Friday, November 21, 2008

Northampton County Council Considers More Corporate Welfare

On Wednesday, Northampton County Council was told its pension fund is currently running a deficit of $60 million. The cost of developing just 50 acres at Weaversville Wayne Grube Memorial Park will be another $6.5 million. Real estate tax revenues are flat. Now is not a good time to be handing out tax breaks.

Yet that's precisely what's before Northampton County Council right now. Proposed Keystone Opportunity Zone (KOZ) expansions in Northampton, Portland and Bangor will remove $13,000 in real estate tax revenue.

The Bangor proposal, which includes The Trust Building, drives Angle nuts. "We're giving a tax break to a guy from out of the county to buy The Trust Building, rent it out and not pay taxes for ten years. . . . The chance of me voting for this is zero."

Council member Mike Dowd disagrees, noting that KOZ classifications spur development.

Council will vote on this proposal in two weeks.

Over the last two years, Pennsylvanians have handed out more than $567 million in corporate welfare grants from the state general fund budget to politically connected businesses. Between 2003 and 2007, Pennsylvania ranked 38th in job growth, 40th in personal income growth, and 42d in population growth among the fifty states. Keystone Opportunity Zones have only helped the make the rich a little richer.


Anonymous said...

bernie...can you or any of your readers tell us of ANY KOZ programs that have actually worked....where a business was recruited, went through the 10-year start up phase and eventually returned the property to the tax rolls at a higher level?

Bernie O'Hare said...

I am unaware of any recent examples with the exception of some small business near Bangor. In NC, I can think of the following recent examples:

1) Cinema Paradiso Atiyeh was going to convert a theatre into offices and draw business from jersey. After the KOZ was granted, he rented it to another theatre group. It is currently vacan.t The place could not cut it, even with a KOZ.

2) Hotel Easton This at first was going to be office space. Then it was condos. Now it is back to being a hotel again. The KOZ did not help.

3) Majestic Unless granted a KOZ, this outfit was going to movee. Now it's moving anyway.

Anonymous said...

They should overspend on the park and justify it by calling the result, "nice."

How appropriate.

Government handouts are the new black. We better get used to it. Have you driven a Ford lately?

Michael Donovan said...

As a former economic developer, I have found that most incentives favor the investor and not the taxpayer. In most cases, negotiation for a partial benefit does not happen. Instead of granting, say, 50% of a tax break, typically 100% is given, something which I totally disagree.

Unfortunately, I do not have influence at the state level to achieve such a result. I have seen only a few states begin to consider partial incentives, or a clawback (which I understand is illegal in PA). Basically, it becomes a race to the bottom, a price war. In my own examination of economic development incentives, I find that such deals are often designed to cut a ribbon, which has great political value, but not necessarily economic value.

I will not say that all KOZ determinations are based on political friendships. I can see why one might think that way. Instead, what I see is the economically powerful are able to qualify for the advantage while others who are not in the position to do so, have to accept exclusion. It really is a case of economic strength that turns into political power. Political power is different, in my opinion, from political friends. I know that is a subtle difference, but it is a difference.

For the three cities to improve, we must consider other antecedents to economic development. Confidence, fairness, and good problem solving contribute to economic development. When people perceive unfairness, problems develop. Scientific advancement and international sales/inward investment also contribute. The quality of the workforce must improve. Much of economic research points out that tax incentives are just part of the equation. Much, much more must be put together to attract firms.

For example, in the region, our traditional views have created an atmoshphere that is not exceptionally attractive to professionals who have experienced cosmopolitan environments. I am aware of recruitment problems, as a result. Our urban areas seem forgotten.

I'll add, finally, that a loss of $13,000 in tax revenue is not that much. The question must ask what are the benefits? Often the benefits are hard to measure.


Best regards,

Michael Donovan


Glenn said...

KOZ Lehigh Valley Listings..

In case that link gets cutoff in this blog message...

"Find a KOZ :"

Anonymous said...

Ron Angle is one of the few people on Council who is talking about and doing his job looking out for the taxpayer. Love him or hate him...he knows his stuff. Hey!!!! I want to know from all of you when anyone honestly tried to really reduce taxes. Angle is a taxpayer to. Don't let these guys with their college diplomas fool you by saying they know better than you. 90 percent of them just graduated on daddys money while many were in the animal house parties all week..