The Gadfly is a series of letters offering commentary on local issues and published in the Warrensburg Gazette.
A month ago I wrote questioning the use of tax incentives to support infrastructure improvement for the Lowe’s development. It now appears that the City Council has before it a set of guidelines on providing such support for commercial (as opposed to industrial) enterprises.
While the guidelines would in theory apply to existing as well new businesses, the suggested criteria appear to be slanted in favor of “big box” stores. The guidelines call for the development to create 50 jobs or to spend $5 million to build & equip the commercial development. This in itself is rather vague; the City Council should insure any such guidelines adopted define what is meant by these numbers. 50 part time jobs would have a considerably different impact than would 50 full-time equivalents. If the $5 million includes land, the construction cost requirement and dollar impact would be considerably lessened.
The other option for tax support would be that vacant property is to be developed and it is hoped that the development will cause additional development. This option is wide open to ad hoc interpretation, allowing some favored developer to get breaks that less-favored ones cannot. While our city has been free of such influence peddling, it doesn’t take much research on the internet to see that it is all too common.
It appears that the effect of big box stores on other businesses is also in dispute. What is clear is that the city needs to take into account the overall effect on the local business climate, not just the effect on sales tax revenues. However, such economic analysis is complex, highly theoretical and easy to slant. Revenues will typically be overstated while costs are understated.
It would be better if the city would not try to distort economic decisions; let the market, without government meddling, dictate whether a commercial enterprise succeeds or fails.
For earlier commentary, see Gadfly 238.
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