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Economic Development in Hard Times: TIFs, CAPCOs, and Other Bad Ideas

Economic Development in Hard Times: TIFs, CAPCOs, and Other Bad Ideas. Greg LeRoy Good Jobs First EARN Conference September 13, 2011 ~ Milwaukee. Your Power-Panelists. Julia Sass Rubin of the Bloustein School at Rutgers Deborah Howlett of New Jersey Policy Perspective

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Economic Development in Hard Times: TIFs, CAPCOs, and Other Bad Ideas

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  1. Economic Development in Hard Times: TIFs, CAPCOs, and Other Bad Ideas Greg LeRoy Good Jobs First EARN Conference September 13, 2011 ~ Milwaukee

  2. Your Power-Panelists • Julia Sass Rubin of the Bloustein School at Rutgers • Deborah Howlett of New Jersey Policy Perspective • Kathy White of the Colorado Fiscal Policy Institute • Greg LeRoy of Good Jobs First (moderator)

  3. $70 Billion per Year! • Property Tax Abatements • TIF: Diversion of Property and Sales Tax • Corporate Income Tax Credits • Sales Tax Exemptions • Enterprise Zones • Land Write-downs • Infrastructure Aid • CAPCOs

  4. Definition of Tax Increment Financing(TIF ) • A diversion of the future growth (the “increment”) in one or more tax revenue streams within a geographically defined “TIF district” • To subsidize (re)development in the district • Originally enacted to reverse physical “blight,” but often since perverted

  5. Our Theory of Change:Dormant Public Power To create good jobs and reduce poverty To grow a stronger, fairer tax base To engage taxpayers in local economies To strengthen local businesses, foster entrepreneurial culture To curb sprawl and global warming

  6. Site Location 101 Business basics matter (not tax breaks) Public officials in “prisoners’ dilemma” “Job blackmail,” “Economic war among the states” (and suburbs) Unregulated site location consultants

  7. Problem #1 Popular Economic Miseducation

  8. Problem #2 Too much retail

  9. Problem #3 Too little green

  10. Problem #4 Fuel for sprawl

  11. Problem #5 Subsidized Shops Running Away

  12. Problem #6 Lack of coordination with transit and job training

  13. Problem #7 Covert budget erosion

  14. Problem #8 Bias against small, local entrepreneurs

  15. Reform #1: Disclosure! • Annual, company-specific reporting of the deal (costs) and outcomes (benefits) • On the Web, accessible, searchable, downloadable • Time for a Report Card!

  16. Show Us the Subsidies • 51-State “report card” on major-program disclosure: company names, dollars, jobs, wages, address – and outcomes • Only two states get a “B” (many still fail to report outcomes) • 13 states plus D.C. still in the Dark Ages

  17. Solution #2: Location Efficiency • In areas with transit, no subsidies unless the worksite is served by public transportation

  18. Solution #3: “Green Strings” • No new subsidies, no renewal of subsidies for dirty commercial-industrial buildings • E.g., no abatements for office buildings w/o LEED or LEED-EB • E.g., no tax credits for factories w/o clean production systems

  19. Solution #5: Reduce and Target Retail Subsidies • Limit strictly to areas such as “food deserts” that truly lack basic retail amenities

  20. Solution #6: Clawbacks • “Money-back guarantee” that provides for repayment of all or a prorated share of a subsidy if a company fails to deliver jobs and/or other community benefits in a reasonable period of time • Related safeguards: rescissions and recalibrations

  21. Solution #4: Priority Shift to Small Businesses • Reduce subsidies to sectors/ companies with best access to credit markets • Increase subsidies to small businesses most hurt by credit squeeze

  22. Solution #7: Unified Development Budget • Annual report to legislature itemizing all forms of spending for jobs • Purpose: treat all forms of spending fairly, including tax expenditures

  23. 2011-2012: A Perfect Storm • State revenues still depressed • No more stimulus relief • Jobs issue highly politicized • Rising taxpayer expectations re: government transparency

  24. Fightback Toolkit • Accountable USA • Show Us the Subsidies • Subsidy Tracker • Public-Private Power Grab

  25. Accountable USA 51 state web pages One-stop shopping for scams Case studies Big Giveaways Links to allies

  26. Big Giveaway Index • Passive Investment Companies • Single Sales Factor • Film/Media Production Subsidies • TIF – Tax Increment Financing • Unregulated Site Location Consultants

  27. Subsidy Tracker First-ever searchable national database of company-specific subsidy data

  28. Public-Private Power Grab • Ohio, Wisconsin, Iowa and Arizona privatizing economic development • 20 years of troubled history

  29. Over-Arching Message “At a time when state governments must make difficult budget decisions, spending to create jobs should be transparent, fair and effective.”

  30. Contact Greg LeRoy Executive Director Good Jobs First goodjobs@goodjobsfirst.org www.goodjobsfirst.org 202-232-1616 x 211

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