Audit: Business Oregon needs more transparency

Business Oregon, the state’s primary economic development agency, should improve accountability and transparency measures in its incentives and loans programs for Oregon businesses to better ensure that recipients are delivering on their targets and that funds are being used effectively, according to an audit released Monday by Oregon’s secretary of state.

“It is critical that Business Oregon and other state agencies regularly evaluate and improve their business subsidy programs to make the best use of limited public resources,” Secretary of State Jeanne Atkins said. “Taxpayers should expect nothing less.”

Incentives and loans that Business Oregon has a role in — such as low-interest loans, grants and tax credits — are estimated to total $680 million in the 2015-17 biennium. Most of that money, about $535 million, is from local property tax exemption programs initially authorized by the state.

The auditor’s evaluation suggested that Business Oregon’s main programs are generating positive returns and helping businesses add jobs. However, they also identified a need for deeper agency evaluation of the cost-effectiveness of incentive and loan programs, the agency’s investment in rural communities, and its ability to encourage projects that pay livable wages.

Business Oregon conducts some evaluation of these programs, but does not regularly evaluate and publicly report some key performance outcomes for individual programs, such as jobs created, wages paid and return on investment. Evaluations of enterprise zones, which exempt businesses from local property taxes, are sporadic.

“Transparency initiatives have improved Oregon’s reporting of economic development incentives and loans given to individual businesses,” said Atkins. “But our auditors found that even with these improvements, policy makers and the public still do not have enough information to assess the value and identify the recipients of many of Business Oregon’s economic development awards.”

The audit recommends that Business Oregon work with the Department of Revenue and local assessors to further increase the transparency of the state’s economic development incentives and loans.

“Economic development incentives and loans are a significant public investment,” Atkins said. “The public and key decision makers need more information to determine their confidence in the programs.”

Business Oregon recently developed a new, more thorough selection process for the Governor’s Strategic Reserve Fund, which awards forgivable loans to businesses for projects expected to create or retain jobs.

Auditors recommended that the agency complete risk reviews before businesses begin their projects. It should also more directly incorporate risk reviews into the decision-making process, and evaluate the state’s full investment in projects before sending proposed awards to the Governor’s office for approval.

“Business Oregon’s economic development spending is low compared to some other states, and competition for state dollars is high,” Atkins said. “This increases the urgency of the need to be more strategic and transparent about the use of business incentives and loans.”