Public-private cronyism

If you question the shedload of economic development projects in your city, you are a bad citizen, a naysayer.

We are guilty, of course. The president of our local redevelopment commission said as much recently, publicly rebuking our city councilman.

The councilman, a former banker, had dared wonder if all of the fiscal work-arounds designed to win a council majority weren’t costing us control of our city.

Far from it, lectured the commissioner, a retired philharmonic administrator. He says we are building a showplace and it is all free, or at least it won’t cost in a way that has political ramifications. And to make the naysayer label stick, he listed all of the projects that have been built using tax increment financing, deferred taxation, bonding slight-of-hand and other arcanum in the economic development bag of tricks:

A minor league baseball stadium, for which the city has agreed to pay undeterminable maintenance costs while the baseball team collects determinable proceeds.

A historically designated shopping and office complex similar in design and financial structure to several that have gone belly up elsewhere, the tenants in this case being businesses and government offices that vacated existing space across town.

The renovation of a failed block of bars and restaurants, the third such renovation there in as many decades.

Grandiose multi-use projects near a new promenade along our muddy, high-banked river.

A distribution warehouse along the interstate that arguably would have been located here even without the city’s generous financial incentives.

“He dislikes these things,” he said of the councilman. “I wonder what he does like.”

Exactly. We may never know. Councilmen rarely get a chance to vote on where proposed projects fit into a comprehensive set of civic priorities, if there even is a comprehensive set of civic priorities.

Decisions are made for us ad hoc by politically connected developers, architects, engineers, attorneys and contractors, all savvy donors to council and mayoral campaigns. Projects move forward not out of any proven civic need or on any logical timetable but rather when special interests happen to mesh.

These are what the commissioner calls public-private partnerships, a fanciful construct that assumes “the public” (the government) and “the private” (the economy) can be combined innoxiously without turning your city over to autocrats.

So we don’t dislike any of those projects intrinsically. Rather, we have become convinced if our city is going to reach its potential this next decade, it will have to start depending on the hard work, productivity and judgment of its citizens and not on fiscal gimmickry that plays into the hands of crony capitalists.

Finally, the commissioner ignores that these projects carry what economists call “opportunity costs,” i.e., the lost value of the next highest alternative use of the spent resources. That is, if you put all of your chips into a gussied-up abandoned factory, you will not know what else might have been created with those same resources or even in that same place.

The yields and risks will be quite different. Businessmen consider opportunity costs an important and difficult calculation. Few politicians bother with it.

It is no accident then that none of the commissioner’s projects were market-tested. Rather, they were of the build-it-and-they-will-come variety with insiders guessing how many will come and determining what defines success.

There is a better way, a system centered on accountable, subservient governance. If a project is worthy of taxpayer support, put its real cost squarely in front of the electorate. And if after open debate its worthiness is still in question, which is the case more often than not, let the market sort it out in good time rather than jam consideration into the confines of an election cycle pledging other people’s money.

Otherwise this “free” stuff is going to bankrupt us naysayers.

Craig Ladwig is editor of the quarterly Indiana Policy Review. Send comments to [email protected].