Local government should support locals
OK, everyone, time for the word of the day: “Clawback.”
An ugly word, to be sure, but today it is being used to describe everything from football games to reining in Wall Street bonuses. But for us here in Northern Nevada, another meaning of the term could offer us hope for a more fiscally-sound future. Around the country, communities and municipalities are rescinding tax abatements to companies that don’t hire enough workers, lay them off or close down, recouping hundreds of thousands—sometimes millions—of dollars in the process. We could serve ourselves well to reexamine our current tax-abatement situation for any opportunities to do the same.
In past columns, I’ve advocated for raising taxes, and I still think this will be a necessary step toward economic resilience. However, even before taking that more politically difficult step, it would be prudent as a community to get smarter with the taxes we do have. Before selling out our local businesses to support the fickle fortunes of international chain stores, we should restore all sources of local revenue and rewrite our abatement structure to ensure that future economic development efforts put our local economy and infrastructure at the top of the priority list.
Think of it as a weatherization plan for our local economy: Find all the leaks in the envelope and seal those up first. Then install insulation to build long-term economic resilience. “Cash for Caulkers,” anyone?
An easy place to start, of course, would be with the notorious Sales Tax Anticipated Revenue bonds that Dennis Myers reported on last spring (see “Death STAR,” April 23, 2009). These STAR bonds cut huge tax breaks to national chains that promised to attract tourists to our area, essentially funding the store’s building costs out of taxpayer funds and diverting revenue streams away from our schools. As Myers and others have pointed out, the STAR bonds are rife with problems for the community. They undermine local business, facilitate such sneaky moves as the Target shuttering one store in Sparks to open another, funded by tax abatements and bonds, and provide huge favor to those stores who claim to be a tourist draw over others—without rigorous guidelines to prove the claim or hold companies accountable. Additionally, while Kansas City, Kan., the first municipality to use STAR bonds, did so to encourage linked downtown redevelopment districts, our community has mostly applied them to “edge” projects on the outskirts of town (Cabela’s, Scheels), leaving our fledgling downtown district to lie fallow in blowback recession. The law was written so loosely that there is little or no accountability to ensure that the chains live up to their promises, so I would be surprised if the law included clawback provisions that we could enforce. However, it is a stunning example of the kind of loopholes in our current system that drain dollars from our crippled state.
Therefore, it is refreshing to read that the city of Sparks recently refused an appeal from a Kansas City, Mo., developer requesting that federal stimulus funds be directed toward a $69 million hockey rink. RED development was willing to put $10.5 million of that on the table. The stimulus funds were already earmarked for infrastructure and renewable energy projects to create jobs and improve the community, so in many ways the city’s hands were tied. But this is the way it should be: Taxpayer dollars go to the economic sectors that businesses won’t touch—transportation infrastructure, schools, conservation, etc. This isn’t anti-business, it’s smart business.
Wouldn’t it be nice if the city of Sparks’ decision was the first step in a new direction for our tax practices? Close the loop, then redirect toward local businesses. It’s been the start of economic turnarounds in other towns across the country; it can be for us, as well.