Mouth That Roars

Bill Liblick has made a name for himself of National TV Talk Shows where he spouted his outspoken views from the front row. Now he offers you his opinion every week in the "MOUTH THAT ROARS" Column in the Sullivan County Post.

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July 11th, 2014

Do Tax Abatements Help Our Economy?

The hot topic in Sullivan County this summer is the casino issue, and underlying that discussion is the strategy we employ in the interest of economic development and business retention.

Many people I have been speaking with are angry that Casino developers in Sullivan County are asking for millions in tax abatements while Orange County casino developers are doing the opposite.

Instead of seeking millions in government handouts, Orange County casino developers are offering local municipalities and civic organizations millions of dollars including paying for new roads, police, school budget shortfalls, and so on.

In Sullivan County our “brilliant” economic development team is instead prepared to open up the coffers with tax incentives to our two remaining casino developers.

At the core of this debate are claims that proposed casinos for Sullivan County need tax breaks because their potential profit margin has shrunk due to the fact that Orange County is now a player and because of that it is expected that casinos here will do minimal business. Imagine that, they are crying poverty even before they are granted a casino license.

Let’s not kid ourselves – Empire Resorts and EPR, as well as other developers, were seeking millions in tax abatements way, way before Orange County or Proposition One’s passage came into the picture.
In essence, this Orange County talk as a reason for tax abatements is just a smoke screen to give corporate handouts to public companies raking in millions for its officers and shareholders.

Some of our economic leaders are claiming that New York State is looking unfavorably at the handouts casino developers are awarding to Orange County. Ha!

In the casino business, it has always been about buying your way in. It’s about partnering with a local municipality and doing everything you can to win support. Money does indeed talk. That is why local governments share in casino profit margins.

Indeed, it seems as if a casino license is gold everywhere else but in Sullivan County.

The market might be saturated, but being awarded a casino license is still considered a crown jewel.

What casino developers are doing in Orange County is no different from the housing Trump, Wynn, and others built in Atlantic City to win gaming approval.

What casino developers are doing in Orange County is no different from the roads, construction of a correctional facility, and millions in donations Foxwoods and Mohegan Sun have contributed to local Connecticut municipalities and organizations in addition to the mandated revenue stream required in their state compact agreements.

Some argue that giving tax abatements to a casino defeats the intent of Proposition One.

When it comes to casinos, if it takes tax abatements to bring them here, let’s do it. But, on the other hand, why aren’t casino developers giving us millions in return? They could be telling the Gaming Commission if two are approved they will be funding our new jail.

The disdain over casino developers seeking tax abatements is just the icing on the cake, and it goes much further than that.

What are we doing to retain the businesses that are already here?

Has anyone investigated or analyzed if awarding tax abatements really helps our economy?

Business people are furious that when a new business comes along we are eager to award millions in tax abatements and other incentives, but we do very little to retain or assist those businesses that are here and are struggling.

Our County leaders should be doing everything they can to retain businesses that are here, but instead there is nothing but discouragement. A known Sullivan County entity called the County Government seeking help with a grant that another business received, but they were turned away saying they did not know what they were talking about.

A big part of the IDA, Sullivan County Partnership for Economic Development, and Planning Department of Sullivan County should be to assist local businesses and do everything they can to help these established businesses. They should visit each and every business and ask one simple question – What can we do to help you?

In reality, the economic development strategies being employed by the “experts” in this county are so outdated that it is almost funny.

They rush to provide tax abatements to anyone promising jobs. This approach has been shown over and over again not to work, but Sullivan County keeps trying it.

There is some interesting information about tax abatements from several publications. I think these should be must reading for all IDA and Partnership members.

All we hear about is the theory that we should give up property and/or sales tax revenue in return for job creation.

One community leader discussing tax abatements with me said, “No matter how high the unemployment rate is in any given place, the fact remains that most people have jobs and so the tax abatements in return for jobs does them minimal (if any) good. These same people who already have jobs are the folks bankrolling the local government with their property tax payments and sales tax payments. To exempt a new company from either or both of these payments in return for jobs is not only unfair to the people who are paying the bills, it is screwing them by increasing their burden in order to help others.”

“Creating new jobs is important to any area, but it can’t be the only thing or even the most important thing. However, if your goal is to create work for the lawyers, accountants, consultants, architects, engineers, environmental analysis firms, etc. among your circle of friends, then you accomplish that goal simply by bringing new companies in, whether they benefit anyone else or not.”

Research indicates that fewer and fewer local governments are turning to tax incentives to try to lure new business, and those that still employ that tactic are increasingly likely to be aggressively enforcing claw back policies (demanding repayment of incentives if job creation and/or other goals are not met).

To quote a report: “Tax incentives do not build the tax base in the short term and they may not lead to sustained employment gains in the long term.”

“Experienced governments have learned that the use of incentives without performance measures in place limits effectiveness and can lead to more citizen opposition. Given the potential for abuse in business incentives, it is important that these governments employ accountability measures.”

Even the corporations know that tax abatements are not the best answer. An able and educated and well trained workforce is.

“If you’re looking at the competitiveness of a region, the most important thing a region can do is to focus on education. And this use of incentives is really transferring money from education to businesses.” – Donald Hall, Jr. Hallmark Corp. CEO

Many economists and policy analysts agree that incentives are not good development policy. In using them to attract businesses they claim they:

1. Waste scarce public dollars without creating net new jobs in the vast majority of cases

2. Subsidize the shareholders of these companies for the economic actions they would have taken anyway;

3. Foster unfair competition by helping some firms and industries and not others

4. Divert the attention of policymakers from other issues that could lead to additional job creation and a better business climate.

According to the CEFD (North Carolina) Report, “Business Incentives Reform,” the challenge for state and local governments is to find ways “to make their jurisdictions attractive without giving away the tax base, and to use incentives selectively and responsibly.”

There is no better example than General Motors to show how tax incentives might not work.

For years, mayors and governors anxious about local jobs agreed to GM’s demands for cash rewards, free buildings, worker training and lucrative tax breaks. When the automaker released a list of factories it was closing during bankruptcy three years ago, communities that had considered themselves GM’s business partners were among the targets.

The time has come for those in control of our economic development to sit down and come to terms and admit that what they are doing is not working.

Wait – I take that back – Perhaps it is working for only a select few who are connected to the “Ole Boys Club.”

In all honesty, look around Sullivan County – Does anyone think that all the tax abatements we have awarded have really helped our economy?

Bill Liblick has made a name for himself of National TV Talk Shows where he spouted his outspoken views from the front row. Now he offers you his opinion every week in the “MOUTH THAT ROARS” Column in the Sullivan County Post Join in on the Conversation on Facebook in the group Sullivan County Post


1 comment to Do Tax Abatements Help Our Economy?

  • David G Komatz

    Bill, you have said a lot here and I agree with you wholeheartedly. I for one am disgusted with the lack of concern about businesses that are already here in SC. Bringing in new businesses is a good idea, however giving them tax abatements with nothing in return is ludicrous. It’s time for a change. If there is anything I can do to help, let me know.