightened some of its rules. The IEDC declined to weigh in on why paperwork was sometimes not filed under previous IEDC leaders.
How board members’ companies benefit
It’s common for board members to recuse themselves due to potential conflicts of interest. At the four board meetings in 2018, there were six projects in which at least one board member had to recuse him or herself due to potential business ties to a project.
Since 2015 when lawmakers updated state ethics laws, board members filed conflict of interest disclosures for 32 scenarios. Some of those documents disclosed indirect benefits, such as the IEDC awarding a tax credit to a project financed by a bank a board member leads; or an entity a board member’s company regularly works with.
For example, in 2017 Mark Miles, president and chief executive officer of the organization that operates the Indianapolis Motor Speedway and Indycar, recused himself during a vote on a $900,000 grant to help Dallara USA Holdings Inc. develop a new racecar component for an IndyCar racing team.
Miles said he never talked to any fellow board member about a conflict on any agenda that could have financially impacted him, nor did any board member talk to him about projects that might have benefited them.
“I’m not sure who you would want to make judgments about incentives and programs for businesses that would have more insight than business people,” Miles said. “I just know [board members] to be people of integrity, who have not individually, or for their companies, profited to my knowledge, and I think they have acted in the best interest of the taxpayers.”
There were other more direct financial benefits that did not show up on those conflict of interest disclosures, because they occurred prior to 2015. There was also no formal opinion from the Ethics Commission posted online, a state requirement prior to the 2015 law change.
Likewise between 2005-2010, the IEDC awarded Columbus-based Cummins at least $20 million worth of tax credits for economic development projects. A Cummins executive was on the IEDC board during that window, both recusing themselves when a Cummins project came up for a vote. Attempts to reach either were unsuccessful.
And in 2009, the late-William Mays signed a contract worth up to $48,500 with the IEDC on behalf of his company Mays Chemical Company while serving on the IEDC board. Meeting minutes provide no indication that the board voted on this contract.
Aside from simply following the ethics rules, Vaughn said conflicts could be avoided if governors simply appoint different people to the board. Right now, board members include bank executives, the chief executive officer of Indianapolis Motor Speedway, a former Eli Lilly head and the co-founder of Fair Oaks Farms.
“Perhaps there’s just a real problem as to the pool of people they’re bringing in,” Vaughn said. “It would be better if they found folks that certainly were experts on the topic, but not eligible to receive this state money. The entire process seems to be set up to make it hard to avoid conflicts of interest.”
Watch the broadcast on Fox 59’s YouTube channel.
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INDIANAPOLIS — Last August, Anne Hathaway’s phone lit up with a call from Gov. Eric Holcomb. Nearly a quarter-century before, Hathaway had recruited the future governor to run for an Indiana House seat in the only race he lost.
With the resignation of Indiana Republican Chairman Kyle Hupfer in hand, Holcomb asked Hathaway to lead the Indiana Republican Party, and in doing so was tapping the first women to hold the role.
For the past 15 years, Hathaway had led the Richard G. Lugar Excellence in Public Service Series, an organization inspired by U.S. Sen. Richard Lugar and created by Teresa Lubbers and Judy Singleton to develop a gender bench for the GOP.
“I encourage women every day to take a risk, be willing to lose; go out of their comfort zones and run for office or serve on a board or commission,” said Hathaway, who serves as Indiana’s national committeewoman on the Republican National Committee, during a recent, exclusive Howey Politics/State Affairs interview.
“I couldn’t continue to do that unless I was willing to do that myself, willing to take the risk, willing to lead by example,” she said, adding, “When the call came for me, I jumped. Yeah, I’m in. Let’s go.”
Holcomb said in making this historic nomination: “Here are several key reasons I believe Anne is the right person at the right time for this role. Anne’s resume of service to the Republican Party is as extensive as just about anyone’s in the country, having served with distinction at the local, state and national levels throughout her entire career. Furthermore, with experience in running campaigns at every level of government, she has the knowledge and relationships to not only keep our party moving forward, but to continue to take it to the next level.”
Hathaway’s roots are in the tiny Illinois town of Galva just north of Peoria. After graduating from high school with a class of 77, and then from the University of Illinois, she decided to spend a year in Washington, D.C., where she began as a typist at the Department of Treasury.
Hathaway served in the White House as assistant and director of scheduling for former Vice President Dan Quayle, was program director for the 2012 Republican National Convention, and was executive director of the Indiana House Republican Campaign
Following Hathaway’s resume is a lesson in stewardship and power.
“Sen. Lugar would be more excited about me being state chair than I am just because, Judy Singleton and Teresa Lubbers were ecstatic,” said Hathaway.
She now helms the party at (or nearing) its historic apex. The Indiana GOP holds all the state constitutional offices, nine of 11 congressional seats, maintains General Assembly super majorities, more than 90% of county offices, and as of the municipal elections earlier this month, 76 mayors. If a Republican is elected governor in 11 months, the party will increase its historic dominance to five consecutive terms.
Hathaway will lead the party through the five-way gubernatorial primary. Following next June’s Indiana Republican Convention, she will head to Milwaukee, where Republican National Chairwoman Ronna McDaniel tabbed her to head the RNC’s Arrangements Committee.
Hathaway has committed to serve only through the May primary. “At that time, she will work together with the gubernatorial nominee and you all to decide who is best to finish out the remainder of the term,” said Holcomb.
Asked if there was a chance to continue as chair beyond the May election, she said, “That’s a conversation to be had.
“I have agreed to stay at least through the state convention. I believe the gubernatorial nominee should have his or her own political partner here. I’m just focused on the time between now and then, she said.
Senior reporter and columnist Brian Howey sat down for a 45-minute, wide-ranging interview with Hathaway where she discussed what it means to make history as the first female state Republican chair, how her work at the Lugar Series prepared her for this new role, the Republican party’s diversity programs and other topics. Read the full conversation on State Affairs Pro here.
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On Tuesday, Indiana lawmakers returned to the Statehouse for Organization Day, the ceremonial start to the legislative session, ahead of what legislative leaders are saying should be a low-key, short session.
“We’ll probably take a pretty measured approach on what we address … , maybe fine tune some things,” House Speaker Todd Huston, R-Fishers, said during an Indiana Chamber of Commerce legislative panel on Monday. “Short sessions are supposed to be for emergency items only.”
Not only will 2024 be a non-budget-writing legislative session mandated to end by mid-March, but this session also falls in the midst of a heated Republican gubernatorial primary. There’s no obvious assumed winner who can lead policy discussions ahead of the election, nor has Gov. Eric Holcomb laid the groundwork for any major policy changes in his last legislative session.
Plus, recent criminal corruption charges against a former lawmaker — and the potential for other lawmakers to be charged in connection with the case — has put a cloud over the Indiana General Assembly.
Still, some minor bills are expected to move, and something can always pop up. Here’s a breakdown of some of the issues State Affairs expects to be debated, and three that probably won’t move.
Both Huston and Senate President Pro Tem Rodric Bray, R-Martinsville, said they want to limit the situations in which schools allow third graders to advance to fourth grade when they fail the IREAD-3, the state’s reading comprehension test.
During the 2021-2022 school year, more than 18% of students failed the test because they were not reading at a third grade level.
“When you pass that kid on, and they aren’t prepared to succeed, you’re not doing that kid a favor,” Huston said, following his Organization Day speech in which he laid out his caucus’ priorities.
Huston’s goal is to make Indiana the No. 1 state in the nation for third grade reading proficiency by 2027.
Democrats cautioned that it may be too soon to make major changes to how IREAD scores are handled in Indiana. During the 2023 legislative session, lawmakers passed a science of reading bill.
“We need to make sure that schools have the opportunity to train their teachers, to implement these strategies across the board before we start throwing new legislative hurdles in the way,” said Sen. Andrea Hunley, D-Indianapolis. “We have to give [new recommendations] time to work before we start, say, failing all children or retaining a whole class of children.”
Continuing to re-think K-12 education
Last legislative session, lawmakers passed a bill seeking to expand work-based learning in high school, but Huston emphasized during his Organization Day speech that legislators can still do more to transform the K-12 school system.
Huston said House Republicans will push to allow state money typically set aside for students pursuing a college education to be used to obtain certificates and certifications for “high demand, high wage jobs.”
“We must continue to adjust the way we think about K-12 education in order to meet the needs of all students, including those who aren’t interested in pursuing a two-or four-year degree,” Huston said. “Let’s use this session to build on skill and work-based learning, and let’s align our funding to this goal.”
This fall the Indianapolis Chamber of Commerce took a delegation of Indiana lawmakers and others to Switzerland to see how the country’s apprenticeship program operates. Expect more changes in the coming years that would enable Indiana’s K-12 system to more closely mirror that of Switzerland’s.
Child care access
During his own Organization Day speech, Bray emphasized a need to expand affordable child care options for young children.
“Day care is a constant challenge from the Ohio River to the Michigan line, trying to find day care at all if you can find it and whether it’s affordable,” Bray said.
He pointed to a legislative study committee on the topic which recommended some minor reforms to the system, such as lowering the age requirement for working unassisted in an infant or toddler classroom to age 18 from 21 and requiring the state to review how it can streamline child care regulations to increase availability.
Don’t expect lawmakers to throw more money at the child care system since 2024 isn’t a budget-writing year.
Health care costs
Lawmakers passed multiple bills during the 2023 legislative session aimed at cutting health care costs, ranging from limiting physician noncompete agreements to creating benchmarks for how high hospital prices in the largest hospital systems should be.
But Bray said he expects lawmakers to offer more legislation on the topic this year in order to help drive down costs long term.
A legislative study committee on the topic backed recommendations to require more disclosures by insurance companies on their “prior authorization” process for medical care, as well as require medical providers to give lawmakers a six-month notice for mergers or acquisitions.
It’s unclear whether legislation on water access will actually pass either chamber, but the topic is almost certain to come up in discussions.
Earlier this year, the Indiana Economic Development Corp. announced plans to pump water from the Wabash River aquifer to the LEAP district in Lebanon. Tippecanoes citizens have been vocal in their opposition to the plan, and just this week the Tippecanoe County Commissioners voted to put a moratorium on high volume water exports.
Legislative leaders say they want to avoid legislating on the issue until they get more data. The Indiana Finance Authority and the Indiana Chamber of Commerce are studying the issue.
“We’re not going to take any other steps until we have an opportunity to study to make sure that there’s ample water for the projects that we’re trying to bring into the state of Indiana,” Bray said, “and we understand just how much is too much to take away from a particular community.”
But, even if leadership would rather wait to address the elephant in the room, lawmakers are almost certain to file legislation.
Issues that won’t move: Gaming
For at least the past two legislative sessions, lawmakers have filed bills to legalize internet casino gaming, or iGaming. It appeared momentum was on proponents’ sides. Until this month.
Earlier this month former state Rep. Sean Eberhart agreed to plead guilty to criminal fraud charges that federal prosecutors say stem from influencing casino legislation in return for the promise of a $350,000-a-year job.
Both Bray and Huston said Monday they don’t expect any gaming legislation to move in 2024.
During Monday’s Chamber panel, Bray said the federal investigation “makes gaming extremely hard to engage in.”
“It taints the Statehouse, it diminishes the confidence that people have in the integrity of the Statehouse, it causes an awful lot of problems and it makes it particularly difficult to engage in that kind of policy,” Bray said.
Issues that won’t move: Marijuana
Lawmakers studied the impact legalizing marijuana would have on the workforce and youth in an interim committee this fall, but the committee never issued any recommendations for legislation.
Both legislative leaders and Holcomb have emphasized their reluctance to legalize marijuana until at least after the federal government reschedules it. Huston reiterated his hesitation on Monday.
“No one has made a compelling case to me yet on why legalizing marijuana or having more people use cannabis in the state of Indiana is a positive thing,” Huston said. “So until I hear that answer, I wouldn’t expect a whole lot of change.”
Likewise, Bray said its passage “seemed unlikely.”
The ceremonial start of the legislative session is just that. Lawmakers won’t start moving bills until they return to the Statehouse in January.
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