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Joan Vennochi

Evergreen’s declawed clawback

By Joan Vennochi
Globe Columnist / January 23, 2011

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EVERGREEN SOLAR Inc. will repay $3 million of $21 million in direct grants it received from the state of Massachusetts.

If that’s a clawback, I’ve had tougher manicures.

Oh, wait. Evergreen — which is shutting down its plant at the old Fort Devens army base and moving the business to China — will also forfeit some $20 million in future tax breaks. Now, that’s really rough — taking away funny money it didn’t have to pay in the first place.

The $58 million package of grants, tax breaks, and other incentives that Governor Deval Patrick handed over to the company, which eliminated 800 jobs as it headed out of town, now looks like a very bad bet. Worse, gambling so heavily on one company looks like very bad tax policy.

“I didn’t think this was a good deal in foresight or hindsight,’’ said Michael Widmer, who heads the Massachusetts Taxpayer Foundation. Broad-based tax credits — applied across an industry sector — “that are thoughtful and go to our strengths’’ make economic sense, said Widmer. An incentive package tailored to one company does not.

Patrick has been less than candid about the deal.

Last August, during the first official debate of the campaign season, which focused solely on energy and the environment, independent candidate Timothy P. Cahill pressed the governor about the decision to give tens of millions to a company that was “now outsourcing jobs to China.’’

In reply, Patrick insisted that the total value was only “about 20, 21 million’’ dollars. After fact-checking his answer, The Globe wrote, “Patrick was misleading about how much assistance the state has afforded to help the company expand and thrive.’’ The total, as tallied then by The Globe, was $60 million. The Patrick administration now puts the figure at $58 million.

During that debate, Patrick also said “Not a single job has gone to China,’’ and called Evergreen “a pretty good success story.’’

While Evergreen had not yet moved jobs to China, it was already building a factory there. Again, fact-checking Patrick on Evergreen’s plan to move jobs overseas, the Globe quoted a company spokesman as saying, “We’re looking hard at that. We may not.’’

Evergreen decided to move more than jobs out of Massachusetts. It moved its entire solar panel business.

The Evergreen story shows how hard it is for government to pick a private sector winner. It also shows that over time, global market forces override state tax incentives, no matter how generous. Finally, unless state government is really careful about structuring a deal, it’s easy for a company to slip off the hook, once it decides to follow its profits-hungry heart.

Economic Development secretary Greg Bialecki argues that the loss isn’t as big as it looks, because the total includes $13 million spent on roads, utilities, and other infrastructure improvements that might benefit other companies. Of course, that $13 million could have been used elsewhere.

He also contends the deal was more an investment in the clean energy sector than in Evergreen Solar. That’s rewriting history.

The Patrick administration now says it will work to give the state more authority to “clawback’’ incentives when companies don’t fulfill the promises they make in exchange for public aid. It’s about time.

Massachusetts is developing a track record for gift-wrapped corporate tax breaks, with few strings attached.

The trend began in 1995, when Lexington-based defense contractor Raytheon Corp. threatened to move its defense operations out of state if it didn’t win extensive tax cuts. It got them, then laid off lower-paid production workers and replaced them with higher-paid, white-collar workers — permissible since the law required the company to sustain its dollar payroll, not its head count.

At least, the so-called Raytheon tax cut applied to other manufacturers.

Last November, General Electric said it wanted $25 million in tax credits from the state, in exchange for maybe keeping employment steady at its Lynn plant. It’s not currently on the economic development agenda, a state official said.

After Evergreen, the state should sharpen its nails.

Correction: In a Jan. 20 column, I incorrectly referred to US Representative Michele Bachmann of Minnesota as a freshman. She was first elected to Congress in 2006.

Joan Vennochi can be reached at vennochi@globe.com.