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Putting a price on employment

Over half of assisted firms miss job goals

By Todd Wallack
Globe Staff / February 23, 2011

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More than half of the companies that received the first round of incentives from Governor Deval Patrick’s $1 billion initiative to help the state’s life sciences industry grow failed to create the number of jobs they promised, according to a newly released report.

The Massachusetts Life Sciences Center yesterday released an analysis of the progress made by 26 companies that collectively received $24.5 million in tax incentives in December 2009.

So far, the center said, five have agreed to return their awards and another eight may have to do so because they have not hit the minimum required job targets.

One other company fell just short of its promised target, but had hired enough new employees to avoid forfeiting the funds.

However, the data also show the companies have collectively added 607 jobs, more than what the state had expected of them as a group.

One company, Sunovion, the Marlborough drug maker formerly known as Sepracor, created 86 jobs, more than triple the 25 it promised.

One economist who has followed state economic development programs said he found the results promising, particularly given the difficulties some companies have had raising capital during the slow economy.

“It’s a remarkable success, giving the financing environment these firms are operating in,’’ said Ross DeVol, who heads economic research at the Milken Institute, a think tank in Santa Monica, Calif.

The findings came at a time when the idea of giving government subsidies to individual companies has come under fire in Massachusetts.

Earlier this year, Evergreen Solar Inc. announced plans to cut more than 800 jobs and shutter a new plant in Devens built with tens of millions of aid from the Patrick administration. The company will have to forfeit less than half of the $58 million in grants, tax incentives, and other government help it received.

The Globe also reported a year ago that many companies that received aid under another Massachusetts incentive program did not have to repay the state when they failed to create the required number of jobs.

But unlike those cases, Massachusetts officials said their approach to helping the life science industry has protected taxpayers: Companies that received aid must either create the required number of jobs or forfeit their funding.

“The center’s program has teeth,’’ said Susan Windham-Bannister, chief executive of the Life Sciences center, which is charged with administering Patrick’s $1 billion program.

Under legislation passed in 2008, companies can receive tax credits and other incentives in exchange for a pledge to create a certain number of jobs.

Some of the incentives can be exchanged for cash, even if companies don’t owe any taxes and have no use for tax credits or deductions.

Any firm that does not create at least 70 percent of the promised jobs within the first year could be forced to forfeit the state aid.

In its second round of awards in December, the center gave $23.9 million in incentives to 30 companies that promised to create 900 new jobs.

And the money isn’t reserved for start-ups and other fledgling companies. For instance, some of the most recent awards went to two giant European drug makers, Novartis and Sanofi-Aventis.

In the 2009 round, eight firms could be asked to return funds because they have not created at least 70 percent of the promised jobs. They include Alnylam Pharmaceuticals of Cambridge, Cubist Pharmaceuticals of Lexington, and Infinity Pharmaceuticals of Cambridge.

The center said it plans to investigate why the eight did not meet their job targets and could order the companies to return the incentives or give them another year to meet their targets.

In addition, InfraReDx of Burlington, which received $630,000 in incentives, fell just short of the 21 jobs it promised. But it exceeded the 70 percent threshold required under state law, so it won’t be required to return the awards.

Brian Gilmore, executive vice president of Associated Industries of Massachusetts, praised the center for closely monitoring the companies’ hiring. And while he found the job-creation numbers encouraging, Gilmore said results of the 2009 funding round show the risk of the government backing individual companies.

“Expansion plans for any firm can go awry because of circumstances beyond their control,’’ Gilmore said. “That’s why we really prefer to concentrate on lowering the cost of business taxes for all industries’’ instead of selectively giving awards to favored firms and industries.

Todd Wallack can be reached at twallack@globe.com.