economic development – Page 4

Music for World-Class Cities

When I was in City Hall back in the late 1970s, the goal was to make Indianapolis a “world class” city. That wasn’t just the rhetoric used by the Mayor and his administration–it was echoed by the City Committee (now long defunct) and by the Lilly Endowment, which facilitated the goal with generous grants.

The decision to make Indianapolis into an amateur sports capital wasn’t made because city leaders loved sports, although many surely did. It was based on a hard-headed analysis of where we might have a comparative advantage. The goal was city-building, and sports were a means to that end.

That was then, and now is now. There is no longer a City Committee, and the Endowment–while still generous and immensely important to Indianapolis– no longer partners with elected officials to improve Indianapolis as it did then. Our current Mayor is not a visionary (to put it kindly). Making matters worse, Indianapolis has lost many of the corporate headquarters and locally-owned banks from which we used to draw private-sector civic leadership.

Now, we are in danger of seeing the Indianapolis Symphony–a symphony befitting a world-class city, a symphony of which we have been justifiably proud–become a part-time (read “second-class”) enterprise.

The Symphony is facing significant financial problems. It will obviously be important to determine the cause of those problems–poor portfolio management? Unfavorable labor contract? Other? I certainly haven’t a clue, and few outside the Board and musicians themselves are likely to have even a reasonable hypothesis.

But I do know one thing: in addition to being a beloved part of our city’s cultural scene and a point of pride, the symphony is important to our local economy.

Nationally, nonprofit arts organizations generate $135 billion in economic activity annually, supporting 4.1 million jobs and generating $22.3 billion in government revenue. Investment in the arts supports jobs, generates tax revenues, promotes tourism, and advances our increasingly creativity-based economy. The typical arts attendee spends $24.60 per person, per event, not including the cost of admission, on items such as meals, parking, and babysitters. Attendees who live outside the county in which the arts event takes place spend twice as much as their local counterparts.

A symphony season has far more impact on the local economy than football. Early in my academic career, I worked on a paper with an expert in the economic impact of sports. Such impact as exists is by virtue of intangibles–the value of raising the profile of the city with the team, that sort of thing. There was no direct dollar benefit. Despite that lack of immediate economic impact, we pump large amounts of public money into privately-owned sports teams and venues.

To the best of my knowledge, no public money flows to the symphony and a mere pittance is distributed among other arts organizations in the city. The arts have clearly not been a priority.

I am not suggesting that long-term public funding is the answer to the symphony’s current problems. Obviously, figuring out what happened, correcting missteps as possible, and developing a plan for future sustainability is critical, but that process takes time. If Indianapolis weren’t so starved for revenue, some sort of “bridge” loan or grant to keep the symphony going during that time would make a lot of sense, because keeping something important is easier and less costly than trying to rebuild it once it is gone.

Indianapolis used to understand that world-class cities require constant attention and inspired leadership. These days we don’t seem to have either.

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WTF?

Excuse the title of this post, but I just read the lead story in the Indianapolis Star about Litebox–the company that was showered with praise and promises of tax breaks just yesterday by both Mayor Ballard and Governor Daniels.

In my post yesterday, I questioned whether the obviously strange owner had been adequately vetted. Today’s news makes it abundantly clear that the answer is no. In fact, today’s story makes it clear that the company and its proprietor had not been vetted at all.

What sort of process awards tax incentives to a man who not only has no history of entrepreneurial or business success, but who also has multiple unpaid tax liens and judgements against him in his home state? As a policy matter, I have qualms about the practice of “helping” businesses financially in order to lure them to one’s city. But if we are going to play that game–and it is a game–the least we can do is insure that the businesses favored by state and local government are real, and that they pay their bills. If the rationale for these programs is job creation, the least we can do is ensure that the companies that benefit are capable of producing jobs.

This fiasco is a good example of why I keep harping on the issue of competence.

Didn’t anyone bother to check on this charlatan? Or were they so anxious to announce “jobs” that they didn’t bother?

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It’s the Economy, Stupid!

Most of us remember James Carville’s admonition—the one that became the singular focus of the successful Clinton campaign—“it’s the economy, stupid!”

That laser-like focus on economic well-being was generally seen as a smart campaign tactic, which it was. But it was also smart policy.

Which brings us to the current campaign for Mayor of Indianapolis.

Partisans have argued about the candidates’ respective visions—or lack thereof—and there have been the usual competing claims about public safety, neighborhood revitalization, tax increases and the consequences of selling off city assets. But addressing those issues—in fact, addressing virtually every single issue that voters care about—depends upon the economic health of the city.

And that means good jobs.

It was Henry Ford who first recognized the importance of paying factory workers decent wages—not out of the goodness of his heart, or because he had some sort of humanitarian impulse (he wasn’t noted for either), but because he wanted them to be able to buy his cars. His logic—his recognition that success in business requires people with the means to buy your goods—seems to have escaped many of today’s officeholders.

The same logic applies to cities. You can’t create bike lanes, improve schools, hire police or pick up garbage without money. In Indiana, thanks to state-imposed tax caps that are starving units of local government, cities desperately need workers able to pay the taxes and fees we do impose. We also need to minimize the burden large numbers of jobless citizens place on municipal finances.

Which candidate is most likely to create the jobs we need? Indianapolis voters have a choice between a former Deputy Mayor for Economic Development and an incumbent with a jobs record we can examine.

So how has Ballard done?

According to the Bureau of Labor Statistics, 62,000 fewer people were working in Indianapolis this year than were working here in 2007. As the IBJ reported in late August, “while Indianapolis was hardly alone in losing jobs during the recession….no other major Midwestern city has seen such a sharp decline.” Among Midwestern cities, Indianapolis lagged Pittsburgh, Nashville, Columbus, Milwaukee, Louisville, St. Louis, Cincinnati, Minneapolis, Kansas City and Chicago.

Those still working also lost ground; wages for private workers have declined 8.6 percent during the past four years.

This is stunningly bad performance.

To be fair, one reason for our pathetic showing is Governor Daniels, who believes that government should slash public employment to balance budgets—despite the loss of tax revenue and the added stress on social service budgets that accompany such measures. Most economists believe such actions trigger a self-reinforcing downward spiral. If Ballard recognized the consequences of Daniels’ policy for Indianapolis, he certainly didn’t protest.

Indianapolis needs leaders who understand the connections between government actions and private-sector reactions–leaders who understand that employers don’t relocate their businesses just by comparing tax rates. (Don’t believe that? Look again at the list of cities outpacing us.) Businesses don’t move to places with bad public schools, troubling crime rates and other elements signaling a poor quality of life; they move to—or stay in—cities offering amenities like well-tended parks, efficient government agencies and convenient public transportation.

Given Indiana’s tax caps and other fiscal constraints, the only way the next mayor will be able to do anything other than continue selling off public assets (and our children’s futures) is to create jobs and grow the tax base.

We aren’t stupid, and it really is the economy. Indianapolis—which used to lead—is lagging well behind our peer cities. Kennedy’s right—we can do better.

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What’s He Smoking?

I concluded yesterday’s blog by asking what Ballard is smoking. That reference to smoking rather naturally led some Facebook friends to raise the issue of the smoking ban–the one Ballard supported when he was a candidate, and refuses to support now that he’s Mayor, arguable pissing off people on all sides of the debate.

I’m pretty libertarian; I don’t think the government has the right to prohibit people from smoking either tobacco or marijuana. But I do support the smoking ban (and I’d support a ban on smoking marijuana in public places), for several reasons.

1) The health of workers (not customers). No worker should have to choose between health and a paycheck, and let’s not pretend that those working in bars can just walk away and get another job. Not in this economy. Mayor Ballard says those who work in restaurants and bars are “transients.” I know some people who’ve worked in the same establishments for 20+ years, but even if these workers do move around, is Ballard saying the life and health of “transients” aren’t a concern?

2) Believe it or not, there is a sound economic development argument for smoking bans. Indiana and Indianapolis are falling behind the rest of the nation, the rest of the world and major cities everywhere – convention cities, NFL cities, NBA cities, etc. Among our immediate neighbors, Wisconsin, Michigan, Illinois and Ohio are all smokefree. We’re the ashtray of the Midwest, and if we don’t clean it up, we’re going to lose convention business–not to mention some long-term businesses that don’t want to pay higher “sick-Hoosier” health insurance costs. Which brings me to

3) A smoking ban will lower health-care costs. What my friend Bruce Hetrick calls “the three-legged stool”–smoke-free workplace laws, FDA regulation of tobacco companies, and higher cigarette taxes–is the most effective way to encourage people to quit smoking. Getting people to quit lowers health-care costs for individuals and those who fund their health care.

By itself, this last argument would not be sufficient–there are lots of things we might do to lower healthcare costs that the government cannot require. But given the overwhelming evidence of the harm done by passive smoke and the competitive disadvantage caused by our failure to act, it’s worth noting that doing the right thing has its benefits.

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Let’s Make a Deal

Most taxpayers want their government to be run in a businesslike fashion—to operate efficiently and to be careful stewards of tax dollars. But most of us also understand that government isn’t a business.

So when is it prudent or acceptable for government to invest our tax dollars in for-profit ventures? When do such deals make economic development sense?

I vividly remember the early days of the Hudnut Administration, when downtown Indianapolis was a pretty forlorn place. Businesses were leery of locating in the urban center, and banks and other financial institutions routinely refused to make loans for those few who were willing to do so. The ability of the City to step up, to guarantee those loans and provide infrastructure and other accommodations was crucial to reversing urban decline. The point was to demonstrate to the private market that downtown enterprises could be viable. The trick—and it could be very tricky indeed—was to generate sufficient business activity to allow market forces to take over, without artificially depressing that market, or inadvertently subsidizing some businesses to the detriment of others.

Today, downtown Indianapolis is flourishing. Those early, strategic investments have paid substantial dividends. Municipal loans have largely been repaid, and more importantly, the central city’s tax base has grown substantially.

There are probably cases where public investment in the urban center is still necessary, but many of us who participated in that early redevelopment process are scratching our heads over the Ballard Administration’s proposal to put $98 million dollars (up from an originally announced $86 million) into North of South, a hotel and apartment complex being developed by Buckingham Properties.

The Administration justifies this use of taxpayer dollars (at a time when libraries and public transportation are starving for funds) by pointing out that private lenders all rejected the project as too risky. It doesn’t seem to have occurred to them that those lenders may have had sound business reasons for coming to that conclusion.

Indianapolis has recently added over 1000 downtown hotel rooms; furthermore, hotel bookings in central Indiana declined by 5% during 2010. Why—in the face of excess capacity —would lenders risk financing a hotel project right now? And why should taxpayers subsidize a hotel that will compete with hotels in which we’ve previously invested?

Local blogger Paul Ogden recently posed a fair question: Why is it too risky to borrow $6 million to buy and install new parking meters, but not too risky to issue $98 million in bonds for a project private lenders wouldn’t support?

Ogden also noted that the project’s lobbyist is Tom John, who just stepped down as Marion County Republican Chairman.

Councilor Ryan Vaughn cast the deciding vote on the ACS parking contract despite being ACS’ lobbyist. More recently, Robert Vane resigned as the Mayor’s Press Secretary and won a no-bid consulting contract with the Capital Improvement Board.

It all looks a bit too cozy.

When there is an appearance of impropriety, taxpayers can be forgiven for questioning questionable deals.