fedgazette

Letters to the editor: Incentives not all bad

Reader comments on economic development incentives.

Published July 1, 2000  |  July 2000 issue

To the Editor:

Before I was executive director of the Lincoln County (Mont.) Economic Development Council, I was an investment director for the Alberta, Canada Ministry of Economic Development. I could probably offer a different perspective to the issue of economic incentives. There has been a recent formal agreement among the Canadian provinces not to use incentives to compete among themselves for industry attraction.

It was believed that the use of incentives frequently resulted in bidding wars that, in the end, benefited no one (outside of the recipient companies). A code of conduct (part of the Agreement on Internal Trade) was established between the provinces not to use incentives to "poach" companies interested in relocating. Although the code has not always been respected (most glaringly by the province of Quebec which recently has spent hundreds of millions of dollars attracting companies), the code remains in place and there is talk of implementing stronger enforcement provisions.

In the case of Alberta, it is the province's policy that that no incentives whatsoever will be offered to companies interested in setting up business there (the fact that it has by far the lowest taxes in Canada helps support this policy). It is felt that the low taxes and costs themselves should be an incentive in attracting companies, attractions which are available equally to all comers.

The only recent exception made to this rule has been the allocation of training incentives, which have the benefit of creating local jobs which for lack of specialized training would otherwise come from the outside.

Robert Tunis
Executive Director
Lincoln County Economic Development Council Inc.
Libby, Mont.

To the Editor:

I am writing in response to the April issue of the fedgazette focusing on economic development. I am unable to speak well for other areas; however, I think I can say for the Upper Peninsula, economic development (ED) efforts are not as disjointed as the articles implied.

Over the last 24 months, most practitioners in Michigan's Upper Peninsula have come together to form the Upper Peninsula Economic Development Alliance (UPEDA), which includes public and private sector members.

The goal of the UPEDA is to coordinate economic development attraction activities and to act as an information-sharing body between member organizations. Two additional points: (1) I found your article comparing ED efforts to stone soup to be slightly insulting to professional practitioners and communities engaged in ED efforts. And (2) if fault is to be placed (without attempting to point fingers) the state and federal government need to assume some fault—an example being purely speculative funding of economic development infrastructure projects (specifically industrial parks) in highly distressed rural areas, which lack any real possibility of becoming successful ventures.

There seems to be very little accountability in the funding of speculative ED projects, especially infrastructure-related projects. Yet there is basically a dry well when it comes to ED projects that might actually add value to a new location, such as loans and grants for the development of speculative buildings and high-tech infrastructure systems.

Frankly, prospects expect land, water, sewer, electricity and telephones. If a community can't provide these basic services they shouldn't be playing the game. However, spec-buildings and high-tech infrastructure that help to differentiate communities is where the winning game appears to be played.

James Anderson
Executive Director
Schoolcraft County EDC
Manistique, Mich.

To the Editor:

I am responding to your previous editorials about public sector economic development.

Recently, the federal EPA designated St. Paul as a Showcase City (one of 16 cities nationwide out of 200 applicants) in recognition of the St. Paul Port Authority's innovative, focused and outcomes-oriented industrial redevelopment production. We link the renewal of defective and dirty land with maximizing private sector development outcomes so that St. Paul residents can have good jobs and wages. We accomplish this through customized job training (serving both employers and job seekers), real estate and finance services.

The efficacy of the Port Authority's efforts is clear, and we are providing St. Paul neighborhoods with a very good "bang for the buck": results that generate significant financial return on investment.

Your paper has recently provided a rather pejorative twist on economic development. Please consider some alternative views. As Dennis Warta of New Ulm recently noted, there are exceptions to the "all or nothing" approach to economic development. These are particularly vital to the very lifeblood and economic pulse of inner cities like St. Paul.

We agree that certain suburban communities over the years have misused tax increment financing (TIF), making direct payments to businesses as a quid pro quo for these companies relocating there. We favor restrictions on this type usage of TIF. However, let's not ever forget that TIF is one of the very few remaining redevelopment tools available. The Port Authority uses every dime of TIF for curing defective land and making it marketable. This was the original intent of TIF, and it works well.

I am surprised that the previous fedgazette editorials have not recognized the key benefits of the use of public economic development tools, especially all-important spin-off effects: long-term incremental private sector investment adjacent to and fanning out from publicly assisted projects. See what's happening now along West 7th Street as a result of the new convention center and hockey arena, and keep watching over the years. Count the housing rehab and new commercial development that has occurred over the past decade as a result of the Port Authority's Energy Park center.

Successful economic development includes specific outcomes criteria that drive the effort. There's no room for naysayers who offer no viable alternatives. Should Frogtown and North End residents live next to the blighted, underutilized Maxson Steel and the Dale Street Shops sites? Absolutely not. As one Federal EPA official gasped as we toured these sites, "Where's the economic and environmental justice for these neighborhoods? No one should have to put up with this." Our work will solve the site issues and create hundreds of jobs.

Should huge piles of aggregate on a 30-acre site with air and soil pollution remain in the East Side's Phalen Corridor? Absolutely not. We just transformed this into the shiny new Williams Hill Business Center, with over 650 jobs and property taxes that have increased tenfold.

The cycle of disinvestment and the defective nature of certain real estate in cities like St. Paul must be acknowledged and understood to appreciate fully the critical need for public sector initiatives. They fill a very large vacuum, created when private investors cannot "pencil out" a reasonable return on equity from these challenging parcels.

It's all about complex real estate and community revitalization issues. They deserve depth of analysis, sensitivity to value-added outcomes, and empathy for residents who might have to live for many more years next to these obnoxious sites, were it not for thoughtful and aggressive public sector economic development that yields jobs and business retention and growth.

Lorrie Louder
Director of Industrial Development
St. Paul (Minn.) Port Authority

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