Tuesday, December 05, 2006
Voters Putting a Foot Down on Public Subsidies
Lost among the handwringing and cheers over election results across the nation, was a resounding “thud” as voters put their foot down on public subsidies for corporations in both Washington state and Minnesota. Voters in Seattle approved Initiative 91 by a 3-to-1 margin, which was designed to block city officials from giving that city’s NBA franchise subsidies for a new arena. Meanwhile, voters in Rogers, Minnesota, a small town of about 6,000 just outside of the Twin Cities, ousted its mayor and two city council members who had approved a $5 million tax subsidy for a Cabela’s outdoor retail store.
Seattle’s Initiative 91 (I-91) contains a feature that precludes any city tax money for any professional sports facility. Specifically it notes that any investment needs to return to city taxpayers an amount “at or above fair market value”, with fair market value defined as “no less than the rate of return on a 30-year U.S. Treasury Bond.” Considering that the current rate is 4.75 percent, it does not set the bar very high. If subsidizing sports stadiums were a good investment, the private sector would be building them—without trying to blackmail taxpayers into funding them.
The blackmail tactic most often taken by team owners is the threat of relocation. Seattle voters were not to be bullied and called the bluff. The team’s owners in this case now plan to move the team, but to somewhere else in the county. However, the likelihood that either the state or county officials will put up the desired funds has been greatly diminished by the passage of I-91. Voters have made it very clear this is not where they want their tax dollars to be spent.
At the same time Minnesota voters in the town of Rogers are fed up with their elected officials’ penchant for using Tax Increment Financing (TIF) on retail developments. Rogers had led all major Minnesota cities in the use of TIFs. From 1999 to 2005, it was reported that 27 percent of the town’s total tax capacity was dedicated to TIFs—the statewide average was 9.5 percent. The breaking point was Cabela’s, the nation’s outdoor retailing giant who has made a habit of dipping into the taxpayers’ pockets. Rogers gave Cabela’s a package worth $5 million in public subsidies.
When Rogers’ voters went to the polls, they elected a new mayor, who had campaigned against the overuse of the taxpayer subsidies, and two new council members—both of whom took an opposition to public subsidies. Of the five members of the Rogers’ council, three are opposed to using taxpayer subsidies.
Collectively taxpayers have seen their money being poured down “ratholes” in the name of economic development while being promised great returns. They have seen little if any return, and are starting to shout “Enough!” We can hope this is the start of an emerging trend that will catch on in Pittsburgh, where subsidies have resulted in a failed department store, two new stadiums, and countless other ventures that will never provide any positive return on investment, let alone one that approximates that of a Treasury bond.
Seattle’s Initiative 91 (I-91) contains a feature that precludes any city tax money for any professional sports facility. Specifically it notes that any investment needs to return to city taxpayers an amount “at or above fair market value”, with fair market value defined as “no less than the rate of return on a 30-year U.S. Treasury Bond.” Considering that the current rate is 4.75 percent, it does not set the bar very high. If subsidizing sports stadiums were a good investment, the private sector would be building them—without trying to blackmail taxpayers into funding them.
The blackmail tactic most often taken by team owners is the threat of relocation. Seattle voters were not to be bullied and called the bluff. The team’s owners in this case now plan to move the team, but to somewhere else in the county. However, the likelihood that either the state or county officials will put up the desired funds has been greatly diminished by the passage of I-91. Voters have made it very clear this is not where they want their tax dollars to be spent.
At the same time Minnesota voters in the town of Rogers are fed up with their elected officials’ penchant for using Tax Increment Financing (TIF) on retail developments. Rogers had led all major Minnesota cities in the use of TIFs. From 1999 to 2005, it was reported that 27 percent of the town’s total tax capacity was dedicated to TIFs—the statewide average was 9.5 percent. The breaking point was Cabela’s, the nation’s outdoor retailing giant who has made a habit of dipping into the taxpayers’ pockets. Rogers gave Cabela’s a package worth $5 million in public subsidies.
When Rogers’ voters went to the polls, they elected a new mayor, who had campaigned against the overuse of the taxpayer subsidies, and two new council members—both of whom took an opposition to public subsidies. Of the five members of the Rogers’ council, three are opposed to using taxpayer subsidies.
Collectively taxpayers have seen their money being poured down “ratholes” in the name of economic development while being promised great returns. They have seen little if any return, and are starting to shout “Enough!” We can hope this is the start of an emerging trend that will catch on in Pittsburgh, where subsidies have resulted in a failed department store, two new stadiums, and countless other ventures that will never provide any positive return on investment, let alone one that approximates that of a Treasury bond.
