Archive for February, 2008

NY Subsidy Law Expires, IDA Reform Still Pending

February 5, 2008

For the third time in the past two years, New York State law makers have failed to reach an agreement on legislation that would make Industrial Development Agencies more accountable. As a result, the part of the law that enables IDAs to issue tax exempt bonds for non-profits has again expired. Advocates have been using the expiration of this provision to push for broader IDA reform that would affect for-profit businesses as well as non-profits, but over the past two years the current law has been extended twice without any new reforms. As legislators continue to negotiate, it is unclear whether the standoff will end with real reform or another temporary extender of the current law. The Assembly recently passed a comprehensive reform bill (A8703), but the Senate has not taken action on this.

IDAs are the entities through which many discretionary economic development subsidies are granted at the county and local level. The State has a total of 115 active IDAs, which grant property and sales tax breaks to businesses and issue tax-exempt bonds for non-profits.

 

Labor, community and watchdog groups, along with some state officials, have long questioned the public benefits of many IDA deals. In 2006 a State Comptroller audit found that two-thirds of IDA projects did not meet their job creation goals and that most IDAs lack effective processes for evaluating projects. Last year Jobs with Justice released a report that also found that New Yorkers have not been ‘Getting Our Money’s Worth’ from IDA-subsidized projects, and Good Jobs First released a report showing that some IDA subsidies promote sprawl.

 

Since the late ‘90s, Good Jobs New York has been keeping track of the New York City IDA and reporting on its more egregious subsidies, including those for the New Yankee Stadium and its associated parking garages.

Is Bridgestone Driving Akron to Provide the Kind of Subsidy Deal Given to Goodyear?

February 4, 2008

The tire industry in Akron, Ohio—traditionally known as the rubber capital of the world—is a shadow of its former self. And now Bridgestone Firestone is threatening to relocate its 600-person technical center to Tennessee unless the city comes across with a juicy subsidy deal. A couple of days ago, the Cleveland Plain Dealer quoted deputy mayor Dave Lieberth as saying that the size of the package would be decisive in the company’s decision on whether to move.

As is typical in these situations, a Bridgestone official made it seem as if the money was the last thing on the company’s mind. “We are looking at quantitative and qualitative factors. One is the historic ties the company has with Akron,” a Bridgestone VP told the Plain Dealer. Those ties did not prevent Firestone from moving its headquarters to Chicago in the 1980s nor did they prevent Bridgestone from moving them again to Nashville after the Japanese company acquired Firestone.

It is not yet clear whether Bridgestone actually plans to stay in Akron and is using the threat to leave as a way of pressuring the city to offer the subsidies—or whether it has made up its mind to leave and is letting the city go through the motions of putting together a retention package.

Recently, Bridgestone’s competitor Goodyear got Akron to put up some $50-60 million in subsidies in exchange for a commitment to build its new headquarters in town rather than accepting one of various out-of-state offers.

Both Goodyear and Bridgestone received controversial subsidies in North Carolina that are the target of a lawsuit filed by the North Carolina Institute for Constitutional Law. That case, filed in December, is pending in state court.

TIF, Greenfields, & Sprawl

February 4, 2008

Good Jobs First today released a new in-depth article about the nation’s most controversial kind of economic development subsidy – “TIF, Greenfields, and Sprawl” – just published in Planning and Environmental Law, a journal of the American Planning Association.

See it on our website

The article includes a segment on the most notorious current TIF dispute in the nation: in New Mexico, where radical TIF deregulation threatens to undermine funding for state and locally funded public services.

Related links:

TIF and sprawl in the Twin Cities Metro Area

Job subsidies and sprawl: Chapter 6 of The Great American Jobs Scam

Sprawling subsidies for Cabela’s and Bass Pro

ARTICLE SUMMARY: Tax Increment Financing (TIF) is an economic development incentive tool funded by diverting the incremental increase in property and/or sales tax created by redevelopment or new development within a geographically defined TIF district.

As originally enacted in most states, TIF was intended to reverse private-sector disinvestment in older, urban areas with physical “blight” or contamination, so its use was not widespread. However, over the past three decades, some states have loosened their TIF-targeting criteria; in other states, courts have granted localities wide latitude in defining “blight.” In the same decades, federal aid to cities declined, and some states enacted legislation or ballot initiatives causing “fiscalization of land use,” or a tax base-driven distortion of local governments’ development priorities.

For all these reasons, TIF is now increasingly associated with “greenfield” or sprawling projects, including big-box retail. A few retail chains have become especially aggressive seeking TIF, such as Cabela’s, the outdoor sporting goods company. And a mixed-use new urbanist project by the partnership Forest City Covington on the edge of Albuquerque will benefit from a very large TIF tax diversion.

Because such applications are so far astray from TIF’s original pro-urban mission, and because TIF often diverts large amounts of revenue for many years from other bodies of governments—especially counties and school boards—it has become the United States’ most controversial economic development subsidy.