Early each semester, I tell my students that–after taking my class–they should find themselves using two terms more frequently than they did before: it depends, and it’s more complicated than that.
For example, in recent posts, I have pointed to significant problems with two proposed public-private projects: a Justice Center and a soccer stadium. In the case of the Justice Center, my qualms aren’t with the project itself, but with the secrecy surrounding it, the important questions that remain unanswered, and the potential for both poor design and unnecessary expense. In the case of the soccer stadium, i’m flat-out opposed to putting scarce tax dollars in a project that’s unlikely to do anything but enrich its politically-connected developer.
But just because some projects raise red flags doesn’t mean taxpayers should never support local business efforts. It simply means we need to be savvy about which ones.
Take the recent proposal from Angie’s List. The company has asked the city to create a TIF to secure approximately 18 million in bonds. In return it has promised to invest $44 million of its own– to retain a thousand jobs on its near-Eastside campus, to relocate another existing 800 employees to that campus, and to grow the workforce there by yet another 1000– all by the end of 2019. In addition to those jobs (paying an average of 50,000), the company will purchase and redevelop an existing building and construct a parking garage.
Obviously, adding 1,800 well-paid workers to the near Eastside of downtown would be very good for the city. But what if Angie’s List defaults–what if it cannot grow its workforce, or even honor the “clawback” penalties for failure to do so? What will the city have to show for its investment?
Several things, actually:
- A contaminated property, the Ford Building, that has been redeveloped and returned to the tax rolls.
- A new parking garage and street level retail on 3 acres of currently undeveloped property added to the property tax base.
- Physical improvements that should spur redevelopment east of the interstate towards Irvington.
- Creation of 500 construction jobs that will generate COIT and sales tax revenue.
- Facilitation of IPS’ relocation of operations from the former Coca-Cola building on Massachusetts Avenue – something both the city and IPS have long desired.
Note that these aspects of the project will benefit taxpayers whether or not Angie’s List can fulfill its employment promises. If it can, the city will obviously see many other benefits.
The point is, every proposed project, every proposed TIF district, every “partnership” must be independently evaluated. Hard questions must be asked, and “what ifs?” must be considered. If rosy projections don’t materialize, will taxpayers still come out ahead? If not (soccer stadium), we shouldn’t proceed. If we don’t have enough information (Justice Center), we shouldn’t proceed until we have that information. If a project has been thoroughly vetted, however, and the downside is still acceptable, it’s a prudent investment.
In other words, it depends.
Sage advice, Sheila. I agree with your thoughts on the justice center and soccer stadium exactly; however, I’m concerned about the Angie’s List promise to keep the new jobs they promise to create. Angie’s List has an unimpressive track record of sustaining the jobs they promise to create with each cash infusion. Too often we’ve seen tax advantages and tax dollars granted to companies that don’t deliver what they promise, yet the executive suite never suffers. Of course I want to see the east and west sides of Indy restored to commerce, but it’s the lack of credibility than makes me question whether or not it’s a good investment. And at some point doesn’t Angie’s List need to turn a profit to demonstrate stability? Perhaps if I bought into their product I would be less skeptical.
“It depends, and it’s more complicated than that” seems like good advise to me.
The equivalent from the world of science that is not often enough heard from amateur scientists but frequently from pros is “I don’t know”. The only scientific alternative to “yes, I know, and here is the answer. “I don’t know” is frequently followed by a hypothesis for experimentation, the only way that “I don’t know’s” get turned into “I do’s” through the scientific method.
“It depends, and it’s more complicated than that” and turning unknowns into knowns is hard work and requires thoughtful discipline and makes for lousy entertainment.
That’s why they’re not popular with the comfort crowd.
One way that private companies have invaded government is the idea that tax payers have to buy jobs through cities competing for means of production. Of course no money is saved. We just pay in taxes what used to be paid by investors. Capitalism chooses socialism over capitalism.
Strange bed fellows until you realize that that’s what benefits oligarchy the most.
As usual, great advice. Why is it that so often our policy makers have to be reminded that “unintended consequence” is not synonymous with “unexpected consequence”?
….and least we forget–Indianapolis World Sports Park for $5.4 million with a new cricket (yes, you read that right, British Cricket) venue built for the cricket tournament that changed it’s mind. I guess the point is as long as you don’t spend a damn dime actually improving the lives of the people who live here it’s all good. Kind of like building, oh, say, a huge, experimental coal plant that none of the more legitimate utilities wanted to support, that doesn’t actually help with fossil fuel pollution, won’t be in compliance with not too distant regulation changes, and cost more than three times what it was originally supposed to cost–(it could be argued that this albatross’ purpose was actually a vehicle to divert, via graft, hubris and crony capitalism funding fossil fuel plants in perpetuity), which, after it is built and paid for by Indiana rate payers, provides no power to Indiana.
And, since Indiana is already such a corrupt state, no wonder Angie’s List likes it here:
http://www.dailykos.com/story/2012/05/28/1095283/-Angie-s-List-dishonest-business-model. I was flummoxed in the beginning when Angie’s list called me for my opinion about local businesses. This was at the end of my free year subscription when they were moving into the state. During that year, there were maybe five companies and at the end of the year they wanted me to pay? Plus, they are being sued for overcharging members, and now that they have gone public take advertising from the very companies they are supposed to be unbiasedly reviewing.
And one investor site posits that they may be positioning themselves for a buy out….or a bankruptcy. Neither is good news for taxpayers who will be picking up the tab on all the purported perks from this company (http://investorplace.com/2015/01/angi-angies-list-bankruptcy-buyout/#.VPR_YS4YG6Q).
Ah, Cricket, I’ll probably be the lone spectator in the stands
with closed eyes dreaming of “Trent Bridge” and “The Oval”
(the great homes of English Test Match Cricket)
The Track Record here is not good. We have the ROC, the new Justice Center, the Broad Ripple Garage, and the Indy Eleven Stadium. Extreme Secrecy, and Crony-Capitalism appears to be Standard Operating Procedure here in Marion County.
The City of Indianapolis could be involved in refurbishing Streets, Roads and Sidewalks for a specific area. The City should not be “Investing” or what ever you want to call it in a Company Private or Public. Who picks which companies the City or State will “Invest” in?? What is the Criteria for the Investment?? Calling this an Investment is dubious at best. Angie’s Stock Prices is the Tale of Tape here. According to Yahoo Finance The Price of Angie’s Stock per share on NASDAQ was $15.80 on 11/14/2011, it rose to $28.00 per share on 6/30/13, today the Price Per Share is $6.68. The Stock Price Per Share has been on a steady ride down since ever since 6/30/2013. http://finance.yahoo.com/q?s=ANGI
The state and city just gave Angie’s List a several million dollar subsidy package in 2011. Since that time, the IBJ reported that the Angie’s List CEO had set up an LLC with another person that was used to acquire property and to sell it to Angie’s List at an inflated price, using the subsidy money to purchase the property. Angie’s List has been hit with shareholder lawsuits alleging securities fraud, at least one of which is still pending. Right before making a second request for more subsidies last year, Angie’s List laid off 97 people.
The notion that government should enter into the marketplace to pick the winners and losers is a foolish enterprise. And if we were to do that, why in the world would we pick Angie’s List? I envision Bill Oesterle and Angie Hicks pitching for the same $18.5 million investment on the show Shark Tank. Mark Cuban: “So you want me to invest millions of dollars in your company that hasn’t turned a profit in 20 years?” Shortly thereafter Cuban rips Angie’s List for a business model that was antiquated before the company even went into business.
An additional consequence of handing millions of dollars, twice, to a company like Angie’s List is that every other company that wants to relocate or expand to/in Indianapolis will also be expecting a million dollar subsidy. And why not? If city/state officials are willing to hand out multi-million subsidies, twice, to Angie’s List, why wouldn’t they spend money on companies that can actually turn the profit.
We taxpayers are going to be on the hook for 25 years for the money we’re giving to Angie’s List. Does anyone actually believe the company still will be around 25 years from now?
A “what if” that got missed is the Toll Road deal. The taxpayers were lied to about “what if” the company went bankrupt. We were told that the asset would revert to the state. Now we find out that was a lie (misspoken!) The asset has not only been allowed to deteriorate to the point of needing major investment to repair, but the state is last in the line of debtors to be paid.
If we have to trust public officials to make the deals, be transparent and build accountability into the deals, we must be able to trust that they are not lying to push the deal through for some personal gain, financial or political.
“It’s more complicated than that” is a respectful way of telling someone that they need to dig further. Too many today are happy accepting everything at face value. I have become suspicious and cynical to the point I believe almost nothing.