fedgazette

Letters to the Editor

Readers respond to Arthur Rolnick's comments on business subsidies in the January fedgazette

Published April 1, 2000  |  April 2000 issue

To the Editor:

Just a few lines to let you know how much I appreciated reading your "Counterpoint" in the January 2000 fedgazette. By way of introduction, I have been working with Congressman David Minge for many years on this public-lending issue and as to how unrealistic it is as an economic development tool. It is simply a gimmick, which is not even a win/lose situation, but is truly a lose/lose result. I attended a session sometime back in your new building—in the boardroom—and I spoke as a former economic development coordinator at the time. I now also can relate to the other side as I am in my fourth year as a city councilor in New Ulm [Minnesota].

I totally agree that public funds should not be used to entice industries to move from one city or state to another. However, Arthur, I must confess that there might be some special occasions where some type of economic help is necessary. An example may be the use or reuse of a piece of land that would never be developed without a tool such as tax increment financing. Another exception might be made if public money were used to make low-interest loans in order to facilitate the rehabilitation of bad buildings, especially if they would raise all property values and reduce the possibility of a seedy or slumlike neighborhood.

I will forward my comments to Congressman Minge's office. Again, thank you for your statements. I hope that some action will be taken on this at some time and the earlier the better.

Denny Warta
New Ulm, Minn.

To the Editor:

I enjoyed reading Art Rolnick's remarks about the lessons that can be learned from the Excelsior Henderson debacle and I agree with Art, as I usually do, about appropriate limitations to the role of government. Let me add an additional thought which does not conflict.

I bought a few shares in Excelsior Henderson, after the stock had declined quite a bit, with the thought that some company might acquire the motorcycle company. I had been through the plant several times and it was a good plant and a well-designed product. Minnesota needs more manufacturing, or substantive economic activity of one type or another. Minnesota has a superficially strong economy but much of it seems synthetic—excessive retail, profligate but marginal services, too much indirect activity but weakening competitive position on production. I agree that government does not seem to be able to favorably impact the industrial economy and I very much agree with Art's point of view on industrial subsidies. But, I wish I could feel more confident in Minnesota's industrial future. Each year, another major company or two seems to get neutered. Agriculture remains problematic. Perhaps more alarming is the dramatic shift of high value-added manufacturing processes to other locations. I am convinced that very few people know about or understand these major wealth-changing trends. Perhaps the fedgazette can continue discussion of these important topics in the future.

Best wishes to you all. I read every issue of the fedgazette, but sometimes I do not get to it right away. It is a great paper.

Fred Zimmerman
Professor of Manufacturing Engineering
University of St. Thomas
St. Paul, Minn.

To the Editor:

I could not resist commenting on your article regarding Excelsior Henderson in the fedgazette of January 2000. I have been involved in commercial real estate investments my entire career and have observed firsthand how the municipal and state economic development tools have been used and abused.

I find your remarks to be refreshing. I agree with your thesis that we should have federal laws that limit and control the use of these tools in bidding wars to transfer jobs and economic growth from one city or state to another.

To be perfectly frank, what real estate developer or private company would not try to avail itself of the benefits of a state loan or municipal subsidy when everyone else is doing it too?

Your principles should apply in spades to the use of state or municipal subsidies and/or loans to private sports teams.

In the case of Excelsior Henderson, it was at least questionable whether its promoters, without the state loan, could have started the business. Clearly, with hindsight, the state backed the wrong horse. However, this loan at least gave its proponents the argument that "but for" the state loan, a new industry might not have been created and the risk was worth it.

In the case of the Vikings and Twins, they are creditworthy franchises that appreciate in value with the capacity to pay very large salaries to players and coaches. These teams could easily adjust their business plans to the necessity of paying market rate rent for a stadium. Labor costs might have to be cut to accomplish this and $2 million to $20 million salaries might have to be cut to $1 million to $15 million so the team has enough cash flow to pay the rent. A level playing field is needed here also. It can only be provided by federal legislation that prohibits the bidding war practices currently being used by teams to leverage communities to use taxpayer dollars to subsidize their profits by building stadiums.

You might do a follow-up on this theme in your next article. I applaud your willingness to speak out on these issues.

Bruce M. Carlson
Executive Vice President
Northco Real Estate Services
Edina, Minn.

Read Mr. Rolnick's comments, and the Minneapolis StarTribune editorial to which he responded.

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