Local Government – Page 26

All Cost, No Benefit

Every city of any size, and every state, has a government agency charged with “economic development.” Economic development is almost always a euphemism for luring new employers to the city or state.

A productive discussion about what a genuine effort to improve the local economy should and should not entail is considerably overdue. Such a re-examination remains unlikely, but here and there, investigations of current practices do remind us that not everything we call an “incentive” deserves the name.

Which brings us to Wisconsin, Scott Walker and Foxcomm. A report from the Brookings Institution recently described that embarrassing boondoggle:

In 2017, the state of Wisconsin agreed to provide $4 billion in state and local tax incentives to the electronics manufacturing giant Foxconn. In return, the Taiwan-based company promised to build a new manufacturing plant in the state for flat-screen television displays and the subsequent creation of 13,000 new jobs.

It didn’t happen. Those 13,000 jobs never materialized, and plans for the manufacturing plant have been consistently scaled back. Even if the project had gone through as planned, there is no way the Foxconn subsidy would have made money for the state, or provided earnings benefits for residents that exceed its costs. It now appears that few of Foxconn’s promises will be fulfilled, even though local governments have gone into debt over the project.

The Foxcomm “deal” was widely panned at the time, but as Brookings reports, criticisms of that effort were mostly based on the enormous size of the incentives being offered, not on the underlying concept. But since 1990, even the average size of these business incentives has tripled, threatening public services and the social safety net.

Even when the incentive being offered is comparatively modest, however, research doesn’t confirm the underlying assumptions of the approach. At least 75% of the time, the incentives don’t really affect the relocation decision one way or the other.

They’re all cost and no benefit. Furthermore, even when incentives do tip a location decision, they do not pay for themselves. They may create new jobs, but frequently they also bring in new workers from outside the city or state, which raises costs to public services that offset at least 90% of any increased revenue…On average, only 10-30% of new jobs go to state residents who are not already employed.

Are there incentives that would work? Brookings says there are, and offers the following checklist:

Do the incentives target the right businesses?

Will the business provide multiplier effects? When the business buys from local suppliers, it helps increase jobs at those companies. Workers employed at the business, too, will buy from local retailers, increasing those jobs.

Is the business “traded”—i.e., selling its goods and services outside of the state or community? Incentives to non-tradeable firms will just displace jobs at other local non-tradable firms.

Is the real job multiplier accurately calculated? Multipliers can be overstated if they ignore the increased local costs that accompany business growth.

Is the business locally owned? Locally owned firms spend more of their revenue locally, benefiting the hometown economy.

Do the incentives target the right areas?

Incentives should target economically distressed local areas, with more available labor that is not employed. That way, the share of new jobs that go to local residents can be two to three times as great, compared to already-booming areas.

Do the incentives target high-tech businesses in an area with an above-average high-tech base? High-tech businesses have additional multiplier effects because they support and spawn other local firms whose workers and ideas flow from one to another. But this only works when the area has a sufficiently large “cluster” of tech firms to build from.

Are they the right type of incentives?

Are they structured so cash incentives occur upfront? Upfront incentives are more cost-effective in affecting business location decisions, because they are more relevant to business decisionmakers who focus on the short term.

Do they include enticements/requirements to hire locally? For example, customized training programs can encourage firms to hire the local unemployed.
Do they include a healthy share of customized businesses services, or is it all cash giveaways? Business services such as job training, business advice to smaller businesses, and new transportation infrastructure can have job creation effects per dollar that are five to 10 times greater than tax or cash incentives.

Do the incentives avoid robbing Peter to pay Paul? If governments pay for incentives by decreasing public spending on education, training, or infrastructure, the negative economic development effects of those budget cuts may exceed any benefits from the incentives.

Finally, is there a decent model to accurately assess the impact of the incentive?

There are practical ways to evaluate incentives. We can compare assisted with unassisted firms, or assisted areas with unassisted areas. There are good estimates of how many location decisions will be swayed by a cash incentive package of a particular size, and how many jobs per dollar will be created by a high-quality customized job training program. State and local government researchers can combine these evaluation approaches with models of local labor markets and fiscal impact to see whether a specific incentive package’s benefits are likely to exceed its costs.

Finding the right answer depends on asking the right questions–not on constantly sweetening the pot.

Comments

Promises, Promises….

I post a fair amount about political hypocrisy: “family values” Evangelicals who love Trump, “fiscal conservatives” who are okay with his massive deficits, etc. But Tuesday’s local elections were a reminder that hypocrisy and cant aren’t just national phenomena.

Indiana was one of the states that held elections this year for municipal offices. In central Indiana, Democrats had some notable first-time victories, including the election of a mayor and at least three councilors in suburbs of Indianapolis that have been reliably red for as long as I can remember. (And I’m old.) But I want to focus on the more predictable results of the mayor’s race in Indianapolis proper—which, like all urban areas with populations of over 500,000 these days, is currently bright blue—where the incumbent, Joe Hogsett, won re-election by a nearly 50-point margin.

I didn’t attend Hogsett’s election-nght party, but friends who were there reported that the Mayor’s victory speech included some interesting (and appropriately snarky) comments.

In particular, after thanking his Republican opponent, Jim Merritt, a sitting State Senator, Hogsett “welcomed” his return to the Indiana Legislature, where, he said, Senator Merritt would have the opportunity to champion so many of the issues he raised during his mayoral campaign: additional resources for Indianapolis public safety and improved infrastructure, support for LGBTQ rights, and greater support for Marion County’s African American community – things that Senator Merritt has not exactly championed (or supported) during his 30 years in the legislature.

(To the extent we still have media watchdogs, I certainly hope they will keep a watchful eye on Senator Merritt’s efforts to legislate improvements on the issues he suddenly discovered were important during his mayoral campaign.)

Of course, Merritt isn’t the only candidate who should be held accountable. It will be equally interesting to see what Hogsett does with his impressive win, which can rightly be considered a mandate. He will also have an expanded majority—indeed, a 20-5 super-majority—on Indianapolis’ City-County Council.

How will he use this expanded authority?

One of my more cynical friends predicts that—based on the Mayor’s extremely timid approach to governing thus far—Hogsett will take his 71% victory as a “mandate to continue doing not much of anything.”

Maybe. But hope springs eternal….

Our city, like so many others, faces a number of critical issues. Those issues will demand focused, thoughtful initiatives from the Mayor’s office: improving inadequate and decaying infrastructure; working with the State DOT to avoid further exacerbating the 50-year-old mistake of running an interstate highway through downtown residential districts; continuing to revitalize in-city neighborhoods while avoiding the pitfalls of gentrification; supporting the extension of public transportation; the continuing effort to improve public safety; and so many more.

The Mayor now has an electoral mandate and a supermajority on the Council. It will be interesting to see how he chooses to spend that political capital.

I’m hoping for signs of bolder leadership and vision in his second term, and I’ve made a wager with my cynical friend, whose prediction is that Mayor Hogsett will “boldly middle-manage the status quo” in ways that keep Indianapolis a reasonably well-functioning but ultimately undistinguished city.

Time will tell.

Meanwhile, all eyes now turn to Washington and 2020.

Comments

ALEC’s Priority: Gerrymandering

One of the many problems exacerbated by the loss of local journalism is the increasing nationalization of American politics. Those who follow political news are focused almost exclusively on Washington, and that focus has only intensified since 2016. If there is one thing Donald Trump is good at (and it is the only thing), it is sucking the air out of the newsroom. He’s like the wreck by the side of the road that you can’t help rubbernecking.

But we ignore state politics at our peril.

Donald Trump occupies the Oval Office because the Republican Party has been punching above its weight for a number of years. The GOP has been able to win elections not because it can claim majority status, but because it has been able to game the system at the state level, primarily through gerrymandering and voter suppression.

And these efforts have been aided and abetted by ALEC.

ALEC–the American Legislative Exchange Council–is a powerful (and secretive) conservative organization. It is best known for preparing “model” bills favorable to its corporate members, bills that more often than not are introduced–unaltered– by conservative state legislators. ALEC has been incredibly successful in getting these measure passed, and the organization has shaped legislation in policy areas ranging from health care (undercutting the Affordable Care Act) to criminal justice (promoting private prisons). It has worked to lower taxes, eliminate environmental regulations, quash unions, and protect corporations from lawsuits, and it depends upon Republicans to achieve its aims.

So the organization’s current priority is gerrymandering.

In the early August heat, nearly 200 Republican lawmakers gathered in an Austin, Texas, hotel to learn about what one panelist described as a “political adult bloodsport.” The matter at hand — gerrymandering — could lock in Republican power in the states for another decade if successfully carried out again in 2021.

This meeting was evidently a bit less secretive than usual, since reporters were able to attend the sessions on gerrymandering. One was even able to record it.

This unprecedented level of reporting on the panel uncovered the tactics conservatives plan to employ as they seek to maintain the Republican hold on state legislatures across the country in the crucial redistricting wars to come….

The conservative experts gave attendees a range of tips on how to approach gerrymandering, from legislative actions to legal preparedness. The panelists scoffed at the idea of appointing independent commissions in states to draw districts, a solution to partisan gerrymandering gaining traction in some states, instead urging state lawmakers to secure as much control over the process as possible. One panelist suggested Republican lawmakers work with black and Latino lawmakers to pack minority voters into districts, and another urged them to exclude noncitizens from the population numbers used to determine districts, a move that would dramatically redistribute power away from blue areas. Yet, ALEC also warned state lawmakers to be careful — to avoid using the word “gerrymander” and drawing lines too heavily based on race.

As the linked article points out, other conservative organizations may be focused on the federal government, but ALEC understands that the key to power is at the state level– and that the key to maintaining that power is redistricting.

ALEC’s ultimate goal is to have more influence on state lawmakers than the lawmakers’ voters.

They want people to listen to them and not their voters, and the way they do that is by creating these gerrymandered districts so legislators don’t have to address the concerns of their district.

Gerrymandering does more than skew lawmaking at the state level, of course–it results in unrepresentative, “safe” Congressional districts that send disproportionate numbers of Republicans to Congress. Democrats win more votes; Republicans win more seats.In House races in 2012, 1.7 million more votes were cast for Democrats than for Republicans, but Republicans came away with thirty-three more congressional seats than the Democrats. Some of this is due to systemic issues, but much of it is due to gerrymandering.

After the last census, Republicans engaged in a national gerrymandering campaign that was so effective, it put Democrats at a disadvantage for a decade.

That disadvantage gave us the Tea Party and lots of laws written by ALEC .

Comments

When Local Newspapers Fail

Last weekend, I was doing some research in preparation for my upcoming Media and Public Policy classes, when we would explore the role played by local newspapers in local elections.

The discussion in my class revolved around the upcoming elections in Indianapolis, where citizens will vote for the Mayor and members of the City-County Council. It has been my strong impression that the Indianapolis Star–the sole (barely) surviving daily newspaper–has given short shrift to the campaigns, and I confirmed that impression by scrolling through the archives.

My admittedly cursory review of the coverage of the last year or so also reinforced the extent to which the paper has neglected coverage of the operations of local government. It isn’t just the electoral “horse races,” which no longer command the column inches they once did; there is virtually no information about the public policies being pursued by the Council or the administration; no coverage of local school board activities–not even articles about the occasional heated zoning battles and fights over sign ordinances that work their way up to the Metropolitan Plan Commission.

Between the annoying and intrusive advertisements that now clutter the local news section, and the even more annoying pop-up ads in its electronic version, the Star tells its declining number of subscribers about sports, concerts and new bar and restaurant openings –and not much else.

I firmly believe that civic engagement and local governance suffer when local media fails to adequately cover government, and there is emerging research that bears that out.

I’ve previously mentioned studies of cities that have lost their newspapers; that loss has been followed by diminished civic and political activity, and higher costs of borrowing (those who purchase the bonds issued by a city with no news coverage factor in the greater risk of malfeasance or incompetence when there is no “watchdog” around.)

Those studies of places that have entirely lost their newspapers are now being supplemented by research into the consequences of the sort of situation we have here in Indianapolis. It’s a situation that is increasingly common–cities where a newspaper continues to publish, but no longer has sufficient staff to cover the affairs of government. A study from earlier this year, titled “Political Consequences of the Endangered Local Watchdog: Newspaper Decline and Mayoral Elections in the United States,” has sobering conclusions.

The article argues that “the loss of professional expertise in coverage of local government has negative consequences for the quality of city politics because citizens become less informed about local policies and elections.”

The data show that cities served by newspapers with relatively sharp declines in newsroom staffing had, on average, significantly reduced political competition in mayoral races. We also find suggestive evidence that lower staffing levels are associated with lower voter turnout.

Another recent study found newspaper closures linked to increased partisanship–presumably because the remaining sources of local information tend to be from partisan sources and Facebook/Twitter “bubbles,” while national media focuses on America’s political polarization.

Newsrooms around the country have dramatically reduced their editorial staffs, and typically, higher-paid reporters with the most institutional memory have been the first to go. That has certainly been the case here.

When I taught this class four or five years ago, I used a textbook titled “Will the Last Reporter Please Turn Out the Lights?”

The lights are pretty dim right now–and as the Washington Post banner puts it– democracy dies in darkness.

Comments

Extra–For Indianapolis Residents Only

Although the lack of a widely-read local newspaper has tended to dim recognition of the fact, Indianapolis is in the midst of a political campaign for municipal offices, including Mayor and City-County Council.

In addition to a plethora of city-wide issues, those of us who live in Indianapolis’ historic districts have special concerns, and an upcoming forum is intended to address those. The HUNI (Historic Urban Neighborhoods of Indiana) + Indiana Landmarks Mayoral Forum on Neighborhoods is set for September 19th, at the Indiana Landmarks Center, 1201 Central Avenue.

The Forum will feature the three major candidates running for Indianapolis Mayor: Democratic incumbent Joe Hogsett, Republican Indiana Senator Jim Merritt and Libertarian Doug McNaughton.

The program will include a 15-minute opening statement from each candidate and an hour of Q&A from audience members. This free and open-to-the-public event is intended to explore issues particularly important to those living in historic neighborhoods.

Seating at the Landmarks Center is limited and will be on a first-come, first-serve basis, so those interested should get there early. Doors will open at 5:00 pm and the program will run from 5:30-7:15pm.

This is the third Mayoral Forum that HUNI has sponsored at Indiana Landmarks.

Historic Urban Neighborhoods of Indianapolis (HUNI) is a coalition of over 25 historic neighborhoods; its mission is to support the preservation, revitalization and interests of Indianapolis’ urban historic neighborhoods.

With nine offices located throughout the state, Indiana Landmarks helps people rescue endangered landmarks and restore historic neighborhoods and downtowns.

If there is one thing we have all learned from nearly 3 years of the Trump Administration, it is that who governs matters. Come listen to the candidates, and cast an informed vote in November.

Comments