Local Government – Page 32

Playing The Economic Development Lottery

Amazon’s recent announcement that it would be “accepting proposals” for a secondary headquarters has set off a predictable–and unfortunate– competition by cities all over the country.

“Pick me! Pick me!” Even Indianapolis and Fishers have teamed up for the hunt.

The Brookings Institution gets the dynamics right.

In the world of state and local economic development, Amazon is a whale. The possibility of 50,000 highly-paid jobs for professionals at a new $5 billion development is too tempting to pass up for any metro area with even the slimmest hope of courting one of the largest and most profitable companies in the world. Amazon’s unsubtle hint that tax incentives will play a big role in its decision helps ensure it will receive one of the biggest packages in history. Already, cities and states have rushed to announce their hope to entice Amazon with their distinct value proposition, and—in all likelihood—breathtaking handouts.

This begs important questions about the wisdom of state and local economic development strategies and their ability to remain focused on addressing the real challenges American communities face today.

Amazon’s shameless invitation to see who will offer the biggest bribe does indeed raise “important questions” about standard economic development practices–practices which assume a zero-sum competition to entice employers to relocate to the redevelopment officer’s city or state.

That competition is expensive for bidders, most of whom have no real prospect of securing the prize, and even more expensive for taxpayers of the eventual winner. As the Brookings article points out, Amazon undoubtedly narrowed its choices to two or three locations before it ever announced its search for a headquarters site.

Amazon’s faux competition will lure one otherwise enviable place into handing over a huge amount of its taxpayers’ money to a fabulously wealthy corporation for something that place could have gotten for free.

As anyone who has ever been involved in one of these efforts can attest, cities will waste significant staff time calculating and crafting proposals, time and effort that could have gone into solving other problems.

It is past time to revisit economic development policies that center on these expensive efforts to lure employer A from location B to location C. Instead, we need to take a hard look at the strengths and weaknesses of our local economy, and determine what measures would help us grow the employers who are already here.

What are the jobs that are open? Why aren’t they being filled? Are there “skill gaps” keeping jobless Hoosiers from filling them? If so, what can we do to provide unemployed workers with the necessary skills? Is the problem transportation–the inability of workers to get to the places they are needed? Can we improve public transportation to solve that problem?

In other words, what are the unmet needs of Hoosier employers and workers, and how can we meet those needs?

Political figures love to cut ribbons and announce that manufacturer A or retailer B is moving to town and hiring X number of employees. Those announcements rarely include enumerations of the costly enticements (bribes) that accompanied the decision to locate here: tax abatements, infrastructure improvements, training grants and the like.

Efforts to grow the industries and other enterprises that are already here would not only be more cost-effective, they would also be fairer. These are employers who are already part of our community, after all–already paying taxes, already hiring local residents. They may not be as glamorous as Amazon, but in the real-world scheme of things, they’re much more important.

Amazon may be a whale, but we don’t have to emulate Ahab.

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Old News–Again

The Evansville, Indiana Courier Press recently ran an “expose” about Indiana’s Township Trustees.

I put expose in quotes because the article repeated and confirmed practices that have been widely criticized since at least 1967, when a law review article disclosed that every dollar of poor relief that Trustees distributed cost Indiana taxpayers another dollar and a half in “overhead” costs.

The Courier Press fleshed out the picture:

What kind of job doesn’t have any competition to apply, lets a person keep their brother employed, gives their husband (who helps approve the budget) a mowing contract, gets paid to use their house as a seldom-used office and have part of their phone paid for? And, oh yeah, it’s all on the taxpayer’s dime?

The job is rural township trustee.

The paper’s investigation found that more than half of the 38 Township Trustees in Vanderburgh, Warrick, Posey and Gibson counties employ relatives, award contracts to relatives or have a Trustee’s relative on the advisory board that (theoretically) oversees the office.

Twenty-seven of 38 area township governments are based out of the trustee’s house. The average number of households those trustees helped in 2016 was 14, with a median of 6. More than half of the townships based in homes helped fewer than 10 households last year.

Four township offices didn’t provide any poor relief in 2016: Armstrong and Union townships in Vanderburgh County and Wabash and Washington townships in Gibson County.

They also can be reimbursed for Internet and telephone usage.

Taxpayers paid about $60,000 last year for rent paid to trustees working out of their homes in the four-county area.

Hundreds of the 1,005 townships in Indiana are managed in similar ways.

In fairness, Governor Daniels tried. When he convened the Kernan-Shepard Commission to study government reorganization, one of its recommendations was elimination/consolodation of Indiana’s 1008 townships. Townships are an artifact of the days when travel to the county seat (by horseback) took half a day. Township responsibilities have steadily shrunk, and today they do very little; a few manage fire departments and most administer (with documented inefficiency) poor relief.

Poll after poll confirmed that most Indiana voters agreed with the Commission. Abolishing townships should have been a no-brainer–except we still haven’t managed to do so.

The problem is that, although a large majority of voters agreed that townships should go–that they wasted money better used elsewhere–it was a rare individual for whom this was a burning issue. For the Township Trustees and members of their Advisory Boards, however, it was issue #1. Eliminating townships would eliminate the livliehoods of the Trustees (and the relatives so many of them employ). It would eliminate the inflated fees paid to Advisory Board members for attending three or four meetings a year. Those Trustees and Advisory Board members focused like lasers on lawmakers, marshalling their forces, bringing in people to testify, hiring lobbyists and calling in political favors.

And Indiana still has townships.

In Washington, this same scenario plays over and over. Most Americans disapprove of the special tax breaks that benefit Big Oil, to offer just one example, but how many of us have written or called our Senators or Representatives about it? Very few–it is just one issue among many for most of us. But it is issue #1 for Big Oil (and Big Pharma and Big Banking, etc.), and they have actively worked to protect their subsidies. When those with lots of resources focus those resources on lawmakers, they tend to get what they want.

When ordinary citizens care enough about an issue to create and donate to grass-roots organizations, call their Representatives, enlist their neighbors and friends–they can prevail. But they have to care enough.

When it comes to Township government, they evidently don’t.

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How Not To Win Friends….Or Persuade People

When he was asked about policy disagreements, former Indiana Senator Dick Lugar had a favorite saying: “That’s something about which reasonable people can disagree.”

That attitude–that recognition that well-meaning people can come to different conclusions–is the foundation of civil discourse and democratic deliberation. Unfortunately, Americans have lost that essential insight (along with the reasonable GOP to which Lugar belonged).

What triggered this recollection was a distasteful display at a recent meeting of the Indianapolis Public School Board. (In the interests of full disclosure, our daughter is a member of that Board, which also includes a former student of mine.)

Serving on a school board, or City Council, or on one of the City’s many boards and commissions is often a (thankless) labor of love, undertaken by people who care deeply about the missions of those bodies and who spend innumerable hours reviewing reports and budgets and meeting with concerned citizens. That doesn’t mean that every decision they make is the right one, or the best that could be made–but in most instances, those decisions have been made in good faith after many hours of weighing the available information and debating alternatives.

Like many other urban districts, IPS educates significantly fewer students than it used to. In 1968, the district’s high school enrollment was 26,107; this year, it is 5,352. The current capacity of the seven high school buildings it operates is 14,450–nearly three times the number of students attending them. The money spent operating and maintaining buildings with so much excess capacity could be better spent improving classroom performance, and the Board has recently faced up to the necessity of closing three of its underused schools.

Such decisions are always difficult and contentious.

The Board has scheduled meetings around the district to explain its deliberations and to hear community responses to the planned closures. At its most recent meeting, members heard from a self-identified “urban education expert” who holds an academic appointment at a local university. This individual has testified at previous Board meetings, and his presentations have been consistently arrogant and accusatory: he has lectured the Board that it is “amateurish,” accused members of being “bought and paid for,” and characterized their elections as “undemocratic.” Rather than a courteous sharing of perspective or evidence, he has delivered boorish, self-righteous rants–the sorts of performances that give academics a bad name.

He outdid himself at the recent meeting. Board members had ulterior motives; board members hadn’t really looked at alternatives; the pending closures would ruin the lives of students whose schools were being closed. (I’m not making this up.) He topped it off by telling the white members of the Board they were racists. (He’s white.) He rarely looked at the Board during this extended diatribe; instead, he aimed his rhetoric at the largely African-American attendees who were clearly his real audience.

Not exactly how one wins friends and influences decision-makers.

I don’t understand people who behave this way. I assume–perhaps naively–that people attend and testify at public meetings in order to influence policy, to offer perspectives that may not have been considered or pose questions that might not have been asked.

Telling policymakers that they are corrupt, racist ignoramuses who don’t know as much as you do is not a strategy likely to persuade them to your point of view, and it certainly isn’t the evidence-based, informative testimony we should expect from an “expert.” (It’s worth noting that, in the testimony I reviewed, he offered absolutely no alternative proposals or constructive suggestions. Just insults.)

If this episode of incivility was an anomaly, it wouldn’t merit a blog post, but such behaviors have become far too common in our toxic political age. Policy differences are no longer issues about which reasonable people can differ; instead, they are showdowns between good and evil. People with whom we disagree can’t simply be wrong, they must be bigoted or “bought.”

This sort of indiscriminate nastiness is deeply corrosive. When everyone who comes to a controversial conclusion is labeled a corrupt racist, we lose the ability to identify people who truly are those things. Voters become cynical about our governing institutions, and public-spirited people–the very people we most need to involve in local government– retreat from public service.

I don’t know how we restore civility to public debate, but we need to figure it out. Sooner, rather than later.

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Lessons From Houston

I wonder if we will learn anything from the pictures of devastation coming from Houston.

Leave aside the contentious arguments over climate change, and the degree to which it contributed to the severity of the storm. There were other omens even denialists should have been able to appreciate. Last year, for example, a ProPublica/Texas Tribune investigation found that officials charged with addressing Houston’s obvious susceptibility to flooding had discounted scientists’ warnings as “anti-development.”

That reaction was so typically Houstonian.

For years, Houston has reveled in its “freedom” from “onerous, unnecessary regulations.” The city has no zoning, and its building codes are lax. As Newsweek has reported, Houston is “drowning in its freedom.”

The feeling there was that persons who own real estate should be free to develop it as they wish…In less-free cities, the jackbooted thugs in the zoning department impose limits on the amount of impervious cover in a development.

Houston’s allergy to “jackbooted thugs” like city planners and its preference for “freedom” over strict building codes is a longstanding feature of its politics. Whether that city’s powers-that-be will moderate their distaste for regulations that would mitigate future disasters remains to be seen.

Meanwhile, the federal government–under our “pro-business” President– is moving away from prudence and toward Houston’s free-wheeling approach.

As Vox explains,

Since 2015, infrastructure projects paid for by federal dollars have had to plan ahead for floods and water damage. But when Houston and surrounding towns start to rebuild after floodwaters recede from Tropical Storm Harvey, they won’t be required to plan ahead for the next big storm.

That’s because on August 15, President Trump rolled back the Federal Flood Risk Mitigation Standard, an Obama-era regulation. The 2015 directive, which never fully went into effect, required public infrastructure projects that received taxpayer dollars to do more planning for floods, including elevating their structures to avoid future water damage and alleviate the burden on taxpayers.

Trump characterized his move as repealing an onerous government regulation and streamlining the infrastructure approval process. But he was criticized by both environmental groups and conservatives, who said it made sense to try to protect federal investments.

Between 2005 and 2014, the federal government spent an estimated $277 billion dollars responding to natural disasters like Harvey.

Obama’s flood risk mitigation regulation was intended to reduce those sorts of expenditures by prescribing certain standards for newly constructed infrastructure. Adhering to those standards might cost more money upfront, but requiring such flood mitigation measures would save taxpayers far more in the long run. According to experts, flood mitigation has a 4-1 payback.

No federal projects were ever built with the new standards, because it took years to go through the required public comment process before the rules were finalized. As federal agencies like FEMA and the US Department of Housing and Urban Development were waiting for final approval, Trump nixed the standards. And without that final approval, the agencies won’t be able to act on any of Obama’s recommendations.

“Had those regulations been finalized for FEMA and HUD in particular, they would have ensured that all the post-Harvey rebuilding complied with those standards, helping ensure that we built back in a way that was safer,” said Rob Moore, senior policy analyst at the National Resources Defense Council.

When the floodwaters recede and Houston looks toward repairing and rebuilding its damaged infrastructure, there very may well be state and local officials advocating for more mitigation projects. But there will be no incentive from the Trump administration to do so.

In fairness, Trump didn’t invent this “penny wise, pound foolish” mindset. It is part and parcel of the anti-government rhetoric that is carefully nurtured by politicians who would never conduct their personal affairs in a similarly imprudent manner.

It will be interesting to see what lessons–if any– the anti-regulation, anti-government, anti-science zealots take from the disaster that is Houston.

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I Don’t Know What This Is, But It Sure Isn’t Capitalism…

A number of media outlets have recently reported that Foxcomm, a company usually referred to as a “Taiwanese giant,” will open a plant in Scott Walker’s Wisconsin. As the Guardian prefaced its article,

The announcement by the Taiwanese giant Foxconn that it will build an LCD-manufacturing facility in Wisconsin worth an estimated $10bn was met with considerable fanfare.

But the state has a troubled history in matters of economic development, and the company, a supplier to Apple, Google, Amazon and other tech giants, has a lackluster record when it comes to fulfilling its promises. The news should raise red flags.

In a way, it is a transaction that barely merits publicity; for as long as I can remember, states and municipalities have been trying to entice “job creators” to their areas by offering bigger and better incentives: tax abatements, infrastructure improvements, job training “grants”–all manner of goodies funded out of our tax dollars.

The deal, backers say, will create 13,000 jobs in six years – in return for a reported $3bn in state subsidies. Only 3,000 of those jobs will come immediately. Furthermore, the Washington Post has reported that Foxconn has a track record of breaking such job-creation promises. In 2013, the company announced plans to hire 500 people and invest $30m in Pennsylvania. The plan fizzled out.

Walker and Paul Ryan aren’t the only politicians taking credit for this deal; the White House immediately weighed in, with President Trump reportedly saying, with his characteristic modesty and eloquence: “If I didn’t get elected, [Foxconn] definitely would not be spending $10bn.”

Jennifer Shilling, a Democratic Wisconsin state senator, is one of those who have criticised the deal, noting that the company “has a concerning track record of big announcements with little follow through,” and questioning the legislative appetite for a $1bn-to-$3bn corporate welfare package. Of course, Wisconsin’s legislature is controlled by Republicans who won’t need bipartisan support to pass the enormous subsidies.

The Guardian noted the patchy performance of Foxcomm elsewhere–Foxconn investments in Indonesia, India, Vietnam and Brazil failed to live up to the hype, despite written agreements–and also referred to the less-than-impressive performance of Wisconsin’s previous economic development efforts.

The Wisconsin Economic Development Corporation (WEDC) is a participant in the Foxconn deal. During Walker’s brief presidential run, it was dogged by questions over failed loans. Businessman and Republican donor Ron Van Den Heuvel was indicted for fraudulently borrowing $700,000 from a local bank. Months after WEDC was created in 2011 the agency, then led by Walker, lent him more than $1.2m, without performing a background check.

Likewise, the state’s manufacturing and agriculture tax credit has been widely criticized as a simple refund for millionaires, according to the Wisconsin Budget Project (WBP) nearly “wiping out income taxes for manufacturers and agricultural producers”.

What the Guardian and other outlets failed to address was the absolute absurdity of these sorts of “job creation” efforts. The use of tax revenues to lure large, profitable corporations to one’s city or state may or may not be immoral (I vote for immoral), but the practice is hardly consistent with genuine capitalism and free enterprise, which require that entrepreneurial activities take place on a level playing field.

Criticisms of these sorts of economic development agreements tend to focus on whether the state or city has made a “good deal.” (Evidently, Wisconsin has not.) But that is almost beside the point. The local factory or other home-grown enterprise that prospers enough to hire new workers doesn’t receive these perks; meanwhile, new, sometimes competitive enterprises are being lured to their state with their tax dollars.

This is corporatism, not capitalism. Paul Ryan and Scott Walker are said to be fans of Ayn Rand, but I’ve read Atlas Shrugged. Rand was a capitalism fundamentalist, and would have been disgusted by this deal; she would have labeled the beneficiaries “looters.”

And she’d have been right about that.

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