Crony Fallacies and Trump’s Carrier Deal

Recently President-Elect Donald Trump intervened in the business of Carrier, an Indiana manufacturer of furnace and air conditioner units, by cajoling the Indiana government to offer the company $7 million in tax breaks to keep hundreds of jobs in the state rather than move that work to Mexico.

Trump’s Carrier deal is cronyist in nature, not capitalist. But what are the ways in which it is cronyist? Here I seek to cut through widespread confusion about this. I begin with a basic review of the key concepts, then discuss two main fallacies pertaining to cronyism. Continue reading “Crony Fallacies and Trump’s Carrier Deal”

Gaylord and the Sickening Politicization of Development

Image: Jeffrey Beall
Image: Jeffrey Beall

Aurora’s efforts to facilitate the development of the Gaylord Rockies hotel illustrate the far-reaching influence of city politics on commercial development. The Colorado Springs Gazette reports, “The city of Aurora invented an incentive tool called an enhanced taxing area to levy higher admissions and lodging taxes, imposed a general improvement district with a 40-mill property tax levy, and declared agricultural land blighted to use urban renewal tax incentives.” In many cases development is now a matter of regional governments muscling landowners through threats of arbitrary “blight” designations and taxing different business owners at radically different rates to “manage” development.

Westminster Pays $727,103 for Demolished Building

The City of Westminster is so strapped for cash that it recently spent nearly $1.5 million for a demolished building and empty store.

City Edition, the tax-funded “news” paper published by the city, reports in its April/May 2010 edition:

The City of Westminster Economic Development Authority on January 27 acquired the vacant Macy’s store at the Westminster Mall property, the latest step in the city’s long-term strategy to revitalize the area.

Cost of the 157,000-square-foot building, which sits on 8.43 acres, was $700,000. WEDA has also acquired the former Trail Dust Steak House on the mall site for $727,103. The Trail Dust building torn down in early March [sic].

In today’s world of tax kickbacks and bureaucratic brown nosing, it is infeasible to redevelop a property without heavy involvement by local government. What Westminster should do to promote redevelopment instead is abolish its “economic development” agency, eliminate other wasteful expenses like its tax-funded “news” paper, stop wasting tax money on empty buildings, and lower taxes and controls across the board to encourage free enterprise.

Last year I wrote about how Westminster declared the mall blighted. Such a move can be a prelude to the use of eminent domain or “tax increment financing,” which essentially refunds property taxes. I do not know whether Westminster’s “economic development” agency intends to pursue either of those courses. (The Colorado legislature has tightened up eminent domain standards, which might have some impact in this case.)

Today Karen Groves wrote a fawning article about the city’s demolished building for the Denver Post’s “Your Hub.” She does add this interesting detail: “City Manager Brent McFall said the city is going through negotiations with its development partner, Steiner and Associates.”

The city’s payment of nearly $1.5 million for a demolished building and empty store seems remarkably like corporate welfare for Steiner and Associates. Because, in today’s controlled economy, there is simply no room for a free market.

Westminster Declares Mall Blighted

The Westminster Mall is nearly dead. That is obvious to anyone who’s visited it in the last year or two. So, obviously, breathing new life into it is the job of central economic planners who work for the city of Westminster. We couldn’t possibly leave individuals free to use their own resources to renovate the property; this is about maximizing tax revenues, after all.

Monte Whaley’s fawning article for the Denver Post, which includes not a single word of skepticism or criticism about the city’s plans, nevertheless offers some useful details.

Whaley notes that the city has formed “an urban renewal area created after the City Council declared the 32-year-old center blighted this month.”

Blighted? The mall is largely empty, but blighted? Here’s is the key bit of Whaley’s article:

The city hired Leland Consulting Group and Matrix Design Group to assess the complex. Their findings showed substantial problems that led the city to put the blighted tag on the mall.

The problems included buildings without fire-suppression sprinklers, poor water availability to fight fires, deteriorating parking and sidewalks, unsanitary pools of standing water, poorly lit areas, unscreened trash and bad traffic circulation.

An urban renewal authority will allow the city to use tax increment financing for upgrades.

The authority will also have the option to use the power of eminent domain to seize ownership of some of the shops in the mall, McFall said.

Eminent domain? “Tax increment financing?” If the problem is that taxes are too high for businesses to succeed in Westminster, then why doesn’t the city simply reduce taxes across the board? That would never do: the purpose of the city is to maximize tax revenues, after all.

Did anyone doubt, going into the study, that Leland Consulting Group and Matrix Design Group would find blight conditions? (How much were they paid to return those results?)

We all know that the city of Westminster will not possibly tolerate any exposed hazards, messy trash, or standing water:

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My guess is that, if every property in Westminster were evaluated by similar standards, over half would be declared blighted. But everybody knows that declaring a property “blighted” has only a superficial relationship to the condition of the property. The point is to let the city threaten people with eminent domain. (This might be a move the mall’s owners would actually welcome, given the lack of business there, but I’m not sure because Whaley apparently didn’t consider contacting them, and I don’t have the time to do Whaley’s job for him.)

Here’s a thought: why doesn’t the city stop trying to plan the economy and instead create simple rules and low taxes that would benefit existing businesses and attract new ones? We all know the answer: then the politicians and bureaucrats wouldn’t get to doll out favors and take credit for other people’s work.