Economic Development in Hard Times: TIFs, CAPCOs, and Other Bad Ideas Greg LeRoy Good Jobs First EARN Conference September 13, 2011 ~ Milwaukee

Your Power-Panelists Julia Sass Rubin of the Bloustein School at Rutgers Julia Sass Rubin of the Bloustein School at Rutgers Deborah Howlett of New Jersey Policy Perspective Deborah Howlett of New Jersey Policy Perspective Kathy White of the Colorado Fiscal Policy Institute Kathy White of the Colorado Fiscal Policy Institute Greg LeRoy of Good Jobs First (moderator) Greg LeRoy of Good Jobs First (moderator)

$70 Billion per Year! Property Tax Abatements Property Tax Abatements TIF: Diversion of Property and Sales Tax TIF: Diversion of Property and Sales Tax Corporate Income Tax Credits Corporate Income Tax Credits Sales Tax Exemptions Sales Tax Exemptions Enterprise Zones Enterprise Zones Land Write-downs Land Write-downs Infrastructure Aid Infrastructure Aid CAPCOs CAPCOs

Definition of Tax Increment Financing (TIF ) A diversion of the future growth (the “increment”) in one or more tax revenue streams within a geographically defined “TIF district” A diversion of the future growth (the “increment”) in one or more tax revenue streams within a geographically defined “TIF district” To subsidize (re)development in the district To subsidize (re)development in the district Originally enacted to reverse physical “blight,” but often since perverted Originally enacted to reverse physical “blight,” but often since perverted

Our Theory of Change: Dormant Public Power To create good jobs and reduce poverty To create good jobs and reduce poverty To grow a stronger, fairer tax base To grow a stronger, fairer tax base To engage taxpayers in local economies To engage taxpayers in local economies To strengthen local businesses, foster entrepreneurial culture To strengthen local businesses, foster entrepreneurial culture To curb sprawl and global warming To curb sprawl and global warming

Site Location 101 Business basics matter (not tax breaks) Business basics matter (not tax breaks) Public officials in “prisoners’ dilemma” Public officials in “prisoners’ dilemma” “Job blackmail,” “Economic war among the states” (and suburbs) “Job blackmail,” “Economic war among the states” (and suburbs) Unregulated site location consultants Unregulated site location consultants

Problem #1 Popular Economic Miseducation

Problem #2 Too much retail

Problem #3 Toolittlegreen

Problem #4 Fuelforsprawl

Problem #5 Subsidized Shops Running Away

Problem #6 Lack of coordination with transit and job training

Problem #7 Covertbudgeterosion

Problem #8 Bias against small, local entrepreneurs

Reform #1: Disclosure! Annual, company-specific reporting of the deal (costs) and outcomes (benefits) Annual, company-specific reporting of the deal (costs) and outcomes (benefits) On the Web, accessible, searchable, downloadable On the Web, accessible, searchable, downloadable Time for a Report Card! Time for a Report Card!

Show Us the Subsidies 51-State “report card” on major-program disclosure: company names, dollars, jobs, wages, address – and outcomes 51-State “report card” on major-program disclosure: company names, dollars, jobs, wages, address – and outcomes Only two states get a “B” (many still fail to report outcomes) Only two states get a “B” (many still fail to report outcomes) 13 states plus D.C. still in the Dark Ages 13 states plus D.C. still in the Dark Ages

Solution #2: Location Efficiency In areas with transit, no subsidies unless the worksite is served by public transportation In areas with transit, no subsidies unless the worksite is served by public transportation

Solution #3: “Green Strings” No new subsidies, no renewal of subsidies for dirty commercial-industrial buildings No new subsidies, no renewal of subsidies for dirty commercial-industrial buildings E.g., no abatements for office buildings w/o LEED or LEED-EB E.g., no abatements for office buildings w/o LEED or LEED-EB E.g., no tax credits for factories w/o clean production systems E.g., no tax credits for factories w/o clean production systems

Solution #5: Reduce and Target Retail Subsidies Limit strictly to areas such as “food deserts” that truly lack basic retail amenities Limit strictly to areas such as “food deserts” that truly lack basic retail amenities

Solution #6: Clawbacks “Money-back guarantee” that provides for repayment of all or a prorated share of a subsidy if a company fails to deliver jobs and/or other community benefits in a reasonable period of time “Money-back guarantee” that provides for repayment of all or a prorated share of a subsidy if a company fails to deliver jobs and/or other community benefits in a reasonable period of time Related safeguards: rescissions and recalibrations Related safeguards: rescissions and recalibrations

Solution #4: Priority Shift to Small Businesses Reduce subsidies to sectors/ companies with best access to credit markets Reduce subsidies to sectors/ companies with best access to credit markets Increase subsidies to small businesses most hurt by credit squeeze Increase subsidies to small businesses most hurt by credit squeeze

Solution #7: Unified Development Budget Annual report to legislature itemizing all forms of spending for jobs Annual report to legislature itemizing all forms of spending for jobs Purpose: treat all forms of spending fairly, including tax expenditures Purpose: treat all forms of spending fairly, including tax expenditures

: A Perfect Storm State revenues still depressed State revenues still depressed No more stimulus relief No more stimulus relief Jobs issue highly politicized Jobs issue highly politicized Rising taxpayer expectations re: government transparency Rising taxpayer expectations re: government transparency

Fightback Toolkit Accountable USA Accountable USA Show Us the Subsidies Show Us the Subsidies Subsidy Tracker Subsidy Tracker Public-Private Power Grab Public-Private Power Grab

Accountable USA 51 state web pages One-stop shopping for scams Case studies Big Giveaways Links to allies

Big Giveaway Index Passive Investment Companies Passive Investment Companies Single Sales Factor Single Sales Factor Film/Media Production Subsidies Film/Media Production Subsidies TIF – Tax Increment Financing TIF – Tax Increment Financing Unregulated Site Location Consultants Unregulated Site Location Consultants

Subsidy Tracker First-ever searchable national database of company-specific subsidy data

Public-Private Power Grab Ohio, Wisconsin, Iowa and Arizona privatizing economic development Ohio, Wisconsin, Iowa and Arizona privatizing economic development 20 years of troubled history 20 years of troubled history

Over-Arching Message “At a time when state governments must make difficult budget decisions, spending to create jobs should be transparent, fair and effective.”

Contact Greg LeRoy Executive Director Good Jobs First x 211