Thursday, December 6, 2012

The HCA Deal and the Race to the Bottom. Maybe Stites was right.

On Tuesday night when the Council voted to lavish $66 million on HCA to entice them to move their headquarters all the way from Brentwood to Nashville and to develop a prime piece of property, only one Council member voted against the give-away deal, Josh Stites.

He argued that the city had just raised property taxes and now we were turning around and giving away massive amounts of money to one of the wealthiest corporate citizens in Nashville. He also argued that by exempting so many companies from paying taxes, that our tax collections would suffer and there would be insufficient revenue to improve schools. Quality of education he said, is one of the prime factors that cause companies to choose to move to a particular city, so while we are enticing companies with massive tax abatement giveaways, we are making our community less attractive to companies by insufficiently improving schools,

Stites also argued that giving such money to big companies was simply not fair and we should also provide the same incentive to small business.

I opined that while in principle I was sympathetic to Stites argument, that if I were serving in the Council, I would have nevertheless held my nose and voted for the deal. I wish we gave no financial incentive to TV and movie production companies, sports teams or companies. The truth is, however, that if we did not we would never get a TV show or movie, we would not have professional sports teams, and would probably loose the areas biggest employers.  Giving money to one company and not another is picking winners and losers and that offends me. I don't like the way we have to do business, but I am pragmatic enough to know we are in competition with other cities. To compete, we have to compete in giveaways and tax abatements.

I don't like it that sports teams or movies or companies can hold us hostage, but they can and they do. If the Country Music Hall of Fame was to announce that they planning to move to either Knoxville, Austin, Atlanta, or Lexington and started a bidding war to go or stay, how high would the bidding go?  How much should and would we pay to keep it?  I don't know, but I would want us to compete to keep it here.

In an editorial appearing in yesterday's New York Times called Race to the Bottom, the problem of cities and states using incentives to lure businesses is explored. The editors must have been listening to Josh Stites when they say, "The Times found that state and local governments are giving out $80 billion a year in tax breaks and other subsidies in a foolhardy, shortsighted race to attract companies. That money could go a long way to improving education, transportation and other public services that would have a far better shot at promoting real economic growth."

I would like to print the whole piece but respecting Fair Use, I am only posting a couple other excerpts:

  • Though they promise that the subsidies are smart investments, far too often the jobs either don’t materialize or are short-lived, leaving the communities no better off. 

  • The fact is, numerous studies show that such incentives result in only a small increase in jobs and that any gains usually come at the expense of other cities and states. 
  • The senseless race to give away billions in subsidies is, of course, hard to stop when elected leaders think a pledge of potential jobs might help in their next election.
 You can read the whole article here. Also, the Times is doing an in depth three-part series exploring how cities lose by giving away money. Part one of that series can be found here.

Stites may be right. I just wonder how one can get off the giveaway treadmill while other cities are going full steam ahead.

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1 comment:

  1. Some of us have been saying for a LONG time that improving our schools, the safety of our city and the infrastructure of our city (sidewalks, sewers, roads) which legitimately makes our city more livable will then naturally attract excellent corporate welfare kickbacks involved. Of course, those mundane duties of the government require servants to accomplish and not politicians who are only looking for monuments to enhance their resumes.