Wednesday, August 23, 2006
Lessons from Texas
In the long list of economic development hand-outs that didn’t work out, one state has decided to ask for its money back. Cabela’s Inc., the country’s largest outdoor retailer, promised that, in return for a $400,000 economic development grant, it would employ 400 people at its destination retail store in Buda, Texas. They fell short of that goal and Texas is holding them accountable. They have to repay $28,000 and forfeit the remaining $200,000 of the grant.
There are lessons Pennsylvania can learn from this—cut your losses and hold grantees accountable. Something Pennsylvania seems to have a lot of trouble doing. The state’s failure to act in a responsible manner has put taxpayers on the hook. A prime example is the Lazarus department store in downtown Pittsburgh. Sales and employee levels fell far shy of predictions and surrounding development never took place. After the minimum required five years in the building, the store closed. Taxpayers put up $23 million—an $18 million loan from Pittsburgh’s Urban Redevelopment Authority and $5 million in City assistance. The project was also the beneficiary of a substantial TIF package. Lazarus never achieved sales levels that would have triggered repayment on the loan and, at the time of its closing, only 115 of a promised 250 people were employed.
Obviously the Governor, state economic development officials, as well as local politicians eager for development have not learned from the Lazarus fiasco. The state has promised $15.5 million to Bass Pro Shops, the nation’s second largest outdoor retailer, for a destination retail store at the proposed Victory Center development in Washington County. Of course Pennsylvania has bought the hype that this project will produce huge increases in jobs and sales.
The Bass Pro project, similar to the Cabela’s store in Texas that has failed to live up to expectations, has also been accompanied by lofty promises of jobs and sales. But when (or if) sales and employment projections are not met, what safeguards do taxpayers have? Currently there are none. However, economic development officials should take a lesson from Texas and demand that companies receiving taxpayer dollars should be prepared to repay the amount when promises fall short. Subsidizing retail is a fool’s errand and not a venture that taxpayers should be undertaking.
There are lessons Pennsylvania can learn from this—cut your losses and hold grantees accountable. Something Pennsylvania seems to have a lot of trouble doing. The state’s failure to act in a responsible manner has put taxpayers on the hook. A prime example is the Lazarus department store in downtown Pittsburgh. Sales and employee levels fell far shy of predictions and surrounding development never took place. After the minimum required five years in the building, the store closed. Taxpayers put up $23 million—an $18 million loan from Pittsburgh’s Urban Redevelopment Authority and $5 million in City assistance. The project was also the beneficiary of a substantial TIF package. Lazarus never achieved sales levels that would have triggered repayment on the loan and, at the time of its closing, only 115 of a promised 250 people were employed.
Obviously the Governor, state economic development officials, as well as local politicians eager for development have not learned from the Lazarus fiasco. The state has promised $15.5 million to Bass Pro Shops, the nation’s second largest outdoor retailer, for a destination retail store at the proposed Victory Center development in Washington County. Of course Pennsylvania has bought the hype that this project will produce huge increases in jobs and sales.
The Bass Pro project, similar to the Cabela’s store in Texas that has failed to live up to expectations, has also been accompanied by lofty promises of jobs and sales. But when (or if) sales and employment projections are not met, what safeguards do taxpayers have? Currently there are none. However, economic development officials should take a lesson from Texas and demand that companies receiving taxpayer dollars should be prepared to repay the amount when promises fall short. Subsidizing retail is a fool’s errand and not a venture that taxpayers should be undertaking.
