By Jason Spencer
The Tribune and Georgian and the Augusta Chronicle recently had articles detailing the efforts of our State Representative, Cecily Hill, on sponsoring a “jobs bill” known as HB 1251 that recently passed the House. While it is commendable that Rep. Hill is doing what she can to bring jobs to Camden County, as a tax payer, I feel a little cautionary discretion is in order before the local and county governments start salivating over a newly anticipated tax base.
According to the Tribune article and its related opinion piece, HB 1251 is designed to entice a potentially large commercial real estate developer, Red Development (RD), based in Kansas City, Mo. to bring in a “tourist attraction”, while highlighting that Red Development has a “track record of success”.
With just a few key strokes, one kind find not-so positive information on this developer with regards to two Missouri communities--Lee Summit and Blue Springs. Each of these communities had to use tax dollars to bailout the large developer to finish projects. In the case of Blue Springs, Mo., the city council backed bonds with the cities credit rating worth $14 million dollars and the city was approached a second time for a bond backed request for $17 million dollars. On its initial submitted proposal, RD led the city council of Blue Springs and its citizens to believe the only assistance it needed to construct the project was to create a TDD (tax development district).
A similar scenario arose out of Lee Summit, Mo. The City of Lee Summit shelled out $53 million dollars of direct tax subsidies before RD came back to them asking for more money to finish their project due to the declining bond market during this economic downturn. Furthermore, the developer wanted the tax payer to back $23 million dollars worth of Tax Incrementing Financing Bonds (TIFs) in case there was a short fall in the financing of the project from those bonds. Clearly, the citizens of Lee Summit saw this as a tax payer bailout. In addition, the developer was hiring out of state contractors to work at the site and did not offer the local labor pool jobs so as to circumvent state working and regulation requirements.
As a tax payer who supports free markets, the aforementioned situations that developed with these two cities clearly does not reflect a true free market endeavor on the part of the developer. Government should never bankroll a private project. This is crony capitalism or corporatism at its best. Using the tax payer as a safety net creates moral hazard when projects stall or become money pits. Private corporations should bankroll their own projects. I hope our local officials will keep their eyes on this one. The Camden County tax payer can’t afford heartbreak from another developer.
Here are some helpful links: http://www.nobailout4red.com/index.html
and here
http://www.examiner.net/business/x1409370357/RED-Development-to-ask-Blue-Springs-for-more-help
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Further than that - even if this company had an impeccable "track record of success", they will still be given another form of bailout: a competitive advantage through sales tax refunds. This in itself is a complete mockery of the free market. Any government assistance of any kind to a company undermines the market. If this venture cannot work without a sales tax credit then I think its obvious that its probably not a very good business model to begin with.
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