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Around the USA, people asking questions about economic incentives

February 22, 2019

IN COMPLIANCE WITH COPYRIGHT LAW, THIS ARTICLE IS NOT REPRODUCED IN ITS ENTIRETY

 

 

By Brian Kaberline  – Editor, Kansas City Business Journal - February 22, 2019

 

New York isn’t the only place where people have begun to question the use of economic incentives.

 

Kansas City voters will have a chance to directly shape incentives policy in the form of a question that will appear alongside the mayoral race on the June 18 ballot. The initiative, put forth by the Coalition for Kansas City Economic Development Reform, would cap property tax abatements approved by the Land Clearance for Redevelopment Authority, the Planned Industrial Expansion Authority, PortKC and the Tax Increment Financing Commission of Kansas City at 50 percent. It also would cap Chapter 100 sale/leasebacks and Chapter 353 abatements.

Debates about economic incentives too often take the form of small pockets of proponents and opponents, shouting at the tops of their lungs in opposite directions. Meanwhile, the bulk of the population is in the middle, often making little effort to listen to the dueling arguments.

 

That’s unfortunate because we’re talking about a policy that involves, yes, millions of dollars, but also growth, employment, fairness and quality of life. It could be tragic if a ho-hum mayoral race leads to a low number of voters deciding the fate of Kansas City’s incentives policy.

 

The situation with New York and Amazon’s HQ2 project has captured national attention, with one side bemoaning the lost opportunity to add 25,000 tech jobs and the other furious with a deal that would grant roughly $3 billion in incentives to a company run by the world’s richest man. The basic forces behind this collision can be found in Kansas City, albeit with a few zeroes knocked off.

 

A fundamental problem is that the payback on incentives is debatable — literally. Kansas City commissioned a big study on the effectiveness of incentives, which was released in August. The consultants said the city received $3.83 in additional tax revenue for each dollar of development incentives granted during the decade ended in 2015. They couldn’t present information on the relative effectiveness of the incentive programs and — the biggie — how much development might have occurred if there were no incentives.

 

You can’t honestly point to all the new and redeveloped buildings in Downtown and claim that none of it would have happened without healthy tax abatements. And you can’t seriously believe that this transformation would have happened to the same extent even without incentives.

 

There have been attempts to put forth a standardized scorecard for projects and to put a 75 percent cap on abatements. But there have been enough exceptions and workarounds to leave those worried about tax breaks unconvinced that there’s been real policy change. The initiative seeking to place 50 percent caps on abatements is a reaction to these doubts.

 

A slick, well-funded campaign might defeat the ballot measure in June, but the better solution is to have an open debate about how to make the city’s development priorities and incentives guidelines clear yet flexible.

The continuing mayoral forums and debates provide a ready platform for discussions about incentives, and the election of a new mayor and a mostly new City Council provides perfect timing for instituting any necessary

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