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28 September 2011

Kraus: The Problem of Mamtek

Economic Development Disaster

Many of you are aware that the governor has been flying around the state, from city to city, touting new jobs. Several times, his visits have backfired as the companies and executives he visits turn out to be less desirable than the state would like. Now, perhaps the biggest failure yet is under investigation by the Missouri Senate Governmental Accountability Committee, on which I sit.

In July, the governor visited Moberly and Mamtek U.S. Inc. (a subsidiary of Mamtek International Limited) to announce $17 million in state incentives to build a sweetener factory. Based on the state’s partnership, the city of Moberly stepped up to guarantee $39 million in industrial development bonds to the company. The company was only to come up with $8 million on its own. Just recently, the company missed its first bond payment and laid off all its employees, leaving Moberly to hold the bag.

Several issues raise red flags in this scenario. Why did the state offer so high a percentage of the overall project costs, and why did it approve any incentives for a company with such a weak structure? Did Moberly rely on the state’s analysis to make its decision to back the bonds? How did the governor and his Department of Economic Development (DED) team not fully investigate the strength of the company and its finances?

The governor has given no good answers so far. He is falling back on the one fact that Missouri hasn’t actually paid any incentive yet, so state taxpayers are not out money. Meanwhile, however, taxpayers in Moberly are out $39 million… an amount that could easily bankrupt a city that size. His team made a bad decision, regardless of the actual consequences. When asked about how the deal was approved, the governor replied, “I don’t run the Department of Economic Development.”* In fact, the governor is in charge of DED. Perhaps he should ask his party’s Missouri hero, Harry Truman, where the buck should stop on this deal.

I look forward to helping find answers for Missouri taxpayers. In addition to the investigation by the Governmental Accountability Committee, the matter is also under investigation by the Missouri Attorney General.

*“Did State Do Due Diligence?” Columbia Tribune, Sept. 25, 2011.

Special Session Stalled

As of this writing, the Missouri House of Representatives Economic Development Committee has still not passed an economic development bill. The Senate has passed two bills on this subject, which have both been sent to the House but have not been heard or voted on in that chamber.

While the passage of an economic bill was to be the main focus of this special session, the General Assembly has passed two other bills, SB1 and SB7. SB1 modifies provisions relating to communications between school district employees and students (the Facebook controversy). SB7 establishes the Missouri Science and Innovation Reinvestment Act (MOSIRA), which provides incentives for investment in science and technology in the state. Click on the bill number for more information.

I’ll continue to keep you updated on our progress during special session in future reports.

Town Hall Meeting

Don’t forget that on Thursday, Sept. 29, Rep. Jeanie Lauer, R-Blue Springs, and I will be hosting a town hall meeting in Blue Springs from 6:00 p.m. to 7:30 p.m. at the Blue Springs Country Club on 1600 NW Circle Drive.

The focus of the town hall is to provide information on the current legislative special session and the recently completed veto session and to discuss the emphasis for the upcoming 2012 regular session. In addition, Blue Springs Councilmen Dale Carter, Jeff Quibell, Chris Lievsay and Kent Edmondson will be in attendance to discuss local issues.

These town hall meetings are important to me because they give me the opportunity to interact on a personal level with the constituents of the 8th Senatorial District. It is a vital way to keep members of the local community up-to-date on activities within the Capitol and upcoming issues and events. I look forward to speaking with concerned citizens and addressing any questions they might have.

I hope to see you there!

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