From the Richmond Palladium-Item:
Richmond Common Council is examining possible changes in its tax abatement ordinances.
Taxpayers should draw some amusement in watching otherwise self-professed, free-market Republicans, who comprise a council majority, use government to try to influence market choices.
Abatement arguably has a role in economic development, but the effort to define what that role should be needs to be heavily weighted toward limiting the role, not expanding it as seems the government inclination because “everybody does it.”
One incentive for limiting that role might be for local government to decrease its own revenues in subsequent years by the amount it has abated in taxes, thereby bringing its spending more closely in line with the dollars it has abated, rather than as now essentially requiring that other taxpayers pick up the difference.
Chances of government taking that kind of hit? Zero.
One of the questions before council that was tabled this week was whether to make changes to its abatement ordinance in a manner that would help retain and create future office jobs which, like retail jobs, have fallen largely outside of abate-eligible properties.
Hard-and-fast rules are often the enemy of sound public policy. Who would argue, for example, against comparatively high-paying pharmaceutical, research or life sciences jobs here, even though they might readily be classified as “office jobs.”
Ditto to the request by Finance System of Richmond, a billing and collections company seeking a 10-year abatement on a $500,000 project that is expected to create 32 jobs at the site of the former Ryan’s restaurant building on Richmond’s east side at U.S. 40 near Interstate 70.
The case for the abatement for Finance System should have less to do with its classification of jobs than its planned location. Is floor space at the site of a high-traffic intersection where a restaurant was once located best suited for another restaurant/retail kind of client, or for office?
While one might argue restaurant/retail space dependent upon those nearby motorists, the right answer surely has to be to let the market, not government fiat or incentive, decide that. Problem is, with its approval of an abatement incentive, should it elect to do so, local government is exercising an undue influence on the market.
Maryann O. Keating, Ph.D., of South Bend, co-author of “Microeconomics for Public Managers,” takes on the matter of tax abatements in a July 24 article for the Indiana Policy Review, where she serves as an adjunct scholar.
“The assumption is that improvements to certain properties would not occur in the absence of abatements; therefore, in the long run, future property-tax revenues, employment and local income-tax revenues should increase,” Keating writes. “There is a real cost, however, to the general public from tax abatements, namely, forfeiting increased taxes that may have been generated without abatements.”
It’s a valid point, and just one more of many that council needs to weigh seriously when deciding — sparingly — whether a planned development justifies a public investment in the form of tax abatements.
http://www.pal-item.com/apps/pbcs.dll/article?AID=2013311200003
