by: J. Charles Coughlin
In the worst economy in recent history, the Goldwater Institute is looking for ways to ensure that cities and towns will be even more strapped for cash. Their latest salvo, from Nick Dranias, attacks development incentives and touts reforms to end one of local government’s most successful economic tools.
At the very heart of economic incentives is the notion that growth should pay for itself. Dranias would like you to believe that cities are handing out sacks of taxpayer money to developers who agree to come to town. The Goldwater Institute’s public relations campaign surrounding their litigation relies on that age old propaganda rule, that if you repeat a lie often enough it becomes the truth.
The truth is, not a single dime of taxpayer money has been spent on City North, nor are the taxpayers of Phoenix at risk. In fact, City North has already generated over $6.5 million in development fees and commercial, restaurant, construction, retail and residential-rental taxes (Az Rep 7/26 Fairbanks op/ed). All of this at a time when Phoenix and the State are most strapped for cash.
The reality is that cities are using these economic incentives to encourage and leverage private investment.
Development incentive agreements require that developers risk all of their own capital to get a project underway and performing before a portion of the revenue generated by the project itself is returned as compensation for the infrastructure already built.
Without being reimbursed for a portion of the five parking garages, CityNorth’s developer would pursue a less capital-intensive design. This would likely result in approximately half of the development being taken up by surface parking lots, thus limiting the number of sales tax-generating businesses and resulting in a less environmentally attractive, sustainable, pedestrian-oriented, economically viable and desirable project.
The agreement ensures that CityNorth will be of sufficient density to maximize the City’s ability to generate revenue and jobs. In fact, the City will receive as much as $900 million in new net revenue with the incentive agreement. That’s a significantly better deal for Phoenix especially in these tough economic times when the city is struggling with cuts and searching for long-term revenue sources.
I agree with Dranias when he says, “Local government fee and tax revenues are plummeting and we just can’t afford to have our cities giving away the tax money that should be spent on vital public services like law enforcement.”
The difference is, the real drain on tax dollars is coming from the Institute’s assault on cities, who must defend themselves in order to preserve the economic tools that allow them to grow and build their economy. The Goldwater Institute’s witch hunt against economic development incentives doesn’t save taxpayer money â€“ it creates even more uncertainty in an already troubled marketplace.
Their efforts to eradicate effective, longstanding economic development policies are economically and politically irresponsible for an organization that is supposed to be dedicated to “economic and educational freedom.”
Dranias and the Goldwater Institute’s harmful efforts to destabilize critical revenue sources for cities portray an organization that does not understand current development policies in Arizona â€“ policies that work to ensure that growth pays for itself. It seems that the Goldwater Institute is not “forâ€ anything, outside of costly lawsuits used for their own publicity and fundraising efforts.
They certainly are showing no interest in finding long-term solutions to revive Arizona’s economy.