Rain Forest: Monday July 31 Update

This week's Monday rain forest update is now available at http://www.nicholasjohnson.org/politics/IaChild. Lots of news. The postponement of the announcement of the final "winner" in the site selection process -- monthly, from January through June -- has now been extended another three months to September. Riverside is raising more questions than answers. Funny numbers continue to form the basis for financial calculations. Developers are functioning as surrogate spokespersons for city governments. And Bradley Franzwa offers more analysis.

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[Every Monday since December 2005 there has been a weekly upload to the pre-existing Iowa rain forest Web site I maintain. In all, printed out it would run over 100 single spaced pages; there are, in addition, links to the full text of hundreds of newspaper stories and reports. It is very probably the most complete resource on the topic anywhere on the Web.

It is found at: http://www.nicholasjohnson.org/politics/IaChild.

Over the past few months the scope of the Web site has expanded from the rain forest project to include material related to the broader range of attractions and economic development generally in which the proposed rain forest exists and by which it must be evaluated.]


Iowa Rain Forest, economic development, attractions, tourism, rain forest, pork, Earthpark, Earth Park, Iowa

"The Only Winning Move"

"A strange game.
The only winning move is not to play the game."

You'll recall that as the lesson learned (and communicated) by the "WOPR" -- the star, not of a new Burger King "super-size me" delight, but of the movie, "War Games."

It's always been a favorite of mine, but my sister, visiting from NYC, had never seen it, so we watched the DVD together this evening (July 28).

It was designed at the time of the Cold War between the U.S. and the U.S.S.R., a time when the "War Games" game of "Global Thermonuclear War" was a potential reality.

But isn't the ultimate lesson of the game, and the movie, equally applicable today? Not just in Lebanon, Iraq, Afghanistan, and the dozens of other areas of military conflict, but in our daily lives?

This is not to advocate appeasement or capitulation, whether in international, or personal, relations. It is simply to say that some strategies, some approaches to everything from mere disagreements to hatreds, will inevitably produce only losers on all sides.

In those situations -- as in the time of threatened "global thermonuclear war," and what we came to see as "mutual assured destruction," or "MAD" -- the ultimate wisdom continues to this day, that "the only winning move is not to play the game."

"What We Know That Ain't So"

"It's not what we don't know that's the problem, it's what we know that ain't so." The quote, in a variety of forms, is variously attributed to Mark Twain, Will Rogers, and others. (The Penguin Dictionary of Modern Humorous Quotations, 1987, attributes it to Josh Billings.)

Yesterday (July 27) a couple of pieces happened to cross my desk that, without quoting the line, applied it both locally and globally.

Karen Kubby, writing in the Iowa City Press-Citizen ("Transforming Assumptions Into Evidence-Based Opinions") described a statewide program to determine the accessability of emergency contraception from pharmacies in Iowa. She assumed Wal-Mart would be the only pharmacy in many of Iowa's small towns. Once data was substituted for assumptions that turned out not to be true.

Later in the day, looking through my latest issue (July/August) of the Boston Review, I read a lengthy article by MIT economist Abhijit Vinayak Banerjee in a Review "New Democracy Forum" of articles on "Making Aid Work" -- How to Fight Global Poverty Effectively (also available here). Not only is it one of the best pieces I've encountered regarding an analytical approach to the effectiveness of foreign aid programs, it's one of the best collections of analytical approaches I've seen for evaulating any program. One example: It turns out that if the goal is to get more kids into primary school it is more effective to spend $3.50 per child a year on deworming medicine (to reduce their down time from illness) than the 1800-times-more-expensive Mexican Progresa program of cash transfers to mothers.

In writing about the Iowa Values Fund I noted that, "The prestigious, independent Corporation for Enterprise Development concludes that 'most economists agree incentives are not good development policy' because they foster unfair competition, don't create net new jobs and divert attention from better strategies." Nicholas Johnson, "Values Fund May Not Be So Valuable for Taxpayers," Des Moines Register, April 13, 2006. In this online, footnoted version of the op ed, I include a link to the Corporation for Enterprise Development (CED) Web site. These folks aren't ideologically opposed to development programs -- quite the contrary; it's their whole reason for being. It's just that, as they've "transformed assumptions into evidence-based opinions" (to quote Karen Kubby) they've come to realize that programs like the Iowa Values Fund just don't work. They're not cost-effective. There are better ways to promote economic development. And the CED is made up of pragmatists who are looking for those better ways.

"What we know that ain't so." It's costly in many ways; not just the money (often tax dollars) we spend in wasteful ways ("A rain forest to promote Iowa tourism, anyone?"), but in the opportunity cost of those inefficient programs that result in valuable lost time as well as diverted dollars.

[Related: Nicholas Johnson, "Getting More Than We Pay For," July 20, 2006.]

"Down By The Riverside"

Rain forest promoters have been singing an old gospel song recently, "I'm gonna lay down my burden, down by the riverside" [Elvis' lyrics].

More precisely, they're hoping to lay their 10-year-old burden on the Riverside, Iowa, City Council.

A couple of the council members are having none of it. We've yet to hear from the rest.

It's somewhere between unbelievably stunning and ironic that, with so much riding on the willingness of the City of Riverside to provide financial support to the rain forest, the promoters have been acting as if they simply assume they will be able to bend the City Council to their will when the time comes. Given the near 50-50 split in the community's vote to approve the gambling casino, that's quite an assumption.

They've yet to brief the Council on this rain forest project and what it's going to cost the 928 residents [2000 Census] of Riverside in increased taxes.

(That's right; the rain forest promoters -- with all their contacts with Washington, D.C.'s Republicans (including Senator Grassley, Chair of the Finance Committee, who gave them $50 million of our money), Fortune 500 corporate executives, and other wealthy individuals around the country who have foundations and otherwise give money for civic projects -- have not been able to raise an additional dime in ten years. Now they want the handful of citizens in this village of Riverside -- not one of Iowa's more upscale zip codes -- to participate in raising $25 million in a matter of weeks.)

That briefing has now been scheduled for August 3.

Mary Zielinski has stories laying out the details in the Washington Evening Journal for July 26 and The Gazette for today (July 27). Both are available, in parallel columns, here.

The Gazette's headline tells it all: "Riverside to Meet Earthpark Officials." See what I mean? Riverside has been a player in this game for a year; lots of talk has transpired among the casino and rain forest promoters; and this meeting scheduled for August 3 is the first effort of "Earthpark Officials" to meet and brief the Riverside City Council?! Unbelievable.

There will be more on this story, including the reactions of the City Council members, in next Monday's rain forest update, http://www.nicholasjohnson.org/politics/IaChild.

"Show Me The Money"

As with the "16 communities' proposals," the media appear willing to accept without further investigation -- or even a follow-up question -- David Oman's assertion that both Riverside and Pella have met his $25 million in hand demand.

The Des Moines Register puts a headline on its story: "Each town has raised $25 million to compete for the Earthpark project." (It was not an unreasonable call by the headline writer, given that Jeffrey Patch wrote in his story, "The two communities, each of which have raised $25 million in local contributions . . ..")

At least The Gazette did not assert this as a fact, but rather repeated it as an assertion made by David Oman: "Developers in Pella and Riverside have viable sites and have met or exceeded Earthpark’s goal of coming up with $25 million in local funds for the project, he said." The Press-Citizen did likewise: "Oman said Riverside and Pella submitted financial packages that met or exceeded the $25 million in local funding." (Though I don't know how many readers of those stories would see the subtle difference and read between the lines.)

There will be more on the funny numbers in next Monday's update, including Bradley Franzwa's explosive analysis. Meanwhile, these bits give a flavor of what's to come:

Mike McWilliams reports in his Press-Citizen story today (July 26), "Officials say the project will be funded by a $50 million Department of Energy grant secured by Sen. Chuck Grassley, R-Iowa, a $25 million contribution from the town awarded Earthpark and state funding they hope will be between $15 million to $20 million. The rest, they said, could come from debt financing."

Zack Kucharski reports in The Gazette, "Local funding is critical. Project officials are trying to unlock a $50 million federal grant that requires matching non-federal funding. They also have plans to seek a state Vision Iowa grant and corporate funding. . . . The [Riverside] casino would contribute $10 million by giving the project $1 million annually over 10 years. His family would provide an additional $2 million, [Riverside Casino and Golf Resort CEO Dan] Kehl said. Additional revenue could come from the casino’s foundation and from a potential motel tax, he said."

The questions all of this raises are almost endless.

1. For starters, how does Riverside's "$1 million a year for 10 years" become the Des Moines Register's "The two communities, each of which [Pella and Riverside] have raised $25 million in local contributions . . ."?

2. Putting aside (a) the problems raised if this is only to be a $155 million rather than a $180 million (or better yet, said their consultants, a $225 million) structure and venture, and (b) the fact that promoters have never revealed the details of what this amount -- whatever it may end up as -- does and does not cover, what money does the project now have in hand?

"Show me the money." All I see is Ted Townsend's promised $10 million (which has surely largely drained away during the last 10 years at the rate the project has been spending) and the $25 million "raised . . . in local contributions" -- on the (false) assumption it does, in fact, exist.

There's no $50 million Senator Grassley obtained for his friends and campaign contributors from grateful taxpayers until the rain forest promoters can match it. So far, they haven't.

What of promoters' "plans to seek a state Vision Iowa grant and corporate funding," reported by Kucharski? (a) When did "plans to seek" qualify as money in hand? A great many Americans have "plans to seek" lottery winnings, but find the money difficult even to borrow against, let alone spend. (b) It's not that this is news, that these are new plans the promoters just thought of. We have a track record. So far, the Vision Iowa folks have not been receptive to dropping state taxpayers' money on this project. And the "corporate funding" has been elusive for 10 years. Unless there is some break-through announcement of a sudden corporate largesse to rival that of Senator Grassley, that's not the answer either.

3. McWilliams' reference to "debt financing" -- something that has seeped into Oman's conversations before -- should frighten any community leader into hiding. As I've learned more about use of tax money for economic development generally, and attractions in particular, over the past few years (in the course of tracking the rain forest project) the one thing that keeps coming up with the projects that fail is their reliance on debt. And this is in large measure because . . .

4. The real problem with this project is not the decade-long failure to raise the construction cost -- as serious, indeed decisional, as that may be. It is the high likelihood that the attendance estimates of 1-1.5 million visitors a year are grossly inflated and unlikely of achievement. That would be serious enough if the thing was fully paid for. If it is also trying to pay off debt, it's fatal.

More Monday.

"Honey, I Shrunk the Rain Forest"

Here's another issue coming out of today's reporting about the news conference yesterday (July 25).

As mentioned in last Monday's weekly Monday rain forest update, which see, the project's promoters have a way of changing the dimensions of their project from time to time without, seemingly, official board decisions or announcements. Once a $300 million project, and more recently a $180 million, 4.5 acre covered rain forest, with a million gallon aquarium, and 1.2-to-1.5 million visitors a year, Mike McWilliams Press-Citizen story this morning revealed that it is now "the $155 million Earthpark project . . . a 3.5-acre indoor rain forest with . . . a 600,000 gallon aquarium . . . [attracting] 1 million annual visitors." The history, significance and implications of such changes are discussed in the weekly update linked above.

Rain Forest: "Sweet 16"?

Next Monday's regular weekly Monday update on the Iowa rain forest project (http://www.nicholasjohnson.org/politics/IaChild) will expand on the current state of the project -- including Bradley Franzwa's blockbuster charges. Meanwhile, here is one observation.

1. The basic problems with the project have been with it for 10 years. For a summary take a look at Nicholas Johnson, "Time to Learn From What Works," Iowa City Press-Citizen, January 20, 2006. (Of the dozens of things I've written on the subject that's as good a brief example as any.) The Web site, linked above, is as thorough a collection of the hundreds of documents supporting these assertions as I know of anywhere on the Web. I won't repeat all of that here.

2. Today's stories (see "Rain Forest: Mid-Week Update," July 26) are illustrative.

3. "Sweet Sixteen." Jeffrey Patch writes, "At the beginning of this year, 16 communities submitted proposals."

David Oman is trying to turn Iowans' sensible disinterest in this project into his own form of a suspenseful "March Madness" -- except for the fact it's taking him 120 months rather than one. "There were 16, next 8, then 4, finally 2 . . . 'and the winner is' . . .." So far as I know, there never were "16." I'd be stunned if Oman could produce anything fairly called a "proposal" from 16 communities -- or even name 16 communities "expressing interest." He consistently refused to reveal the names of more than four genuine contenders.

(Of the six identified, Dubuque made clear from the outset it had its own plans regarding its nationally recognized Mississippi River Museum and Aquarium -- which is undergoing more expansion plans at the moment, and is doing very nicely thank you. If Oman could find a place for his project within their plans, fine; otherwise forget it. It was forgotten. Rain forest promoters essentially kicked Coralville in the face before leaving town, after Coralville had put months of effort and millions of dolars into development plans that were to include the rain forest. So, while it may have been a theoretical possible one of six, both sides knew that was highly unlikely.)

Of the four, neither Grinnell nor Tiffin were rejected by the rain forest board; they pulled themselves out of contention. Doubts about the project were expressed locally in both communities. The project's continued delays were complicating other local plans. And the $25 million, demanded of the local communities by the project, were not forthcoming.

So this "selection" of a "final two" has not quite been the case of 16 eager, hopeful communities being narrowed down through a process of visitation and evaluation by the board that the media buys into repeating.

How this kind of thing happens is itself an interesting subject for inquiry in a media class.

Rain Forest: Mid-Week Update

As always (at least since last December), the full weekly Monday update on rain forest developments (or lack thereof) will be next Monday, July 31, at http://www.nicholasjohnson.org/politics/IaChild.

But there are three published stories, and one insider's observations, related to yesterday's (July 25) rain forest news conference worth at least citing here along with some brief comments.

Zack Kucharski, "Rain Forest Contenders Down to 2; Tiffin Drops Out, Riverside, Pella Confident They'll Prevail," The Gazette, July 26, 2006, p. 1A, col. 1 (also available here).

Mike McWilliams, "Riverside, Pella Finalists for Earthpark; Contenders Met or Exceeded $25M Funding Criterion," Iowa City Press-Citizen, July 26, 2006, p. 3A (also available here).

Jeffrey Patch, "Rain Forest Site Finalists: Pella, Riverside; Each Town Has Raised $25 Million to Compete for the Earthpark Project," Des Moines Register, July 26, 2006 (also available here).

Bradley Franzwa, "The Rest of the Story," [email] July 26, 2006. (I'm going to hold off on publicizing Franzwa's dramatic revelations until Monday's update; until the reporters, to whom he also made this information available, have had an opportunity to investigate it and make clear they are taking a pass on this prize-winning story.)

And don't miss the "Iowa Pork Forest" "Earthpark Update: Down to Riverside and Pella," July 25, and State29's "Iowa Pork Forest," July 26.

Bottom line: David Oman has succeeded once again in gaining the attention of, and placing major stories with, Iowa's major print and electronic media, that somehow end up putting a positive spin on stories on page one, column one, and that lead the evening news, the substance of which is somewhere between "no news at all" and "still no money" and "more delays." Whatever else you may say, you've got to hand it to this guy for his skills as a publicist. Why the White House has never brought him to Washington to tell the story of all the wonderful progress we're making in Iraq is beyond me.

(Additional commentary will be forthcoming.)

Flash: Oman Says September

At 3:00 p.m. this afternoon (July 25) we received advanced word that David Oman is about to hold a news conference at which it is believed he will announce that the final decision on the location of the rain forest will be announced in September.

It is reported he will say that the two finalist communities are Riverside and Pella, both of which -- given the withdrawal of Grinnell and the silence from Tiffin -- have been widely believed to be the two finalists now for some time.

Given the numerous early reports that each had long since presented the requested $25 million to the rain forest's promoters, there has been no explanation of the delay in selecting the "winner" between them

In fact, the final decision was promised for, but not forthcoming in . . .

January
February
March
April
May
and June.

It was never promised that a decision would be announced in July or August, so the promoters cannot be faulted for the final 60 days of the eight-month delay.

So why is the promise of a decision in September any more worthy of our reliance? Guess we'll jsut have to wait and see.

More details will be passed along as they become available.

The Gazette's early report of these events is consistent, adding that Tiffin had actually withdrawn from consideration. Zack Kucharski, "Riverside, Pella Named Earthpark Finalists; Tiffin Officials Withdraw Proposal," The Gazette Online, July 25, 2006.



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Bring Lunch

My thanks to K.L. Snow ("Diary of a Political Madman") for the suggestion someone might actually want to read "Are TIFs 'Corporate Welfare'?" And for the good humor that I find so delightful among bloggers; in this case, "bring a lunch."

It reminds me of the woman who complained that men have only two requests of women: "Arrive naked" and "bring food."

Anyhow, here's what K.L. had to say:

Diary of a Political Madman
http://klsnow.blogspot.com

Saturday, July 22, 2006

TIF Tidbits to Transfer to Text

Nick Johnson of FromDC2Iowa is becoming the guy who consistently digs deeper into an issue than I would be able to on my own, and today is no exception.

Today, Nick writes about the more subtle features of TIF, or Tax Increment Financing, how it impacts developing businesses and why calling it anything but "corporate welfare" is a mistake.

Go read the whole thing, but pack a lunch and something to drink, cause it might take a while.

KL

posted by KL Snow @ 2:15 PM

http://klsnow.blogspot.com/2006/07/tif-tidbits-to-transfer-to-text.html

KL is right -- as well as funny. I'm used to speaking for entire semesters at a time, and can easily drift into writing the same way. Friends complain, both that I interview instead of converse, and that, when speaking, it is in entire paragraphs at a time, instead of sentences. I'm working on trying to develop the capacity for the written equivalent of sound bites that makes bloggers' writing so easy and fun to read. (How did I ever survive as a radio commentator?) But as you can tell from even this simple paragraph, it is going to take me awhile to get the technique polished.

Gazette: Corporate Welfare's "Cool"

This morning's (July 24) Gazette includes among its "Homers" and "Gomers" features this "Cool Announcement" as one of its "Homers: What's Going Right":

"COOL ANNOUNCEMENT: Locations in other states and Mexico were considered, but Iowa's Middle Amana Whirlpool plant has landed an $11 million expansion to meet consumer demand for bottom-freezer models. A good relationship between the plant's management and the Machinists Local 1526 played a key role in bringing 438 new jobs to Eastern Iowa instead of elsewhere. State incentives worth $7.3 million and local incentives worth $1 million were also essential to persuading Whirlpool to expand."

"Homers: What's Going Right; Cool Announcement," The Gazette, July 24, 2006, p. 4A.

Where to begin?

OK, I'm happy for the 438 employees, and whatever impact they and their wages may have on the economy of Eastern Iowa in general and the Amanas in particular. I'm strongly in favor of employment.

But, "new jobs"? How quickly we forget. It was scarcely two months ago that we were reading, "Whirlpool announced Wednesday it would close the laundry factory with nearly 1,000 workers and the Maytag corporate headquarters with about 900 employees late next year." See, e.g., Associated Press, "Iowa Loses Maytag Jobs," Quad City Times, May 11, 2006.

Unless my math is off, shouldn't the Gazette's "Homer" have been headlined, "Whirlpool Cuts Its Contribution to Iowa's Unemployment from 1900 to 1562 Jobs"?

And "landed an $11 million expansion"? Again, you can question my math, but an $11 million project, for which Iowa taxpayers have paid $8.3 million, and Whirlpool has paid $2.7 million, looks to me more like a $2.7 million than an $11 million contribution to the Iowa economy. What the heck, if generous taxpaying Iowans would build me an $11 million plant I'd be willing to build refrigerators here.

"Locations in other states and Mexico were considered"? "Considered," or used as a negotiating gambit? "Gee, if they're considering paying Mexican workers $2.00 an hour to make these refrigerators, how much can we realistically ask for in wages?"

What is this "good relationship" between Whirlpool and Machinists Local 1526 going to cost those who possess these "438 new jobs"? What are their hourly wages, health care and retirement benefits? How do they compare to union members elsewhere around the United States? Does this "good relationship" represent a negotiated reduction below what the Machinists usually get, or initially asked for? Does the corporate welfare sacrifice of Iowans take the form of lower pay as well as higher taxes?

Were either of these sacrifices "essential to persuading Whirlpool to expand"? Would the expansion not occur "but for" this financial contribution? Remember, this was the same Whirlpool that turned down Governor Vilsack's generous offer of $100 million of Iowans' tax money to build a washing machine factory in Newton. So $100 million wasn't enough to be persuasive, but now $8.3 million is? That doesn't compute.

How much of this decision by Whirlpool is just a part of its public relations and marketing efforts? Iowans buy washing machines and refrigerators, just like everyone else. A lot of Iowans were plenty pissed when it chose to close down Maytag in Newton, and were willing to boycott the company -- as, if not the only, at least an effective way to express their displeasure. Is this an effort to win them back?

There's a lot of hand wringing about keeping our children in Iowa. It's not just about "jobs." It's about jobs that pay a "liveable wage," enable a young person (or couple) to buy a home, raise children, send them to college (with ever-escallating tuition), and enjoy some of the pleasures of life. Iowa remains in that shameful category of states that won't even raise their minimim wage above the federal $5.15 hourly rate. The rest of the state's salary scale reflects this approach -- except for football coaches. One of the quickest, easiest things we could do to keep Iowans' children in this state is to pay them.

How will this 438 Whirlpool jobs measure up by this standard? Are they an effort to drive down pay to the lowest possible level for this type of skilled labor, or will they offer an incentive to our high school and college graduates who are considering whether to leave home or stay?

A "Homer"? Well, maybe.

Jeff Cox on TIFs

I only just found UI Prof and Iowa pol Jeff Cox's published Letter to the Editor in the Des Moines Register last Saturday:

Next: Go after tax increment

The Iowa Legislature had one of its better days when it overrode Gov. Tom Vilsack’s veto of a bill setting reasonable limits on the use of eminent domain. Legislators should now turn their attention to another widely abused tool of economic development, the Tax Increment Financing District (TIF). Iowans who are driving down Interstate 80 and see the huge Coral Ridge Mall in Coralville probably assume that its owners pay local property taxes. They are wrong.
Through a TIF, property tax money from that development is diverted to investors in the mall. Throughout Iowa, local governments are finding their budgets shredded through the hidden mechanism of the TIF.

— Jeff Cox, Iowa City.

Since Anonymous' comments seem as applicable to Jeff's Letter as to my Blog entry, it would be interesting to know Jeff's reactions.

Rain Forest: Monday July 24 Update

The Monday, July 24, Update for the Iowa Rain Forest Web site has been uploaded and is available at http://www.nicholasjohnson.org/politics/IaChild. (Ever since the failure to hold the promised mid-June board meeting, and the refusal to annouce its next scheduled meeting, one of the most skilled public relations operations to come along in a long time, with regular "news" announcements as regular as clock work, has mysteriously gone silent.)

Here's an excerpt:

# # #

Those who are fans of CBS' "Late Night with David Letterman" will recognize the line, "Oprah didn't call again today."

What's going on? Why isn't the mainstream media finding out for us?

1. Are the promoters trying to keep the illusion that this is still alive through the November elections to avoid additional embarrassment for Senator Grassley, and the other Republicans identified with the project?

2. Are they on the verge of announcing a $100 million gift that will make construction possible (along with a perpetual subsidy to cover the probable shortfall in operating budgets)?

3. Or, are they further reducing their plans to fit the money ("Honey, I shrunk the rain forest").

If you've been following the evolution of this story over the past few months you may have noticed the shrinking size of this project. Originally a $300 million undertaking, it was first reduced to $225 million. At that point, one of the project's own consultants pointed out that any further reductions risked its ability to generate enough income to sustain operations. (The rationale: the only way to attract enough visitors, especially in Iowa, is if the rain forest is truly "the world's largest" -- the claim of the Omaha Zoo's rain forest for many years.)

The next reduction was to $180 million, which remained for many months the fixed number -- "the $180 million rain forest project" -- even though there was never any explanation of exactly what this $180 million would, and would not, cover (e.g., construction only, trees and animals, the included school or teacher training facility, parking lots, pre-opening promotion, subsidies for school children); they weren't saying.

During the past six months, though I'm not sure exactly when it began, it has become a $155 million project, with a smaller acreage under cover, and a smaller aquarium (although all the components itemized above remain just as unknown as they've always been).

As such, it illustrates a number of the problems the project has had from the beginning:

1. the failure to focus,

2. to know and reveal precisely what it is they're talking about,

3. the rather casual off-hand way in which changes of direction are announced without board endorsement or details, and

4. the willingness to ignore the consultant's counsel regarding the necessary size of the project if it is to have even a chance at financial sustainability.

# # #

Are TIFs "Corporate Welfare"?

There is a July 21 comment in "'Takings': Eminent Domain and Iowa Values Fund," July 15, 2006, deserving of more than a brief reply. Here it is:

# # #

Anonymous said...

You are confusing TIFs with Tax Abatement. Under tax abatement, a company can benefit financially by not having to pay taxes.

When a TIF is used, the company moving in doesn't necessarily get a monetary benefit. In most cases, the city or county uses TIF to build roads, water lines and other infrastructure in order to help facilitate the company's locating there. In my mind, it is much different than a cash payout.

Either way, the issue in question was whether or not the Legislature needed to pass a statewide ban on using TIF because somewhere between ONE and TWO percent of the city officials that were using TIF were abusing it.

In the end, legislators decided that local control was probably the way to go; that the countless communities that use TIF effectively to benefit their own taxpayers (by lowering taxes in the long run) should not be penalized because of a few morons, and that local citizens should vote out of office city officials who abuse TIF instead of running to Des Moines and asking for them to fix the whole state.

7/21/2006 08:34:03 PM

# # #

So far as I know, even the most vigorous opponents of Tax Increment Financing have never charged its advocates with being terrorists, or otherwise persons in need of something akin to the "witness protection program." So why someone must take on a cloak of anonymity before saying a kind word on behalf of TIFs is not clear to me. But I, like the U.S. Supreme Court, acknowledge that there is sometimes a value to anonymous speech, and I certainly welcome comments from all directions.

Moreover, whoever this "anonymous" may be, she or he (hereafter "s/he") certainly writes as if they know what they're talking about -- a description I've seldom felt entitled to apply to myself with regard to any subject. I'm not trained as an economist, and struggled to understand (and write three columns about [December 22, 1998; January 5 and 19, 1999]) Iowa K-12 school district financing. I did OK as a law student understanding what was then the Internal Revenue Code, but whenever I've come close to grasping one of the intricacies of TIFs it has always burst in my hand, like one of those liquid soap bubbles we used to make with bubble makers when we were kids.

1. I guess the bottom line, for me, is that the capitalist, free private enterprise system ought to be able to live out its dream without taxpayer support. Officials' largesse with taxpayers' money -- when it is focused on a single individual, firm or project (as is often the case with Congress' "earmarks") -- always raises my suspicions (especially when preceded by campaign contributions). (Obviously, city-wide police and fire protection, trash collection, provision of a public library, and the filling of pot holes in the roads are another matter.)

2. Even though I can't always follow the shell-and-pea game involving exactly what is going to whom, when and for what, if there is a project that, say, a developer says s/he won't do, for financial reasons, and a governmental unit intervenes, and something financial transpires (even though we're not told, or can't figure out, what it is), and subsequently the project goes ahead, it seems to me reasonably intuitive (not proven, but a good guess) that the developer has somehow benefited from public money.

3. My sources, this morning (since I'm responding to a blog comment rather than writing a doctoral dissertation), are via Wikipedia. See "Tax Increment Financing," Wikipedia, which contains a fairly straight-forward description of TIFs, but with virtually no critique. So much so that Wikipedi felt obliged to provide a boxed caveat, "The neutrality of this article is disputed. Please see the discussion on the talk page." The talk page, "Talk: Tax Increment Financing," Wikipedia, as might be expected, does contain criticism. One example: to the extent TIFs involve "capturing" future taxes for the benefit of the developer, and property taxes aren't raised for everyone to cover that amount, the TIF deprives the other programs of that governmental unit of the share of those taxes they would have otherwise enjoyed. That's a complaint I have heard from Johnson County officials regarding the shortfall to the county as a result of the substantial use of TIFs by the City of Coralville. Wikipedia also contains links to other material, including Minnesota House of Representatives Research Department, "How TIF Works: Basic Mechanics," (undated).

4. The Minnesota publication would require at least a slight modification of anonymous' comment:

"When a TIF is used, the company moving in doesn't necessarily get a monetary benefit. In most cases, the city or county uses TIF to build roads, water lines and other infrastructure in order to help facilitate the company's locating there. In my mind, it is much different than a cash payout."

(a) The Minnesota report described uses of TIFs whereby the governmental unit buys property for the developer and either gives it to him or her, or sells it at a price below what the governmental unit paid. In that scenario what happens, from my perspective, is not "much different than a cash payout."

(b) As for infrastructure, I'd say "it depends." When I wanted an extra water line on my property, the City charged me for laying it in. My understanding is that the costs of street or sidewalk improvements are sometimes "assessed" against the adjacent landowners. Presumably, farmers who want to have roads going through their fields personally pay whatever costs are associated with grading. So when a City pays for a half-mile of road from a pre-existing public road to the future location of a factory, or shopping center, I'm presuming that the cost is something that, but for the City's generosity (and TIF), would have been paid for by the corporation or developer. If I'm right about that, then I would say that such improvements are also not "much different than a cash payout."

(c) Indeed, anytime a taxpayer is paying reduced (or no) taxes, or postponing the date when the taxes are due, or enjoying the benefits of having the taxes s/he pays being put in a special fund, all the benefits of which come back to the taxpayer (with the consquence of either raising others' taxes, or cutting the budgets of other public programs), it would seem to me that is not "much different than a cash payout."

5. Which leaves us with "public benefit."

(a) Might there be some public benefits from TIFs? Of course. There may be some additional jobs at the new shopping center (as distinguished from jobs being transferred from the former retail outlets, now out of business, to the new shopping center). At some point in the future (hopefully) there will be some property taxes actually paid by the beneficiary that are put in the tax revenue pool to benefit the budgets of all of that government's programs.

But there are two necessary additional analyses or issues.

(b) Benefit-cost analysis. Sure, there are benefits; but do they equal or exceed the costs paid by those receiving those benefits?

(c) And, benefit-cost analysis aside, there are benefits of that nature from every capitalist enterprise (the externality social costs of which do not exceed those benefits): jobs, taxes, the goods and services provided customers, etc. Given that the TIF costs are zero in these cases -- and putting aside the unfairness to competitors of favoring one business over others with the public largesse of TIFs -- isn't the public necessarily, mathematically, better off with the benefits of capitalist enterprises that go it alone than with those that suck money from the public trough (regardless of what the public program is called)?

I close as I began. I don't claim to know what I'm talking about, but this is how it seems to me.

Follow-Up: Corporate Welfare

This morning's Gazette also had a story about the continuing hemorrhaging of public money handouts to big business -- although the details we taxpayers would most like to have known were inexplicably omitted. George C. Ford, "State OK's Assistance for C.R. Projects, Jobs," The Gazette, July 21, 2006, p. 8B (also available here).

1. Now the first thing we need to agree on is that a tax forgiveness of X dollars is the precise equivalent of a corporate welfare handout of X dollars in cash once it hits the bottom line. (E.g., By analogy, if MidAmerica Energy were to tell me that I didn't have to pay my, say, $100 a month electric and gas bill every month, the impact on my budget is precisely the same as if it said, "You're going to have to continue to pay your monthly bill, but we're going to give you $1200 a year in cash.)

2. And who are these small, struggling entrepreneurs we're keeping at home here in Iowa with these transfers of wealth? Archer Daniels Midland Co., JRS Pharma (a subidiary of J. Rettenmaier & Sohne of Germany), and Clipper Windpower -- which is now part of an alliance with British Petroleum.

3. What are they getting? "Tax benefits" from the Iowa High Quality Jobs Creation Program (ADM), and "enterprise zone tax benefits" (Pharma and Clipper-BP).

4. How much is involved -- that we taxpayers will now need to pay, in addition to our former taxes, in order to make up the tax losses resulting from these giveaways? The story doesn't say -- and presumably that's because neither the agencies involved, nor the beneficiaries, said either.

5. Jobs? You've got to be kidding. If you need a reminder of this blue smoke of an argument that hides our corporate welfare programs, re-read Nicholas Johnson, "Values Fund May Not Be So Valuable for Taxpayers," Des Moines Register, April 13, 2006, http://www.nicholasjohnson.org/politics/general/njdr0413.html.

Follow-Up: Iatrogenic Disease

In an entry a couple of days ago, "Gazette: 'Is Faster Safer?'" July 19, 2006, in the course of wandering around a number of topics, I mentioned something called iatrogenic disease -- diseases caused by doctors and hospitals.

I had no idea at the time that the Institute of Medicine was about to release a major report on the subject the very next day. Associated Press, "Report Says Medication Mistakes Common; 1.5 Million Americans Injured Every Year," The Gazette, July 21, 2006, p. 6A (and also available here).

Bear in mind that the 1.5 million Americans who suffer this particular form of iatrogenic disease are a small subset of the whole -- the ones for whom some mistake has been made with regard to their prescribed medicines. Iatrogenic conditions may also be caused by any one of a variety of other factors, most of which are unknown to me -- after all, this is not my normal line of work.

I recall reading somewhere of a study that some 30% of doctors and other hospital workers fail to wash their hands thoroughly after using the rest rooms, as required. Diseases can locate in areas of a hospital floor, or equipment, that have not been adequately cleaned. Care -- up to and including surgery -- may be applied to the wrong patient. X-rays may be mis-read.

I hasten to add that I have great admiration for the medical profession -- especially the nurses -- and don't mean to pick on any who have given their lives to the care of the rest of us. "Doctors Without Borders," and others, are real heros. It would be remarkable if there was not a similar level of mistakes made by lawyers, accountants, architects and engineers, and various trades people.

I just found it interesting, and worth comment, that the day after I referred to the subject this major report was issued.

Follow-Up: Getting More Than We Pay For

I'm not always going to try to track subsequent references to ideas in blogs here, but when the come the very next day. . .

Yesterday ("Getting More Than We Pay For," July 20, 2006) I was challenging the old adage that "You get what you pay for." My suggestion was that, with a little focus and creativity it is often (not always, but often) possible to come up with (or find on the Internet) solutions/approaches that are simultaneously capable of producing higher quality results while also reducing costs.

Today's Daily Iowan has yet another example:

"I wanted to commend the administrators of the IMU for silently but effectively implementing enviornmentally friendly solutions that are also cheaper to operate and make sense. . . ."

Marcelo Mena [UI Center for Global and Regional Enviornmental Research], "Color It Green," The Daily Iowan, July 21, 2006, p. 6A. (If you're intererested in what those "solutions" were, see the full text of the letter online.)

Follow-Up: State 29

Great pleasure to have acknowledgment from State 29, "Wednesday, July 19, 2006, Nicholas Johnson on Transfers Of Property," a reference to "Takings": Eminent Domain and Iowa Values," July 15, 2006.

Any mention by State 29 always produces a great number of hits on my newborn baby blog.

State 29 was one of my first exposures to blogs. And although he or she remains a mystery -- and, indeed, may be simply an extremely sophisticated bit of software -- the blog has set the standard for me. State 29 certainly provided a good bit of the inspiration for my Iowa rain forest Web site, http://www.nicholasjohnson.org/politics/IaChild, indeed is even rumored in some quarters to be the genius behind the Iowa Pork Forest blog, though there have been no sightings and that has never been confirmed.

We don't always agree; I don't always agree with anyone. But we often do; and I always admire the insight, humor, and creative, quality writing.

So thanks, whoever you are.

Getting More Than We Pay For

Yesterday I attempted to pull a lesson from a Gazette editorial about highway speeds: that caution is wiser than certainty when it comes to our assumptions and intuition about the data underlying public policy decisions. ("Gazette: 'Is Faster Safer?" July 19, 2006).

Today three paragraphs at the end of a Gazette news story caused me to reflect once again on the old adage, "You get what you pay for." Cindy Hadish, "Global Warming Issue Heats Up I.C.," The Gazette, July 20, 2006, p. 4B (also available here). (The story is about an effort of the Iowa Public Interest Research Group, and a law school colleague of mine, Jon Carlson, to urge legislators to back a bill designed to reduce greenhouse gas emissions.)

What caught my eye were the last three paragraphs of the story:

"Ferman Milster UI associate director for utilities and energy management, cited action the university has taken to reduce carbon dioxide emissions.

"Its biomass fuel project replaces coal with oat hulls from Quaker Oats in Cedar Rapids, providing a revenue stream for Quaker and reducing emissions while using a renewable fuel, he said.

"The program has saved the UI more than $1 million in fuel costs."

"You get what you pay for"? Not in this case.

The switch from coal to oat hulls means the UI has reduced its contribution to carbon dioxide emissions, is now using a renewable fuel, depending on what Quaker Oats was formerly doing with the oat hulls it may mean less need for land fill -- and (a) provides more revenue for Quaker Oats, while (b) reducing costs for the University.

I'm not suggesting that we should cut expenditures for social or other programs in the hopes that someone will come up with a way of delivering more for less money. All I'm suggesting is that, far more often than one might suspect, a little focus, and creativity, can produce alternative ways of doing things that can simultaneously increase performance while decreasing costs.

Here are a couple examples, both from education.

There was a thoughtful, best-practices report from The National Commission on the High School Senior Year, about 2001, that concluded much of the last year of high school is essentially wasted for many students. (Sadly, this report may no longer be available on the Web; at least the only sites Google brought me just now (that I examined) no longer contained it.) It proposed a number of programs school disticts could adopt that would similtaneously generate more student enthusiasm, provide a higher quality of education, while reducing class size, dropouts, the need for increased capital costs (building more, or expanded, high schools), and (with, if anything, fewer teachers) operating costs as well.

Most districts (sadly, I hate to report, a number that included the one on whose school board I sat at the time) either weren't aware of the report, were aware but didn't read it, or read it but decided the poorer quality education at higher cost was more comfortable and less disruptive than undergoing the changes that the improvements would require of them.

(In the case of my district, parents and other taxpayers decided they'd much rather float a $40 million bond issue, and expand the local high schools, than adopt the changes that would improve quality and lower costs. Moreover, all of this in the face of data suggesting the optimum size of high schools is roughly 650 students when ours, even before expansion, were already roughly two to three times that size.)

This is simply one more illustration of the proposition that there are approaches, to almost anything, that can increase quality while simultaneously decreasing costs.

In higher education there is an assumption that when it comes to university presidents and football coaches it is simply impossible to find a good coach for less than $3 million a year, or a good president for less than something between $400 and $800,000 a year: the more you pay the better quality person you get. I questioned that in a couple of pieces in the Daily Iowan: Nicholas Johnson, "Pricey Presidents' Added Cost," The Daily Iowan, March 7, 2006, and Nicholas Johnson, "When Too Much Is Not Enough," The Daily Iowan, June 30, 2006.

The latter began, "How much is enough? Regent President pro tem Teresa Wahlert said, 'You get what you pay for. You don't get an extremely qualified academic and entice him to stay' with a lower salary,' ("Board eyes more $ for prez," June 22)." It seemed to me that was an assertion worth testing; that it was possible those who come only for the money might very well be less enticed to stay when the next larger offer came around rather than more.

From rolled oats to roiled regents, it's not always the case that "you get what you pay for."

Gazette: "Is Faster Safer?"

The Gazette has an editorial this morning (July 19) about highway speeds that got me thinking about a number of things -- other than speed limits. Editorial, "Is Faster Safer?" The Gazette, July 19, 2006.

1. Because it seems (to me) intuitive that higher speeds would correlate with more accidents, I've kind of bought into that assertion without questioning it. (As I mostly walk and bike, and only put about 500 miles a year on my vehicle, none of this affects me very much personally -- either the danger or the desire to drive faster.)

On the assumption their numbers are right, the Gazette's editorial offers some interesting perspectives on my "intuitive conclusion":

"Alcohol was involved in nearly 40 percent of fatal accidents in 2005, and 56 percent of those killed in vehicle accidents were not wearing seat belts. . . . 80 percent of accidents (fatal and non-fatal) involved a driver who was drowsy, using a cell phone, applying makeup, distracted by children or otherwise not fully concentrating on the job at hand."

2. I don't cite this (for now) to argue one way or another about the impact of speed limits on accidents, but rather to raise some issues about arguing about the impact of speed.

There would be very little public policy discussion throughout the day if we had to have readily at hand all the relevant most current data and the sources from which it was obtained. We cannot do thorough research prior to every occasion we are about to engage someone in discussion of an issue.

But it is perhaps useful, for those interested in maintaining civility of discourse (and, in the process, friendships as well) to be mindful of the possibility that there are relevant data of which we are unaware -- such as the facts the Gazette brought to my attention this morning.

We need to ask ourselves, as well as those with whom we are talking, what general semanticists consider two very basic questions: "What do you mean?" and "How do you know?" We need to recognize that what produces the language we use is an electro-chemical process inside our skull -- not something outside. We need to more often utilize qualifiers, such as: "to me," "I'm not familiar with the research or data, but intuitively one would think," "I'm basing my opinion on one anecdotal experience I had; I know that's not statistically significant," "there may be a lot of facts here of which I am unaware, but . . .," etc.

I'm reminded of a comment attributed to Aristotle. A group of men were debating how many teeth a horse has. The debate was growing quite hot. Aristotle brought it to a halt with the suggestion, "Why don't we go find a horse and count them?" One of my favorite former school superintendents had a large sign on his wall, "In God we trust . . . all others please bring data." (I think Aristotle gave it to him.)

3. To return but briefly to the presentation in the editorial, are the statistics it cites dispositive of the issue? I don't think so (nor did the editorial writer). The answer (to whether we should have increased speed limits) does not require a choice between "inattentiveness" or "speed."

(a) There will probably always be a proportion of drivers who are drunk, not wearing seat belts, or inattentive while driving. Isn't the issue then whether they have more (and more serious) accidents at 75-80 mph than at 55-60 -- not whether "the cause" of the accident was "speed or inattentiveness"?

(b) Similarly, even sober, belted, and attentive professional drivers (e.g., NASCAR and semi-truck drivers) have accidents. There can be mechanical failures, or unforeseeable hazards created by others. The time and distance it takes to stop a moving object is in part a function of speed. Again, the researchable question might be whether even these skilled drivers have more, and more serious, accidents as their speed increases.

(c) There are at least two questions here. (1) Are there more accidents at higher speed (regardless of the skill of the driver)? And (2) Are there more serious accidents at higher speed (regardless of the skill of the driver)? The first is the issue the editorial addresses. On the second, intuitively and without data, I would think principles of physics would suggest that the higher the speed the greater the force of the impact and, therefore, probably the greater the potential damage to vehicle and driver.

4. Finally, the Gazette's added data raises a more general observation. Many -- possibly most -- of the problems any individual confronts are problems of their own making.

Consider health. How much could one improve an individual's -- or a nation's -- health if we'd follow the apparently well-documented suggestions provided us by every source from our mothers to the daily newspapers: regular exercise, weight control, proper nutrition, adequate sleep, lots of water, elimination of tobacco, minimal amounts of alcohol, treatment of addictive behaviors -- including the suggestions from the Gazette's data regarding driving (don't drive drunk, wear a seatbelt, be attentive to driving)?

(Indeed, reliance on medical treatments can be a part of the problem. It even has a name: "iatrogenic disease" -- medical conditions brought on by a doctor's treatment or a hospital stay. One study -- I believe of a hospital in Boston -- concluded that 30% of the patients there were suffering from iatrogenic disease.

My doctor says that about half the time (but note, not always) you'll recover from most conditions without any medical treatment at all. If roughly one-third of the time you to go to a hospital you'll end up worse, with some iatrogenic disease in addition to your original condition, my math suggests you have only one chance in six that medical treatment is actually going to make you better.

This is just one more reason to keep yourself healthy and avoid the need for medical treatment.)

How many financial problems, regardless of income -- and up to and including bankruptcy -- could be prevented (or at least reduced) by using some very basic tools of accounting, controlling impulse buying, and reading Consumer Reports?

Walt Kelly's Pogo had it right: "We have found the enemy, and he is us."

Rain Forest: Monday July 17 Update

For those tracking the "progress" on the Iowa Rain Forest by way of this blog the weekly Monday update went up yesterday (July 17).

Not all that much news; Riverside's still hopeful. But not a peep about when that decisive Board meeting (last set for June) will be held -- or even its scheduling announced. Odd, since both Riverside and Pella have asserted they have the requisite $25 million ready to hand over.

As for attractions and economic development generally, there are a number of items about gambling.

_______________

[Every Monday since December 2005 there has been a weekly upload to the pre-existing Iowa rain forest Web site I maintain. In all, printed out it would run over 100 single spaced pages; there are, in addition, links to the full text of hundreds of newspaper stories and reports. It is very probably the most complete resource on the topic anywhere on the Web.

It is found at: http://www.nicholasjohnson.org/politics/IaChild.

Over the past few months the scope of the Web site has expanded from the rain forest project to include material related to the broader range of attractions and economic development generally in which the proposed rain forest exists and by which it must be evaluated.]


Iowa Rain Forest, economic development, attractions, tourism, rain forest, pork, Earthpark, Earth Park, Iowa

Can Iowa Gamble Itself Into Economic Prosperity?

From this Monday's (July 17) weekly Monday update to the Iowa Rain Forest Web site (http://www.nicholasjohnson.org/politics/IaChild):

Gambling was a big story, as Iowa prepares to gamble itself into prosperity.

Remember Steve Martin's character in the movie "The Jerk" (Navin Johnson)? He's guessing peoples' weight at the fair, but so poorly that the boss has to explain to him how much money he's losing, giving away all those prizes. Finally, the character gets it, and exclaims, "Oh, I get it; it's a profit deal."

Well, gambling is a profit deal. And last week we learned that Iowans leave $1.15 billion at Iowa's casinos, not counting the three additional casinos run by Native American tribes. William Petroski, "Gamblers Left Behind $1.15 Billion at Casinos; Average Patron Lost $57 During Past 12 Months," Des Moines Register, July 12, 2006. I don't have the numbers, so this is from memory, but my recollection is that some slot machines return as much as 95 percent or more of what's dropped in them. But let's be real conservative and say that, on average, the payback is only 80 percent. (In other words, if you were to start with $100, play the slot machines, keep all your winnings separate (that is, not put them back in the slot machines), once your $100 ran out you would, on average, be able to walk home with $80 in your pocket.)

This would mean that Iowans had bet (as distinguished from "lost") $5.75 billion (or more, counting the other three casinos) during the course of a year. (And that's just at casinos; it doesn't include online gambling, private poker and bingo games, the lottery, and so forth.) For those concerned about the "tax burden" our State imposes, it should be noted that even the smaller $5.75 billion figure significantly exceeds all the State's General Fund Expenditures, combined, for FY 2003. Apparently Iowans agree that, when it comes to gambling, "too much is not enough." More casinos have, or will soon open -- including the one in Riverside. Although, at this point, the powers that be appear willing to hold up for a little before authorizing more. William Petroski, "New Licenses Likely on Hold 'till '08," Des Moines Register, July 14, 2006.

Can Iowa gamble itself into economic prosperty? Don't bet on it. Gambling doesn't manufacture or grow anything we can sell on the world market. Moreover, a good deal of that $1.15 billion -- as Ross Perot used to say -- just makes a giant sucking sound as it leaves the state for Nevada or, in the case of Riverside, South Carolina. Are we bringing in gamblers from out of state? To those casinos on or near the border, some, yes. But most gamblers go to the nearest casino; gambling increases in communities that find themselves near a new casino; few travel more than 50-100 miles. Mostly (I would guess, without having access to the data) these are Iowans who are imposing this equivalent of a "tax" upon themselves.

I won't take this occasion to expand upon the negative economic (and other) impact of gamblng: the increased cost to taxpayers of the necessary additional law enforcement, increased crime, domestic violence, family financial hardship -- up to and including the increase in bankruptcies -- as well as all the infrastructure costs (such as water and sewer), and cash grants and tax forgiveness.

By contrast, Dick Doak believes "it is possible for a community in Iowa to make it without having a casino," Richard Doak, "Muscatine Remaking Itself," Des Moines Register, July 16, 2006.

"Takings": Eminent Domain and Iowa Values Fund

This morning's big local news (July 15) is the Iowa Legislature's dramatic override (41-8, Senate; 90-8, House) of Governor Vilsack's veto of the legislature's eminent domain bill (making it more difficult for the State or cities to seize citizens' private property -- farms and homes -- for "economic development" (that is, the personal profit of individual "developers"). Illustrative is The Gazette's page-one story, Rod Boshart and James Q. Lynch, "Lawmakers Override Vilsack Veto; By An Overwhelming Margin, Legislature Restores Limits on Property Condemnations," The Gazette, July 15, 2006, p. 1A. [The Register's report is Tim Higgins and Jonathan Roos, "Legislators Override Vilsack's Veto; Property Rights Question Could Head to Courts," Des Moines Register, July 15, 2006.] The Gazette reports this is the first time in 43 years an Iowa governor's veto has been overridden.

Joe Gerst, a member of the Linn County Farm Bureau, is quoted in the Gazette as saying, "We're not against libraries, schools and roads, but we don't want our property taken for private development."

Mr. Gerst has rather nicely captured the relevant distinction at play in Iowa's legislation and the recent Supreme Court case which provided the incentive for it, Kelo v. City of New London, ___ U.S. ___ (2006), decided June 23, 2006.

However one comes out on these issues (and legislators from my area (Iowa City; Johnson County) constituted a disproportionate number of those 8 dissenters in each body) most people would recognize distinctions in government functions (whether paid for through cash payments, tax forgiveness, or the use of eminent domain). (a) Use of the public treasury to perform functions traditionally those of government (e.g., military, and, as Mr. Gerst says, "libraries, schools and roads), (b) payment to private firms under contract to perform services for government (e.g., defense weapons contractors, transportation of troops and supplies, road building), (c) payments to identifiable groups of people similarly situated (e.g., student loan programs, food stamps -- programs often rationalized as necessitated by religious or humanitarian princples and the obligation, indeed definition, of a civilized society), and (d) transfers to a single individual (or small group), engaged in a for-profit commercial enterprise, where the gifts from the state are distributed to some and denied to others who are similarly situated. Use of eminent domain to transfer land from one private individual to another (in the name of "economic development") would be an example of this category.

But what baffles me is how legislators who bring such passion to being against the transfer of one individual's property to the private profit of another through the use of eminent domain -- with this near-unanimous, first veto override in 43 years -- can become so huffily hostile and defensive when asked to justify their enthusiasm for the Iowa Values Fund or TIFs.

What, exactly, is the difference? In one case the government takes property against the will of one citizen and gives it to another single citizen. In the other case the government takes the property of all the citizens against their will and gives it to a single citizen for his or her own private profit. On the face of it one would think it multiples more offensive to take from many than to take from one.

I find some hypocracy in the fact that among the greatest enthusiasts for these various forms of corporate welfare are the same folks who hold to a "marketplace regulation," "free private enterprise capitalism," "get the government off the backs of business," Republican ideology. In fact, I have yet to find anyone -- though I am sure such must exist -- willing to take this ideological position in opposition to corporate welfare.

Within the last couple days I have discussed some of these issues with five of my law professor colleagues and one practicing lawyer. Each recognizes the drawbacks to such programs, such as the difficulty of public officials knowing when the launch of a project really does turn on the availability of grants, their inability to predict (better than the market, with its venture capitalists and banks' loan officers) which ventures will prosper, often the failure to follow up and measure effectiveness (return on the public's investment), opportunities for pay back on campaign contributions, etc. But each seemed willing to evaluate each project separately on its facts, even if they predicted the number they would personally approve would be very few indeed.

For example, one said his position on the program generally would turn on the data obtained from a controlled study: find comparable businesses to those that are given grants or tax forgiveness. Record over, say, five years or so the expansion of each (physical plant, employees, sales, taxes paid, number of failures). Calculate the marginal increase in public benefits (if any) from the businesses that received the grants over the comparable businesses that did not, and the benefit-cost ratio this represents.

Meanwhile, I'd like to see the Iowa Legislature bring a consistent concern to all the ways in which government uses its power over citizens (taxation as well as eminent domain) to transfer wealth from one citizen to another.

See generally, Nicholas Johnson, "Values Fund May Not be so Valuable for Taxpayers," Des Moines Register, April 13, 2006.

More: Justifying Corporate Welfare

I've been exchanging emails with an elected official regarding the Iowa Values Fund (which is back in the news today, July 13) and other gifts of public money to private business. He favors such programs (for the most part). This morning I wrote him along these lines:

I still can't wrap my head around an ideology and algorithm that would enable me to (a) come up with a rationale as to why tax money ever ought to be given to private individuals for their own personal business and profit, and, if it is to be done (b) an algorithm or analysis for concluding which, among all requests, should be granted or denied.

I treat as a separate issue social programs for those who, for a variety of reasons, are without basic human services. I'm not, now, arguing for or against such programs. It's just that they are created and evaluated more (though not exclusively) from a perspective of considerations relevant to religions, humanitarianism or the basics of a civilized society than economic analysis.

And I acknowledge that if one is ideologically committed to fascism (the blending of corporate and state power and economics) or socialism one would have less difficulty with the ideological side of this. I'm looking at it from the perspective of the capitalist, marketplace-driven, free private enterprise ideology/economy which I have always assumed most Republican/conservative/business-oriented public officials believe in.

The algorithm. How can one be enabled to say, "this particular grant was the result of a thorough prior analysis, and subsequent detailed monitoring, that demonstrate the public received a benefit well beyond its investment and one that, but for the grant, we can prove beyond any question would not have occurred," or "this other grant was the result of good-old-boy-ism, or campaign contributions, wasn't necessary (because the investment would have taken place anyway), was not thoroughly researched or monitored, and is going to cost the public much more than it will ever receive by way of benefits."

Even if those two problems [(a) and (b) in the second paragraph] could be solved, I don't see the formula for explaining the basic fairness (politically and economically) of giving public moneys to one business while denying it to that business's competitors. Basic fairness aside, doesn't this constitute the very kind of interference with market forces that a system of marketplace competition should want to avoid?

Putting aside basic fair and equal treatment of competitors within an industry, how do we justify not applying this philosophy of government involvement in the economy to everyone?

For example, what do we say to the high school graduate who offers, "If, for the next five or ten years, until I can get going economically, you will forgive my obligation to pay taxes, and provide a fully funded college education (so I won't have student loans to pay off), I will more than return the government's investment in me with the increased income, property, sales and various excise taxes I will pay over the course of my lifetime"? What is wrong with this student's argument (on the assumption the student can meet the challenges of (a) and (b) in the second paragraph)? To what extent might it be the result of the fact that high school students are notoriously miserly when it comes to making $10,000 campaign contributions to influential public officials?

As a footnote, while there may be analogous questions regarding the public funding of infrastructure that has a substantial economic benefit for business -- the "gift" of facilities that, but for the public expenditure the business would have to pay for-- they have the benefit of being (a) equally (more or less, but not always) available to all businesses, rather than a single competitor, and (b) public alike. Examples: community college (not to mention K-12) training of future employees, roads and bridges, water and sewer systems (and, in progressive communities, municipally owned electric power, broadband wireless Internet, or cable television), fire and police protection, etc. To which can be added recreational facilities and amenities that help attract business persons, professionals -- and tourists, for the motels and restaurants. I'd mention in this connection, parks, trails, the theater in the park, downtown concerts, etc.

On the other hand, having property tax payers foot the bill for cleaning up the vomit outside the bars on Sunday morning that is seemingly a necessary byproduct of the way the bars conduct their very profitable businesses is a more marginal matter. On the one hand, it can be thought of as a cost of doing business that they should pay for; on the other hand one can argue it's also of benefit to any member of the public walking around the downtown area on a Sunday morning.

Nicolai Brown on Government vs. Citizenry

Don't miss Nicolai Brown's (AmesWire's) chilling July 10 comment in "Pentagon's Monitoring Students' Email," July 9. Is it equally obvious to all?

And read his insightful and utilitarian reflection on a personal experience with lessons for all of us: "Compare an Authoritarian to a Neighborly Solution," July 10.

Neutral Principles, Anyone? Justifying Corporate Welfare

Today's news (July 12; Iowa City Press-Citizen and The Gazette) raises again the issues addressed in "Where's Value in Values Fund?" July 7, 2006, and "Values Fund May Not be so Valuable for Taxpayers," Des Moines Register, April 13, 2006.

A bakery in North Liberty, Iowa, has -- for the second time -- been the recipient of public tax money from a grateful citizenry. The new operator has been granted a $100,000 forgivable loan, or tax waiver (TIF).

State governments tax -- and spend. The federal government borrows and spends. What they spend on tends to fall into three categories (with subsets): (1) clear government functions (e.g., the military and and public schools, libraries and parks) primarily performed by government employees; (2) outsourcing related governmental functions to private contractors, performed by employees of for-profit firms (e.g., defense contractors and road building firms); and (3) simple transfers of public tax revenues to for-profit firms (and individuals).

The latter is problematical for a number of reasons. (a) Ideologically, how does it square with "capitalism," "free private enterprise, etc.? (b) With one-third of the 800,000 new start-up firms each year out of business four years later, these aren't very good odds for our tax dollars -- especially given that the recipients we choose to enrich are those who couldn't convince investors, venture capitalists or bankers to pick up the tab. (c) The data is somewhere between fuzzy and totally non-persuasive that the public receives anything like fair value for its money. (d) How can we possibly know that a grant of public funds (or tax forgiveness) is actually tipping the scales and making a difference in any given business decision? How do we know the recipient wouldn't have gone ahead anyway with the investment, or that the decisive factors in the decision involved matters other than how much public money they could worm out of the state (e.g., quality of the work force, schools, outdoor recreation, crime control, water supply, transportation networks)? (e) How do we justify providing cash to one business person while denying it to his or her competitors? (f) And isn't a system like this just asking for something between good-old-boy-ism and outright bribery in terms of how the goodies are distributed?

Anyhow, what I'm looking for are what might be called "neutral principles." What's a decision tree, an algorithm, for deciding when it is -- and is not -- appropriate to take tax money from the middle class (and wealthy) and bestow it upon one relatively wealthy private business person and not his or her competitor?

One can say, (1) "it should never be done. Let business rise or fall on its own." Or, (2) "it's always a good idea if the business appears viable and says it needs the money, that whether to invest further will turn on the receipt, or not, of public funds. After all, that's the way we create jobs and prosperity for all."

(3) But on the assumption you don't buy either of those extremes, how should government go about making these decisions?


Iowa Rain Forest, economic development, attractions, tourism, rain forest, pork, Earthpark, Earth Park, Iowa, politics, TIF

Babblemur on Rain Forest, Pentagon Student Spying

Babblemur has provided an insightful and amusing commentary regarding the possibility of putting the Iowa Rain Forest ("Earthpark") in Iowa's Tulip Capital, Pella (along with links to this blog and my Rain Forest Web site). Babblemur, "Earthpark Pella? Why not Earthpark Oshkosh?" Babblemur & Akaoni Power Hour! ("Money is Property; It is Not Speech"), July 9, 2006, http://babblemur.com/blog/?p=586.

The blog also provides the full text of the Chronicle of Higher Education story from which I could only provide a brief excerpt ["Pentagon's Monitoring Students' Email," July 9] (the Chronicle's Web site provides full text to hard copy subscribers only). Babblemur, "DoD Monitoring Student E-mail," Babblemur & Akaoni Power Hour!, July 7, 2006, http://babblemur.com/blog/?p=582.

Thanks to Babblemur for both contributions.
Iowa Rain Forest, economic development, attractions, tourism, rain forest, pork, Earthpark, Earth Park, Iowa, politics
War on Terror, spying, Iraq, domestic spying, spying on students' email, Department of Defense, don't ask don't tell, anti-war protests

Rain Forest: Monday July 10 Update

The Monday, July 10, Iowa Rain Forest update is now available at http://www.nicholasjohnson.org/politics/IaChild. (Click on "Weekly Updates" at top of page; then click on "July 10.")

The news? It reminds me of the country song line, "Since the phone it still ain't ringin' I assume it still ain't you." The project's board selection of the ultimate "winner" from the "final four," promised for January, February, March, April, May and June, it has now been announced, "is still pending, but unscheduled."

Grinnell has dropped out. The Iowa Pork Forest suspects Pella doesn't have the money either. And we discussed last week the money situation in Riverside. Tiffin anyone?

On the "economic development and attractions generally" front there were a number of stories about the Iowa Values Fund (a defensive Governor sparring with critics), and a new "small is beautiful" approach to Iowa tourism.

_______________

[Every Monday since December 2005 there has been a weekly upload to the pre-existing Iowa rain forest Web site I maintain. In all, printed out it would run over 100 single spaced pages; there are, in addition, links to the full text of hundreds of newspaper stories and reports. It is very probably the most complete resource on the topic anywhere on the Web.

It is found at: http://www.nicholasjohnson.org/politics/IaChild.

Over the past few months the scope of the Web site has expanded from the rain forest project to include material related to the broader range of attractions and economic development generally in which the proposed rain forest exists and by which it must be evaluated.]


Iowa Rain Forest
economic development
attractions
tourism
rain forest
pork
Earthpark
Earth Park
Iowa

Pentagon's Monitoring Students' Email

Here is a chilling report that involves (a) more domestic spying, (b) done by the military (Department of Defense) rather than the FBI or NSA, (c) on students, (d) in many intances related to their legitimate free speech (however much DOD would find it more convenient to silence them). [For Sean Blanda's July 9 link to this item and comments see CollegeV2.]

The Chronicle of Higher Education reports:

Pentagon Surveillance of Student Groups as Security Threats Extended to Monitoring E-Mail, Reports Show

By SAMANTHA HENIG

The Department of Defense monitored e-mail messages from college students who were planning protests against the war in Iraq and against the military's "don't ask, don't tell" policy against gay and lesbian members of the armed forces, according to surveillance reports released last month. While the department had previously acknowledged monitoring protests on campuses as national-security threats, it was not until recently that evidence surfaced showing that the department was also monitoring e-mail communications that were submitted by campus sources. * * *

The Chronicle, a subscription only site, http://chronicle.com/daily/2006/07/2006070601n.htm
provides non-subscribers no more than this much of the story. However, Edupage, where I picked up on the story provides its usual summary of stories:

PENTAGON ACKNOWLEDGES MONITORING STUDENT E-MAIL
Surveillance reports obtained through the Freedom of Information Act indicate that the Department of Defense monitored student e-mail as part of its efforts to identify and track potential terrorist suspects. The Servicemembers Legal Defense Network filed requests for the
information, and the reports released so far cover e-mail surveillance at the State University of New York at Albany, Southern Connecticut State University, the University of California at Berkeley, and William Paterson University of New Jersey. Student e-mail was monitored when it dealt with protests against the war in Iraq or against the military's "don't ask, don't tell" program concerning gay and lesbian members of the armed forces. Instances of monitoring were evidently prompted by reports of suspicious behavior, but a Pentagon spokesperson would not say who submitted the reports that led to the monitoring described in the surveillance reports. Kermit Hall, president of SUNY-Albany, said his institution is investigating the nature of the monitoring and how it was conducted and would decide later how to proceed.
Chronicle of Higher Education, 6 July 2006 (sub. req'd)
http://chronicle.com/daily/2006/07/2006070601n.htm

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War on Terror
spying
Iraq
domestic spying
spying on students' email
Department of Defense
don't ask don't tell
anti-war protests