Bank of America canceled a jobs contract with Texas because the mortgage crisis and a complex merger were preventing its Countrywide Home Loans from adding the 7,500 jobs it promised to the state by late 2010, the company said Wednesday.
Bank of America spokesman Rick Simon said the merger between Countrywide and Bank of America made it difficult to identify and report new jobs added in the state. He said the company is keeping a large presence in Texas with almost 23,000 employees.
"The decision recognizes the severe economic headwinds facing the entire mortgage industry during the past two years and heading into 2010, and other circumstances not foreseen five years ago when the agreement was signed," said a company statement about its Texas Enterprise Fund agreement.
Bank of America notified Gov. Rick Perry's office in December that it was ending the $20 million deal as of Dec. 31, 2009. Perry's office didn't publicly reveal the agreement termination until Tuesday, when the governor's office announced it had changed 11 enterprise fund contracts to make them more favorable for the companies and that two others — with Countrywide and Gulfstream — were canceled.
That announcement came after Perry's office learned the non-profit Texans for Public Justice was about to put out a report detailing the performances of firms in the Texas Enterprise Fund, a program Perry frequently points to when he cites his record of bringing jobs to Texas. Countrywide had one of the largest enterprise fund agreements.
Critics of the enterprise fund question whether it does enough or holds participating companies accountable.
Perry, after a speech in Houston on Wednesday, said the fund is successful in bringing jobs to the state. He said it has adequate safeguards and oversight.
"It has worked well," Perry said. "When you have the oversight of the lieutenant governor, the speaker of the House and the governor's office before any of these dollars can go forward, I would suggest to you all three of those offices are highly critical of any state tax dollars going out the door. They've been vetted, vetted very well. I'm very pleased with the success and the success rate the enterprise fund has had."
Perry's office takes the lead in overseeing the fund. It was created by the Legislature in 2003 at his urging.
More than 20 companies receiving grants from the fund failed to meet their job creation promises in 2008 or struggled to do so as the recession took hold, according to the TPJ report.
Countrywide is paying the state back $8.45 million, which Perry's office and Bank of America said was allowed under its agreement.
Perry's aides did not release a copy of the termination agreement when The Associated Press asked for it Wednesday and referred the request to its open records division.
The AP reported last year that Countrywide fell more than 1,600 jobs short of its job creation target for 2008 after the company sunk into financial turmoil amid a mortgage meltdown and the start of the recession. It was supposed to create 7,500 new jobs by the end of 2010 and maintain them at least through 2011.
Countrywide was to create 5,500 new jobs by the end of 2008 under its contract, but created only 3,876. The company used "surplus credits" from jobs created in previous years to offset the annual shortage. The company filed compliance agreements with the state each January.
After announcing plans to acquire Countrywide in early 2008, Bank of America continued to say it was sticking with its Texas Enterprise Fund agreement. Simon said Wednesday the company had discussions with state officials over the past year as the economy remained in a slump and the bank tried to decide what to do about the Texas contract.
"Ultimately we determined it was probably in the best interest of the company and the state to just bring the contract to an end at this time and fulfill the contract through the payment," Simon said.
Meanwhile, Perry's office released more details Wednesday on enterprise fund contracts it amended.
For instance, Fidelity originally had an agreement receive $8.5 million to create 1,535 jobs by Dec. 31, 2009. Fidelity paid a penalty to the state of $484,000 for 2008. The amendment reduced its grant to $4.5 million for creating 850 jobs and extended its job creation time frame.
Heliovolt's original agreement was for $1 million to create 158 jobs. An amendment extended the job creation timeline two years to the end of 2012 and extended the amount of time the company must maintain those jobs.
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Associated Press writer Juan Lozano in Houston contributed to this report.
Copyright 2010  AP News
