There's been quite a bit of discussion and even some outright arguing lately over just how successful the traditional “economic-development tools” really are in “creating” new jobs.
Michael Hicks, the director of the Center for Business and Economic Research at Ball State University, has been leading the forces who say that, on the local level at least, tax abatements and Tax Increment Finance zones (the two most-frequently employed of the aforementioned economic-development tools), produce “generally disappointing results.”
A request for tax abatement, in which the potential new business is granted a reduction in its property-tax bill for a specific period (usually 10 years) if it locates in the area, is standard-operating procedure these days.
There are conditions attached to the abatement, benchmarks that the business must meet to continue to receive the benefit. But such goals are generally set pretty low and can be easily attained.
The justification cited for granting a tax abatement is that, eventually, the business is going to be paying its full share of property taxes, and in the meanwhile, there will be the additional local income tax revenue generated through new jobs that the county will be collecting.
There's also the if-we-don't-someone-else-will argument, and elected officials don't want to risk the criticism (especially come election time) that they let “good-paying jobs” get away to a rival county.
And they are always “good-paying jobs.”
Hicks says those new jobs actually cost counties about $30,000 apiece to create — money that could have been invested in other ways that also would have attracted new development, such as education and infrastructure, and generated additional tax revenue.
TIF zones are even worse economically in creating new jobs, according to Hicks, with each new job costing $33,000 each year in lost local tax revenue.
Hicks' solution is to let state government handle job creation and for local governments to focus instead on quality-of-life issues — good schools, attractive recreational facilities, adequate public infrastructure such as roads and sidewalks, clean drinking water and proper sanitary-sewage systems.
The city's Redevelopment Commission is in charge of spending the property tax dollars collected through the TIF zone, and we haven't agreed with every decision it has made in spending that money.
We don't see why TIF funds were used to pay for the cleanup of the Gimbel Corner or to tear down the building at 401 Main St. (We also don't understand why those properties haven't been sold, why they haven't been put up for auction to get them back on the tax rolls.)
There's other RDC spending that's concerned us, for varying reasons, and our thinking always comes back to these questions:
What could the Vincennes Community School Corp. have done with its share of that money?
What could the other affected taxing units — the library, for instance — have done if they had received all their normal property-tax revenues?
How economic-development resources are spent matters. Too much of the spending of TIF dollars goes to projects that aren't likely to create a single job, good-paying or not, that are projects more within the purview of the city itself — parking lots and such.
Hicks' and his allies may be right that TIF zones and tax abatements on the local level are ineffective in their intended purpose — and unfortunately local officials may be providing the evidence to support their case.