Hagan stimulus story hits the ad wars

Republicans are hammering incumbent Democratic U.S. Sen. Kay Hagan with the fact her husband's company landed stimulus grants after she voted for the bill. Hagan says it is Republican Thom Tillis who has conflict of interest problems.

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Kay Hagan and Thom Tillis, 2014 U.S. Senate race
Mark Binker
Tyler Dukes

Both Republican state House Speaker Thom Tillis' campaign and a conservative PAC are taking to the air this weekend to accuse Democratic U.S. Sen. Kay Hagan of profiting from the 2009 stimulus bill.

Hagan and Tillis are locked in a close race for the state's U.S. Senate seat, and this latest round of ads will pile on top of $44 million in spending on broadcast television by the campaigns and their allies since the end of the May 6 primary.

"Days after Kay Hagan took office, she pushed Obama's stimulus bill," says the narrator in Tillis' latest ad, which then cuts to a clip of Hagan saying the economic infusion would help the country move forward. The narrator then continues, "It didn't. But it did help Kay Hagan move forward personally."

The Tillis ad is one of two on the air making use of the fact that, after the stimulus passed, JDC Manufacturing, a company owned by Hagan's husband, Chip, applied for and landed $390,000 in federally funded grants and tax credits for energy-efficiency projects. The other ad is by Freedom Partners Action Fund, a super PAC tied to the politically active Koch brothers.

While there is no question Hagan voted for the stimulus, none of the documents housed by what is now the Energy Section of the North Carolina Department of Environment and Natural Resources shows that she directly influenced the grant award. Those documents also specifically state that JDC Manufacturing abided by the terms of the grant and were reimbursed for the project only after its completion.

Both Hagan and President Barack Obama were elected in the fall of 2008 and took office in January 2009. At that point, the national economy had dipped into a recession, and federal policymakers wanted to do something to pull out of the economic nosedive. What they came up with was an $800 billion stimulus bill that plowed money into a number of areas such as building roads and keeping teachers in classrooms.
The stimulus set aside $812.6 million in grants and $852.5 million in tax credits for renewable energy, energy efficiency and similar projects in North Carolina. Of that money, roughly $115 million was overseen by what was then North Carolina's State Energy Office, which had been held in the Department of Commerce. That office is now the Energy Division of DENR, which still maintains records from the time.
Those grants got little notice over the past few years until the online magazine Politico published piece pointing out the JDC Manufacturing grant in the context of the Senate campaign. 

That same story also noted, "Hagan’s GOP opponent, statehouse Speaker Thom Tillis, voted in 2010 to allow the state to participate in the federal renewable energy tax credit program, which benefited a bank in which he owns at least $50,000 in stock."

However, it has been Republican organizations and partisans on social media who have pushed the story, expressing frustration that most North Carolina outlets have passed on the story or treated it as weak tea.

"They say in politics that the cover-up is worse than the crime, but it’s tough to see what could be worse than pocketing hundreds of thousands of dollars in taxpayer money," North Carolina Republican Party Executive Director Todd Poole said in a news release Friday.

The most notable exception has been Carolina Journal, a newspaper owned by the John Locke Foundation, a conservative think tank. The Carolina Journal report expands on the Politico story, noting that the JDC originally projected spending  $438,627 but was later revised downward by more than $100,000 and emphasizing the company "kept all of the savings, sending none back to taxpayers who had funded the stimulus grant."

Both Hagan's campaign and the company deny they did anything wrong, and officials with the Energy Division emphasize that the JDC was not required to send any of the money from the grant back to the state.

Hagan's "only involvement was to seek the opinion of an ethics attorney who found that it would be appropriate for her husband's company to receive the grant just like hundreds of other North Carolina companies did," said Sadie Weiner, a spokeswoman for the Hagan campaign.

Some of the basics aren't much in dispute. Chip Hagan's company owns an industrial property in Reidsville currently occupied by a plastics recycling outfit. In JDC's original grant application outlined three different projects: installing energy efficient lighting, replacing inefficient furnaces and installing solar panels on the roof.
Documents detailing the JDC grant show JDC reduced its originally projected cost by $114,519. That same budget amendment notes that this decrease came from the company's "leverage funds," the money that the company puts into the project. The amendment document from the state Energy Office notes, "Leveraged funds were not a requirement of this program. Reducing leverage funds does not affect overall eligibility for the program."

The overall cost of the project reported to the state was $324,108, which is still more than the $250,644 in grants it received from through state.

Revisions to stimulus grants related to the Commercial, Industrial and Large Nonprofit grant program were not unusual. Officials with the state energy office said Thursday that roughly 90 percent of projects paid for through this particular grant program revised their costs downward during the course of the grant period. Officials also pointed to documents that show stimulus projects, including the one linked to the Hagans, were inspected and audited throughout the process. In fact, the JDC project was inspected by both state and federal officials, according to both public and proprietary documents as well as interviews.

JDC Manufacturing also received $137,000 in tax credits related to the project, which the company says were to be paid out over a five-year period. Unlike the grant, those credits were not competitive. Rather any company that did a qualifying renewable energy project would have received them.

Combined with the grant administered by the state, the grant and tax credits appear to be about $60,000 more than the project's costs JDC claimed when applied to draw down its funding from the state.

However, an internal accounting of the project provided to WRAL News by JDC Manufacturing shows that that the project's final costs totaled $503,477. A company spokeswoman said the official project cost was revised downward to show the money actually spent by Dec. 31, 2010, the end of the grant's term. The rest of the money was spent in 2011, and those costs were not eligible to be reimbursed. Other records disclosed by the Energy Division show the total cost of the JDC project inching up to roughly $509,000 over two years, confirming the accounting provided by the company.

"Hundreds of companies received these grants, and Kay Hagan had no role during any of this process. Under no circumstances did JDC profit from these grants, and any assertion otherwise is false," said Caitlin Legacki, a former Hagan aide hired by JDC to speak to reporters about the stimulus funding.

Carolina Journal has also reported on an additional $50,000 renewable-energy grant that JDC received. That grant went to a different project, according to the company, and was not referenced in any of the documentation about the original stimulus grant.

Both the Carolina Journal story and the Freedom Partners Action Fund ad also charge that JDC Manufacturing paid part of its grant to a company owned by Kay and Chip Hagan's son, Tilden. An invoice for solar panels bills Tilden Hagan of SolarDyne for the panels. SolarDyne, now Green State Power, was incorporated shortly before JDC undertook its project.

Legacki said that Tilden Hagan helped buy the panels for the larger project, but JDC paid for them directly. Tilden Hagan also worked as a contractor for Circuit Makers, the company that installed the panels. She again pointed to proprietary documents that show no funding, public or private, went to what was then SolarDyne.

The Hagan campaign responded to the Tillis and Freedom Partners Action Fund ads with an ad of its own.

"It's Thom Tillis who has the ethics problem, caught using his official office to personally profit on a land deal," the narrator in the Hagan ad says. That line is a reference to a report from the left-leaning Huffington Post that detailed Tillis' dealings over a trailer park that he owned. Much like the JDC Manufacturing story, that allegation has been largely ignored by newspapers and television stations in the state.


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