Friday, March 27, 2015

Angie's List Offers Phony Job Promises in Exchange for $18.5 Million Taxpayer Subsidy

Next Monday, the Indianapolis City-County Council will vote on whether to provide an $18.5 million subsidy to Angie's List, an Indianapolis-based company has never shown an annual profit in nearly two decades of operation.  It will be the second multi-million dollar subsidy to the company in four years.

In exchange for the $18.5 million, Angie's List is agreeing to hire 1,000 additional workers at an average of $23 an hour.  At least, that is what the company and city officials are telling the media and council members.  A review of the 22 page "Project Agreement," however, shows that the jobs promise is an illusion. 

First some important terms in the Project Agreement need to be understood. The first is the "Target Outside Date" which is December 31, 2019.  The second is the "Retention Period" which is between January 1, 2020 and December 31, 2020.  (See Definitions Section, p. 7.) 

The Agreement does discuss a job target of 2800 jobs (there are about 1800 people employed at Angie's List so this would be a 1000 job increase) at $23 an hour.  But the language reveals an enormous loophole: 

During the Retention Period: (A) the Jobs Target shall be the lesser of 2,800 Company Jobs or the number of Company Jobs existing on the Target Outside Date; and (B) the Wage Target shall be the lesser of the Average Wage of $23 per hour or the Average Wage for the Company Jobs existing on the Target Outside Date 

(Emphasis supplied) (See Section 10(f)(i), p. 17) 

Translation:  If by December 31, 2019, i.e. the "Target Outside Date," Angie's List not only has not hired the 1000 new workers single person but instead has laid off 500 workers and cut their pay to $15 an hour, the company still will have met its obligations under the Project Agreement. 

It appears that the only time Angie's List is obligated to hire 1000 workers at $23 an hour average pay is if the company moves its office out of downtown before December 31, 2020.  (See Section 10(f)(i), p. 17)  If that happens, then the expiration date for the contract is extended from December 31, 2020 to April 30, 2025.  (See Section 10(g)(ii).) 

Pursuant to the Agreement, the failure to not meet jobs target during the retention period (January 1, 2020 to December 31, 2020) is not an event of default. (Section 10(f)(ii), p. 17)).     Rather the only remedy is to pursue a “catchup plan."  (Section 4, p. 9).  Only if Angie’s List fails to diligently pursue the catchup plan, and is less than 90% compliant, can the city pursue a remedy with respect to the amount escrowed.  (Section 8(c)(d)(e)(f), pp. 14-15). 

Bill Oesterle, CEO
Angie's List
But even that appears to be an empty threat.  Since the job target is 2800/$23 OR the number of jobs and average pay existing on December 31, 2019, then the company is always going to be compliant going into the retention period beginning on January 1, 2012. Finally, the document does have at the end a Job/Wage Schedule with targets until the end of the target outside date on December 31, 2019.  (See Exhibit D, p. D-1).  If Angie’s List doesn’t meet 90% of those goals then it may be required to deposit money into escrow. (How they come up with the amount, I’m not sure.)  But read the definition of “Final Compliance Percentage Reports” which is due for April 30, 2020 with respect to 2019 compliance.  If Angie’s List is compliant on that report because the company hits its job target, then Angie’s List is entitled to be paid the amount in escrow.   (Section 9(d)(iii.), p. 15).  But, again,, whatever employment numbers Angie’s List has on December 31, 2019, the Target Outside Date, even if below 2800 jobs and $23 an hour, meets the requirements of the Project Agreement.   

If that wasn't enough of safeguard to ensure that no enforcement of the 1000 jobs/$23 an hour promise ever takes place, the "Sole Remedy" provision steps in.  (Section 9(f), p. 15) Even if Angie’s List fails to meet a project target or a project compliance percentage, it still is not an event of default and the sole remedy is a catchup plan under Section 4 or, under Section 10(g) a requirement Angie's List pay Indianapolis Public Schools $1 million and sign a “Taxpayer Agreement” which appears to be a document that would limit the right of Angie’s List or an successor to take a tax assessment appeal during the retention period which ends on December 31, 2020 if not extended. (Definitions Section, p. 7).  But even that Taxpayer Agreement is sharply limited in that as long as the challenge is not seeking to reduce the tax burden more than 50%, such a challenge is not precluded by the Agreement.  (Definitions Section, p. 7).  

The only other remedy the City has is to go to court and ask for specific performance, i.e. to force Angie’s List to meet its promised targets. (Section 10(f)(ii), p. 17).  But again, by the time you get to the Retention Period, it is irrelevant as the employment numbers (Section 10(f)(ii), p. 17.)  Whatever employment Angie’s List has on December 31, 2019 by definition meets its obligations under the Project Agreement. (See Section 10(f)(i), p. 17).

Bottom line, the Angie's List jobs promise is certainly an illusion, with any mechanism to enforce it for show only.  It appears that what we're buying for $18.5 million is a promise that Angie's List will keep its headquarters in Indianapolis through the end of 2020.  But even if Angie's List doesn't live up to that promise, the penalty for the company moving is at best a slap on the wrist - a payment to IPS of $1 million and signing a Taxpayer Agreement that only slightly limits a tax assessment challenge for a handful of years.  (See Section 10(g), pp. 17-18). 
While the Angie's List Project Agreement is not as harshly one-sided as the ROC Agreement, it is filled with meaningless provisions that leave the taxpayers with no guarantee of getting anything for their $18.5 million.


Anonymous said...

"While the Angie's List Project Agreement is not as harshly one-sided as the ROC Agreement, it is filled with meaningless drivel that leave the taxpayers with no guarantee of getting anything for their $18.5 million..."- which is EXACTLY why career political hacks like Zach Adamson, Jeff Miller, Mary Moriarty Adams, and Maggie Lewis will support it.

Anonymous said...

Jobs for lawyers?

Anonymous said...

Jobs for minimum wage earners that are able to write the 'reviews'.

Anonymous said...

Well.... Now I guess we do not have to worry about Angie's list and this junk deal. Of course it is because of RFRA, not because they are being hounded in court and loosing money or anything like that.

Anonymous said...

How did the deal from 4 years ago compare to this one?

Paul K. Ogden said...

Anon 943, good question. I didn't have the agreement from last time to review. Needless to say, these agreements are very difficult to review as they're written to be almost completely incomprensible. Reports are that Angie's List made job promises in exchange for the previous subsidy. Whether AL lived up to those job promises who knows. The subsidy money last time was also used to buy property. There was the story in the IBJ that AL CEO Oesterle partnered with someone else to form an LLC, used the subsidy money to buy up downtown property and then sold them at a much higher amount to Angie's List. I kid you not.