Our income is their play money

It’s so nice to know that the city of Dayton is realizing that they aren’t going to collect as much income tax. NCR moving to Georgia was a big hit to collections. But, it’s amazing as they hike fees, cut services and complain about dropping revenue, they still find ways to spend our money on speculative corporate welfare.

Yep, same article, they talk about a drop in revenue they hand out $25K to a multi-national corporation:

“We were thinking we would be down about 2 percent,” said Riordan, at the close of the City Commission’s weekly business meeting on Wednesday, March 10. “We were down 6 percent. “We wanted to get an early warning out as soon as possible.”

Riordan said income tax is the city’s most volatile source of revenue and represents about two-thirds of all city revenue….

The City Commission also approved a $25,000 Development grant for Quickstep Composites located at 3251 McCall St.

Quickstep, founded in Australia in 2001, is a leader in composite materials processing for the aerospace and defense industries.

The company will invest $910,000 at its current site to buy and install machinery. The company also will be making improvements to its offices, including telecommunications and networking updates.

Within three years, the project is expected to create about 20 jobs with an average salary of $63,400.

via City’s income tax revenue falls again.

Either Dayton makes sense for Quickstep to locate here because of costs of doing business, access to raw materials, access to customers, connections with research universities- or it doesn’t. Us handing them a check shouldn’t make a bit of difference to a viable business. In fact, it’s time to have companies sign contracts- if they don’t create the 20 jobs paying an average of $63,400 by a certain date- they have to pay the money back, plus interest.

It’s time for some accountability with our money. Remember- it is our money.

Here is our take on this for the Dayton Grassroots Daily Show:

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5 Responses

  1. Civil Servants are People, Too March 11, 2010 / 11:31 pm
    Oh, here we go again.   There ARE contracts for these deals.   It was probably on the city’s meeting agenda.   The question of how and when you enforce clawbacks is the more difficult question.    In this case the company is already there and wishes to grow.

    “The company will invest $910,000 at its current site to buy and install machinery.”

     
    Let’s assume it’s a good, honest, hardworking, locally-owned company that gets an incentive to grow (since this is the case most of the time, if not this particular case).    They want to build an addition or buy machinery in order to get a new contract and add jobs.    They need a little short-term help to finance the deal because the banks are now requiring 30 percent equity.   The incentive is successful, they get the contract, and they create jobs as a result.
     
    Now the national economy goes bad and the company struggles to maintain their position because of the recession.    Is THAT the time to go after them to repay the grant, when it might just drive the final nail into the coffin?
     
    I understand accountability, and that’s important, but it’s not always so simple…
     
    Just wondering, does the new Mayor agree with you or support the grant?
     
     

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  2. jstults March 12, 2010 / 7:16 am
    David:

    Either Dayton makes sense for Quickstep to locate here because of costs of doing business, access to raw materials, access to customers, connections with research universities- or it doesn’t.

    According to the policy wonks in aerospace, grants and subsidies matter (among many other things, like those you listed) in making a successful cluster.  I’d love to hear some of the local Austrians chime in with the cons of this sort of subsidy even if it did play out as expected.

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  3. Dad March 12, 2010 / 8:24 am
    How did Austrians get into this discussion?
    Did you mean Australians?

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  4. jstults March 12, 2010 / 11:22 am
    David’s Dad:

    Did you mean Australians?

    No, I should have been clearer; I was trying to stir up our resident students of the Austrian school of economics.
     
    They would probably argue that government has no business funding expansion of private enterprise, no matter what the state of the balance sheet (the business’s or the government’s).  As CSAPT pointed out, banks aren’t loaning to these businesses (really?  that company has some pretty big defense contracts, I don’t think they would have trouble securing financing, certainly not something on the order of $25k; what are they going to do, spend that on the new landscaping?).  Rather than being an indication of something the government needs to ‘fix’, it’s probably an indication that it wouldn’t be a good loan to underwrite (so probably not a good deal for the taxpayer either), or more likely it’s just another panicky pork project.    I think Dayton has some neat historical examples of ‘corporate welfare’ that was voluntary; if it really is in the ‘public good’ you shouldn’t have too much trouble getting people to contribute voluntarily.  No need to spend local tax bucks on giveaways (the article did say ‘grant’, not ‘loan’) when we’re cutting back on garbage pickups and looking at budget shortfalls.
     
    CSAPT:

    Oh, here we go again.   There ARE contracts for these deals.   It was probably on the city’s meeting agenda.

    Link?  I tried a couple quick searches on the meeting agendas (the most recent of which has actual search-able text by the way, thank you to whoever managed that, maybe you heard our complaints?)

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  5. Jesse March 12, 2010 / 1:59 pm
    Jstults,
    I don’t know if I am one of the resident Austrians but I will take the bait.
     
    “Tax incentives” like less taxes, are fine.  They should be evenly distributed so as to not encourage malinvestment into unsustainable industries.  Less taxation is good for everyone.  As a matter of fact…why not try lowering the tax rate to 1% (provide a guarantee that it will stay at that rate for X years) and see what happens with regard to the number of businesses that would move back to Dayton.  I know my company would strongly consider the move.
     
    I think you did a fine job of expressing most of the Austrian views that are pertinent to this discussion.
    I am wondering if you have any examples of government incentives working “as expected.”

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