Saturday, January 31, 2009

"Economic Development" - A Tale from the Mid-West

This story from the Mid-West, found via the Regional Communities blog, could have been set in the Mohawk Valley: Billions of dollars blown in regional development subsidies.
Since 1990, the St. Louis region's crazy quilt of taxing authorities has dedicated more than $2 billion in public money to subsidize private "economic development" projects. And there's almost nothing to show for it.

At best, the subsidies have created a handful of jobs, few of them long-term or high-paying. The subsidies have created no increase in retail sales nor have they sparked any other economic activity.

The primary beneficiaries of the public investment have been national retail chains, real estate developers, lobbyists and public finance lawyers.

These are some of the findings of the first comprehensive study on the impact of local development incentives in the St. Louis region . . .
The report is titled "An Assessment of the Effectiveness and Fiscal Impacts of the Use of Local Development Incentives in the St. Louis Region"

From the Executive Summary:
Local governments in the St. Louis region have made extensive use of public financial incentives to compete for tax-generating businesses. In some areas, most new development is, in effect, publicly subsidized through foregone taxes in the form of abatements, tax increment financing, and related mechanisms. . . . While the short-term effects of these incentives are usually positive for the local government or private sponsor, the overall impact on regional growth and the financial viability of local governments is less clear.
Sounds like the New Hartford Business Park, no?

Among the conclusions:
Broad measures of regional economic outcomes strongly suggest that massive tax
expenditures to promote development have not resulted in real growth. While there are certainly short-term localized benefits in the use of incentives, regional effects are more elusive. Development incentives have primarily acted to redistribute spending and taxes. While distribution effects might yield broader economic benefits when used to redevelop economically distressed communities, when incentives are used in healthy and prosperous communities the regional effect may be to destabilize the fiscal health of neighboring areas.
That, my friends, is exactly what is happening here . . . the rich communities benefit themselves, neighboring areas become destabilized, and the whole region suffers.

The key to making sense of all this is found in the first story's phrase: the "region's crazy quilt of taxing authorities . . . "

It is the "crazy quilt of taxing authorities" that makes it possible for one community to negatively impact its neighbor fiscally. If the communities were part of the same tax jurisdiction, governed by a common body of elected representatives, one community could not take advantage of another, and solutions benefiting the region would emerge.

The implications of this should be obvious. . . .


Greens and Beans said...

Nice Work Strikeslip.

It looks as if we are being scammed again. The similarities between the Saint Louis, Missouri – East Saint Louis, Illinois economic development fiasco is uncanny to what we are experiencing here in the Mohawk Valley. They spent public money to insure private developer(s) investment all in the absence of any semblance of a clawback clause. This economic development ruse has cost the taxpayers of the Saint Louis Region $billions without any additional job creation. All of the “new” job creation in the Saint Louis region was actually job shifting of lower income retail jobs by national chain stores that maximized their profits as a result of the tax breaks caused by the economic development arrangements. As private developers took on hefty taxpayer backed profits, local retailers were displaced by their own tax dollars.

Sound familiar? It is as if we are experiencing the same tragedy of the Saint Louis Region’s playbook of debauched economic development deals.

There is hope for the Saint Louis Region because the East-West Gateway Council of Governments Report addresses the shortfalls and offers solutions to insure that this colossal waste of taxpayer money is not replicated. To halt this tax dollar hemorrhaging here in Central New York, this report should be required reading for all elected officials. Perhaps an infomercial would be in order to educate everyone on the dangers of what we previously have entitled “good economic development” practices.

Anonymous said...

The basic truth is that most politicians have two characteristics when it comes to "economic development". One, they'll do anything in the short term to do a deal and make an announcement. Two, they lack any kind of guts to stand up to outrageous demands being made for concessions even when nine times out of ten, the demands are bogus. Like no one in their right mind would believe that Hartford would leave unless it and it's developers got tax breaks. No company makes a locational decision based on local taxes. The politicians are too greedy, stupid and careless to realize this. Anyone, like a DiMeo, who works with companies understands this but plays the game anyway. The tax give away game played is almost as dumb and deceitful as the Wall St./ sub prime mortgage game.