Recently there have been many stories in the press about efforts across the country to lure the new headquarters for Amazon.
Cities are falling all over themselves to attract this new economic development behemoth and are offering massive financial inducements.
Juxtaposed with this nationwide lovefest for Amazon, there is the planned move of a division of Minhas Furniture House to Robbins. A Pilot article points out that the “lack of assistance from the state was one of the major hurdles that local leaders faced in attracting Minhas,” and that economic incentives “were restricted to what the town and county could put together.”
We have read many times in this paper about the lack of state financial incentives for the wealthier counties like Moore. So in this case, the county and town of Robbins have come up with alternatives themselves.
Does this nationwide and local focus on financial incentives for specific companies bother anyone else besides me?
During my career in city management, I worked on economic development efforts in four cities in three different states. By far, the most successful of these efforts were in McKinney, Texas, where we were welcoming a new employer to town every single month for months on end.
One would think that we must have been offering millions of dollars in financial incentives to attract such a steady stream of new employers. And while there are many numbers from my career that escape my memory, I have perfect recall of the amount of money we offered these businesses to locate in our community: zero.
Businesses came to the community not through monetary inducements, but because the city was well-positioned to meet their needs for a well-qualified workforce, access to markets, and a well-connected transportation network. We were able to provide the services that they required, and a great environment in which their employees could live.
Now, I recognize that not all communities have in place these desirable attributes, nor are they located in particularly desirable areas of the country. But wouldn’t it be better if struggling communities did not need to pony up monetary incentives? What if all towns could compete by improving these attributes instead?
In fact, research shows that financial incentives do not even work.
According to Richard Florida, director of cities at the University of Toronto and a distinguished fellow at the University of New York’s Institute of Real Estate, “The broad body of evidence on incentives … finds that they do not actually cause companies to choose certain locations over others. Rather, companies typically select locations based on factors such as workforce, proximity to markets, and access to qualified suppliers and then pit jurisdictions against one another to extract tax benefits and other incentives.”
A 2011 study by the Lincoln Institute of Land Policy found property tax incentives to be counterproductive, being too frequently given to companies that would have chosen the same location anyway.
“So instead of creating new jobs or spurring employment,” Florida wrote, “the main effect of incentives is simply to deplete a community’s tax base.”
Considering all of this, I am not, however, advocating unilateral disarmament in the offering of financial incentives. What I am advocating is that Congress exercise its constitutional authority to regulate interstate commerce by prohibiting any state or its political subdivisions from offering such incentives. We have a federal government totally controlled by the party that extols free enterprise, and yet the gross interference of economic development financial incentives for specific companies continues here and across the country.
I have heard arguments that our government should not be picking winners and losers in the economy. One prominent current example of this argument is in energy, where federal incentives either promote or demote (depending on your point of view) oil, gas, nuclear, coal, solar and wind.
If this is how the party that controls our federal government truly feels, why do they continue to allow local and state economic development incentives? Are these incentives not even worse because they make winners of individual companies — one furniture manufacturer over other
furniture manufacturers, one retailer over others?
I think that communities in this country should compete by offering a well-educated and well-trained workforce, a well-maintained infrastructure, a well-connected transportation network, and a pleasant place to live and raise a family.
Aren’t we already familiar with the challenge of meeting these needs here in Moore County? Shouldn’t our local and state efforts go to making these attributes possible, rather than throwing money at the latest business relocation?