Government handouts to business are nothing new- and in some places they’re illegal

Ballpark Village was going to be another “silver bullet” solution for all of our problems. The way it was supposed to work was your tax dollars would backstop rich private developers so they could overbuild our retail inventory and play shell games while skimming what they could before pulling out of town- long before the tax breaks were done. Don’t believe it- look around, it’s been happening for years. We’ve just turned a blind eye.

In Arizona, a state where it’s legal to walk into a bar with a six-shooter on your hip, they actually got this part right- back in 1910- banning government subsidies to private business. Apparently, other states have similar rules- including New York (but of course it didn’t stop them from throwing money at Bill Nuti to move the C-suite of NCR there a few years ago).

Currently, heading to the Arizona supreme court is a case questioning the legality of a big handout to a mall developer. The plaintiff is the Goldwater Institute:

From the Wall Street Journal (thanks Alan P. for the tip):

By any reading of the man, George W.P. Hunt — Arizona’s first governor — was a progressive Democrat. He favored creating an income tax, extending the right to vote to women, and passing compulsory education laws. But when it came to drafting a constitution that would bring Arizona into the union as the 48th state, “Old Walrus,” as he was called for his weight of about 300 lbs and his handlebar mustache, presided over a convention in 1910 that banned nearly all government subsidies to private business.

Hunt would probably be amazed at what’s happening in Arizona today, as the old battles are once again being fought — this time in the state Supreme Court, which is taking up a lawsuit to determine whether cities can give subsidies to private companies.

Arizona’s founders banned gifts to private companies as the result of bitter experience. In the closing decades of the 19th century, local governments borrowed money to force-feed private railroad development. Pima County outside of Tucson, for example, took out $300,000 in bonds in 1882 for a railroad that promised to build some 100 miles of track. The money was spent but the railroad dissolved after a mere 10 miles of track was constructed. The bonds were worthless, but taxpayers were still on the hook for the money.

This time around it’s shopping malls and the like, and the preferred subsidy is tax rebates rather than bonds. But the result is the same. Local governments are foisting the cost of private development onto taxpayers as private companies promise that with just a few tax dollars they will create a wealth of new jobs….

And it is in Phoenix where the biggest fight is taking place.

Two years ago, the city signed a contract with developer Thomas J. Klutznick, who is building an outdoor mall. The city has to rebate to him $97.4 million in sales taxes over the next 11 years, in return for which it gets 200 parking spaces for commuters catching a municipal bus. The mall, called CityNorth, will be home to an Ann Taylor Loft and other retailers, as well as residential apartments that are already being rented. Arizona Republic columnist Laurie Roberts summed up the deal earlier this year by noting the city will spend about $487,000 for each commuter parking spot. “Wouldn’t it be cheaper to just chopper them in to work?” she wrote.

via Arizona’s Landmark ‘Bailout’ Battle – WSJ.com.

It’s time we reexamine corporate welfare, before it puts all of us out of work.

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