Corporate Bankruptcies Stick Tax Payers With the Bill

In September Digital Domain Media Group, Inc., the movie production company created by James Cameron filed Chapter 11 Bankruptcy, closing the doors of their Port St. Lucie production studio and laying off 300 Florida employees. Chapter 11 Bankruptcy allows businesses to reorganize under the United States’ Bankruptcy Code.

In addition to the loss of several hundred jobs, is the dilemma of millions of state and local government funds given to Digital Domain to lure the company to South Florida. The State Legislature stands to lose $20 million. In addition, Port St. Lucie gave Digital Domain $60 million and West Palm Beach gave $2 million plus a $10 million land deed to open a digital arts school.

Digital Domain, which also has offices in California and Vancouver, British Columbia, is responsible for creating special effects for movies such as Titanic, Transformers and The Curious Case of Benjamin Button. The idea of attracting such a high profile creative company caused the state to dip into their Quick Action Closing Fund. This discretionary fund is used in relocation and retention deals and hands out cash up front to companies who promise to create jobs.

In September Digital Domain Media Group, Inc., the movie production company created by James Cameron filed Chapter 11 Bankruptcy, closing the doors of their Port St. Lucie production studio and laying off 300 Florida employees. Chapter 11 Bankruptcy allows businesses to reorganize under the United States’ Bankruptcy Code.

In addition to the loss of several hundred jobs, is the dilemma of millions of state and local government funds given to Digital Domain to lure the company to South Florida. The State Legislature stands to lose $20 million. In addition, Port St. Lucie gave Digital Domain $60 million and West Palm Beach gave $2 million plus a $10 million land deed to open a digital arts school.

Digital Domain, which also has offices in California and Vancouver, British Columbia, is responsible for creating special effects for movies such as Titanic, Transformers and The Curious Case of Benjamin Button. The idea of attracting such a high profile creative company caused the state to dip into their Quick Action Closing Fund. This discretionary fund is used in relocation and retention deals and hands out cash up front to companies who promise to create jobs.

A quick check into Digital Domain’s background would have revealed that the company was doomed from the start, as it had a history of defaults on loans going back to 2008.

But Digital Domain isn’t the only state funded company to close its doors after receiving state funding. In 2011, Savtira Corporation went bankrupt shortly after it was given $2.65 million to keep 265 jobs in Hillsborough County. And Redpine Health Care Technologies received $765,000 in state and local funds to relocate to Panama City and closed its doors just a few months later.

This trend of “Cash for Jobs” isn’t only affecting taxpayers at the state level. Solyndra solar power company received $535 million in federal loans, before going belly up and laying off 1,100 workers.  Solyndra is now under FBI investigation for fraud.

There are probably several examples of state and federally funded companies that have been successful in growing the economy and creating jobs. But with nearly 8% of our workforce filing for unemployment, can we afford for the State and Federal governments to be funding companies without doing their due diligence?  In each of the examples noted, all of these companies showed signs of trouble before receiving incentives to relocate or expand their operations, thus leaving the taxpayer to foot the bill.

A quick check into Digital Domain’s background would have revealed that the company was doomed from the start, as it had a history of defaults on loans going back to 2008.

But Digital Domain isn’t the only state funded company to close its doors after receiving state funding. In 2011, Savtira Corporation went bankrupt shortly after it was given $2.65 million to keep 265 jobs in Hillsborough County. And Redpine Health Care Technologies received $765,000 in state and local funds to relocate to Panama City and closed its doors just a few months later.

This trend of “Cash for Jobs” isn’t only affecting taxpayers at the state level. Solyndra solar power company received $535 million in federal loans, before going belly up and laying off 1,100 workers.  Solyndra is now under FBI investigation for fraud.

There are probably several examples of state and federally funded companies that have been successful in growing the economy and creating jobs. But with nearly 8% of our workforce filing for unemployment, can we afford for the State and Federal governments to be funding companies without doing their due diligence?  In each of the examples noted, all of these companies showed signs of trouble before receiving incentives to relocate or expand their operations, thus leaving the taxpayer to foot the bill.

 

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