The city of Madison is considering changes to its economic development policies that are striking and dangerous. If adopted, they would put our city in a race to the bottom that will needlessly sap our tax dollars while doing nothing to increase our region's economic strength.
Two fundamental policies have governed our economic development programs for decades. The first is that we will grow our own rather than trying to steal businesses and jobs from other communities. The second is that we will provide city financial assistance to a project only when a developer can prove that without it the project wouldn't happen.
In recent years we developed a third strategy, which is to work cooperatively with our neighbors to form a more dynamic regional presence nationally.
The new policy would reverse all three of those sound principles.
The change comes in the fine print of a detailed proposal to revamp the city's policy on tax incremental financing (TIF). Much of what is being proposed in that lengthy document is either innocuous or positive.
But the most far-reaching proposal is the most troubling. It essentially would say that city tax dollars could be provided to a business simply because that business claims that it's getting a better offer from a neighboring community. The exact language in the proposed TIF policy states that city money can be provided if "the employer has received or is soliciting an incentive offer(s) from other governments or economic development entities."
Not only will this mean that businesses with no need for public dollars will demand them, but in fact the policy says that the city can't even take that into account. The exact language from the report reads: "the balance sheet or wealth of an applicant shall not be grounds for rejecting an application."
There's no other way to say it. If this policy is adopted we're simply inviting corporate extortion.
In an excellent series of stories, the New York Times reported on how these kinds of corporate subsidy wars lead nowhere. The Times exhaustively analyzed 150,000 deals and reached this conclusion: "Over the years, corporations have increasingly exploited that fear (that companies would leave), creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors."
The Times estimated that state and local governments give up more than $80 billion a year for incentives that are usually meaningless. "In the end, the money that towns across America gave General Motors did not matter," the Times reported, referring to just the most greedy of corporate welfare clients.
Look, what is being proposed here is cutting edge 1980s-era economic development strategy that was discredited long ago. It doesn't work and it's not worthy of a forward-looking, liberal community.
The city's Economic Development Committee considers these changes at a meeting tonight. Again, some of what's being proposed is just fine. But this dangerous 180-degree turn in long-standing and successful economic development policy direction needs a full public airing. And, in my view, it should be rejected with some enthusiasm.
Still, it's not as if we can afford to stand still. Tomorrow, I will write about what a more sensible, progressive economic development policy might look like.
