Oklahoma officials praise Quality Jobs program despite firm's closing

BY KYLE ARNOLD World Staff Writer
Tuesday, August 14, 2012
8/14/12 at 3:42 AM

The state of Oklahoma invested more than $1.8 million in DMI Industries Inc. before the Tulsa-based wind tower manufacturer announced last week that it would close its plant in November and lay off 167 people.

The manufacturer said a drop in orders and other industry factors are causing it to shut down the Tulsa facility.

The state's investment came through the Oklahoma Quality Jobs Program, which gives payroll rebates to companies in certain sectors for creating "high-paying" jobs with benefits.

But state officials, including one of the Legislature's chief critics of tax incentives, say DMI's failure isn't an indictment of Quality Jobs.

In fact, they say, the closure shows the program is working the way it's supposed to.

"It's a performance-based program, and there's no money up front," said Donald Heckler, a spokesman for the Oklahoma Department of Commerce, which administers Quality Jobs applications. "Those initial jobs probably wouldn't have been created in the first place without this incentive program."

Only 160 jobs at the plant qualified for Quality Jobs funding, but the factory had as many as 275 employees in late 2008.

The program allows companies up to a 5 percent return on their payroll taxes in exchange for creating jobs. Participants range from large manufacturers such as Spirit AeroSystems Inc. to the Oklahoma City Thunder's NBA ownership group, according to the Oklahoma Tax Commission.

Heckler said 656 companies have enrolled in the program, and those that obtain the incentive pay an average wage of more than $65,000 a year.

Companies don't actually receive rebates until their taxes are paid, said Paula Ross, a spokeswoman for the Tax Commission.

Participants must meet wage criteria for their respective industries, and those that are not manufacturers are required to get most of their revenue from out-of-state sources.

Certain job categories cannot be part of the program, such as retail store employees and oil field workers, because those jobs do not directly bring increased revenue into the state.

Quality Jobs participants also have to hit and maintain minimum payroll targets before receiving a payout. Many companies accepted into the program never reach the payroll threshold.

Each company also has a 10-year participation limit.

DMI had been earning the tax rebate since 2009 and will continue to do so until the factory closes.

Oklahoma adopted the Quality Jobs Program in 1993 as a way to offer tax incentives to create jobs in the state. Since then it has been copied by about 30 other states, Heckler said.

State Rep. David Dank, who has criticized many of Oklahoma's tax incentive programs, said Quality Jobs is one of the few that actually works well.

"It requires pre-approval, and you have to pay in before you pay out," the Oklahoma City Republican said. "You are pretty well assured that the state is reaping benefits."

DMI Industries isn't the first company to shut down or leave Oklahoma after receiving Quality Jobs tax credits.

Pryor Creek aerospace company Labinal Inc. closed and laid off 485 people in 2008 after taking more than $1.5 million in Quality Jobs rebates beginning in 2004. The company moved its work to Texas and Mexico.

In Tahlequah, American Woodmark took about $1.8 million in rebates during roughly the same period before shuttering its facility.

How Oklahoma Quality Jobs works

The program provides a payroll tax rebate to companies that add jobs after enrolling with the state. The rebate, available only to manufacturing, research and service sector companies, can be as much as 5 percent and is given back as a quarterly cash payment after payroll taxes are paid.

Some of the other restrictions for the program:

Companies must have a $2.5 million payroll for at least four of the first 12 quarters enrolled in the program and then maintain a certain payroll level.
Average wage of new positions must be at least the average county wage ($15.04 an hour in Tulsa).
For service companies, 75 percent of sales must be out of state.
Must pay health insurance benefits

Source: Oklahoma Department of Commerce; U.S. Bureau of Labor Statistics

Original Print Headline: Quality Jobs at work

Kyle Arnold 918-581-8380
kyle.arnold@tulsaworld.com

Associated Images:

Welders work inside a steel pipe section that is made into a wind turbine tower at DMI Industries in Tulsa. The plant will be closed this fall. JAMES GIBBARD / Tulsa World file

A crane operator works with a section of pipe for a wind turbine tower at DMI Industries in Tulsa. JAMES GIBBARD / Tulsa World file