October 24, 2007

TPJ : Austin's Spendthrift City Council

With the city council elections coming up next year, it's worth talking about all the great incentives that our marvelous city council has lavished on companies that promise to move or expand here. Simply put, as this TPJ report discovered, the incentives cost Austinites more than $100 mm and, as it turns out, weren't even necessary.

In August, city development staff made a presentation to a subcommittee of the Austin City Council on existing incentive agreements. Council members wanted to review the effectiveness of this program. The presentation estimated that the city had committed itself to $80 million in development incentives. Yet a Texans for Public Justice review of the underlying agreements found that this estimate omitted at least $37 million of program costs, including subsidies from city-owned Austin Energy and rebates of city fees.

The total $117 million cost of the city’s incentive deals is equal to the city giving away the average annual property-tax revenue for 128,635 homes.3 The city says it must divert some public funds from such public assets as parks, libraries and public safety programs to entice private businesses to generate jobs and economic growth.

Yet the city counts torrid growth among its most urgent challenges and it even earmarked $5.4 million of its 2008 budget for managing this growth. For the foreseeable future, businesses will continue to invest in Austin en masse without a publicly subsidized handout. While depressed areas can make an argument for such incentives, does publicly subsidized growth constitute smart growth in the Live Music Capital of the World?

Let's be honest... if the economy in Austin were in the toilet (it isn't) or our citizens were a bunch of uneducated trash (they aren't) or if Austin was a relatively high tax area (which it sooo isn't) then abatements would make sense. However, none of that is true and that's why giving the abatements just to give them is stupid, short sighted, and (probably the most offensive) VERY anti-capitalist.

Check out the rest of the article for information on companies that either came here or expanded without the incentives. And of course, the most offensive of the abatements, the one for the Domain. Unfortunately, bad tax policy and ridiculous development incentives aren't limited to Austin. Even Hutto has been touched by them.

EOW a few weeks ago posted about the City of Hutto granting a massive tax break to the Carmel Creek developer. The funniest thing is the idiot Hutto Mayor Love (via the AAS)...

Hutto approves incentives to retail developments on a case-by-case basis, City Manager Ed Broussard said. The recently approved package provided the city leverage in reaching a separate agreement that gives it more control over landscaping, parks and other infrastructure on the site, he said.

Giving up a portion of the sales tax was necessary for Hutto, Love said.

“If the complex wasn’t there, what sales tax would we have?” he asked.M

Hutto is rapidly expanding due to cheap housing and the higher relative cost of living in Travis and Southern WillCo. Since people are moving there, retail is going there as well. Because retail goes where the people are. Retail should never receive abatements. That's the dumbest thing I've ever heard.

Mayor Love, much like some of our leaders in Austin, you don't understand how and when incentives should be used. You're like very green salesman, willing to give up everything just to close the sale and then finding excuses as to why it was a great deal. Problem is, there's always someone better and smarter than you to burst your dumb little bubble.

Posted by mcblogger at October 24, 2007 10:37 AM

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