Tuesday, January 03, 2006

More Crony Capitalism in the City of Milwaukee

From Murphy’s Law:

. . . an account of how Mayor Tom Barrett wants to subsidize Manpower, Inc. in a deal to induce the firm to move from Glendale into downtown Milwaukee.

The deal involves a TIF district, the proceeds of which are to build a parking deck for Manpower employees, who will not have to pay for parking.

As columnist Bruce Murphy points out, the deal is irrational on several levels.
The Journal Sentinel quickly gave the deal one thumb up, saluting it for strengthening Downtown while conceding that Glendale might be miffed. Indeed. At a time when we’re working for (and the JS is editorializing for) regional economic cooperation, what is the payoff for spending millions to move a company a few miles?

The plan involves tax incremental financing, meaning the city borrows money that is then repaid over a period of 20 years from increased property taxes generated by the development. That means that for two decades, until the TIF is paid off, no property taxes on this real estate will go to Milwaukee County, Milwaukee Public Schools or Milwaukee Area Technical College.
This is a funamental problem with TIF districts. While lowering all taxes (including property taxes) is a dandy idea, and while we might consider paying for municipal services in some way other than property taxes, giving huge tax breaks to businesses that happen to have clout and political connections (while requiring other businesses to pay full freight) is simply irrational.

Murphy goes on:
The site in question is on the river, a much desired location for residential development. What would be the loss if Manpower stayed in Glendale and more condos moved along the river? Wouldn’t that result in more people paying city property taxes and going to Downtown restaurants and shows?

It would be one thing if this were a manufacturer offering new family-supporting jobs for unemployed central city residents. But this is a white-collar company where 70 percent of employees live outside the city. . . .
This is all too typical of how government distorts markets.

The market would say that, since Manpower employees are heavily white collar suburbanites, having them work in the suburbs (saving gas money and minimizing highway congestion) is a good idea. The market would also say that if riverfront property is desirable for condos, but not any better than any other place for a large, boxy office building, the condos should be built on the river, and the office building put someplace else.

And if one is the sort of person who doesn’t like markets, one should at least concede that if government is going to intervene in markets, it ought to do so to help people in need, rather than affluent corporations.

Like much that happens in politics, this is a scheme to give Barrett and other politicians something visible to brag about, all the while imposing massive (but for casual observers, hidden) costs on everybody.

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