Tuesday, August 28, 2007

Two TIF Alternatives

August 28, 2007, 4:00 p.m.

Growing Iowa Business the Right Way

A month ago I wrote:

I've had it with the Iowa City City Council and TIFs. I'm going to do my best to see to it that anyone running for council who persists in continuing to take Iowa City taxpayers' money and give it to wealthy, supposedly "free private enterprise" for-profit corporations -- while denying it to their competitors, not to mention needed social programs -- is prevented from serving on the City Council.
Nicholas Johnson, "They're Back: The Terrible TIFs" in "The Terrible TIFs," July 26, 2007 (the entry contains links to prior TIF blog entries and 12 categories of arguments against TIFs).

To which State29 commented:

Nick Johnson . . . says he's going to campaign against every city council candidate there who supports TIFs . . .. Good luck with that uphill battle. Unless Ron Paul is planning to run for political office in Iowa City, I think Nick is going to be rather busy. TIF-supporting candidates (regardless of political affiliation) tend to be "connected" and "experienced", something which voters eat up, even if it takes money out of their own wallets.
State29, "Over in the People's Republic of Iowa City," August 15, 2007.

As is often the case, State29 is right.

The best I've been able to get out of them is that some recognize that Iowa City and Coralville have gone too far with TIFs, or an admission that, yes, some of them have not worked out. But all insist that there are some cases -- perhaps with start-up entrepreneurs -- where they make sense.

So, I hear you say, "We understand what you're against. But does that include any and everything that benefits business -- especially new entrepreneurial start-up businesses? And if not, what are you for?"

This entry is an effort to explain what I'm for: (1) "state-qualified community seed funds" and (2) micro-credit programs.

Community Seed Funds

At the end of "The Terrible TIFs" entry July 26, among my suggestions was: "The business community could create its own venture capital fund to invest in, or loan to, business developments they thought worthy."

Since I know that 90% of my ideas are going to be rejected out of hand (and that many of them deserve to be) I just spin them off and forget them until I'm reminded.

This morning I was reminded.

George C. Ford, "'Seed Fund' Raised to Back Iowa Entrepreneurs," The Gazette, August 28, 2007, p. B8.

It turns out that Iowa has something called community seed funds, and that Corridor banks and private investors have put together a $1.25 million one already.

The approach has many advantages over TIFs.

It's an investment, not a gift -- let alone a gift of the taxpayers' money without their permission.

"An investment committee of seasoned investors" makes the decisions -- rather than a bunch of public officials who have no financial stake in the project and, whatever their strengths may be, are for the most part not "seasoned investors."

Moreover, The Entrepreneurial Development Center President Curt Nelson also says, "We will continue to work closely with these entrepreneurs, monitoring the company and the fund's investment."

I need to find out more about this undertaking, and whether there are some downsides of which I am unaware. But it's always fun for me when it turns out that something that is spurred by my imagination and intuition, and comes out of the depths of my ignorance of a subject, turns out to have been proposed, and put in motion, by folks who really do know what they're talking about.

Micro-Credit Programs

You may know the name Muhammad Yunus. He and his Grameen Bank were awarded the Nobel Peace Prize for 2006.

For what? For what's now called "micro-credit" -- small loans to the poor -- that began with Yunus' 46-cent loans to each of a group of poor craftspersons in Bangladesh in 1976 (for a total of $27).

For the world's truly poor a small loan can make a big difference.

The results were impressive -- both in terms of what the borrowers were able to do with the money and their honorable approach to repaying the loans.

The idea quickly spread. Among other things, this approach removes the opportunity for tempted government officials to take a slice of a multi-billion-dollar loan to their country and send it off to a personal Swiss bank account.

When I served on the board of Volunteers in Technical Assistance some years ago it was one of the categories of projects in which VITA was engaged.

Now, it turns out, you no longer need to own a bank, or be managing funds from USAID, to get into the micro-credit business. You, like Muhammad Yunus, can provide a $25 loan directly to a third world entrepreneur with a face and a name.

You can do it through an organization called Kiva, which you reach at http://kiva.org.

It humanizes and provides a personal story regarding the loan applicants. By joining with Kiva, their third-world "field partners" that administer the program locally (funded by the interest on the loans), and other Kiva members, your $25 (or more) contributions can quickly total the $450 or $1100 requested. As the loans are paid back (and they almost always are in full and on time) your philanthropy becomes a revolving fund that can go on helping more and more entrepreneurs.

There's no reason why micro-credit won't work for entrepreneurs here in Iowa as well as abroad -- even if the "micro" is going to have to be a little bigger.

"Community seed funds" and "micro-credit" are but two of the ways that Iowa can help business grow in the right way.

They draw upon the strengths of the free private enterprise market system -- rather than tax revenues.

Moreover, because an investor, or a creditor, has a personal financial stake in the venture it's more likely the business plan will be well thought through, and reviewed, by people with the incentive -- and skill -- to be of real help in avoiding preventable disasters.

They are more fair to the new venture's competitors -- all of whom have a shot at the funds; all of whom will be judged by the same standards -- than the now-you-see-it-now-you-don't, inexplicable, random allocation of TIF benefits.

They are devoid of the internal ideological inconsistency and hypocrisy of cutting the budgets of legitimate public projects and transferring taxpayers' money directly to a wealthy, for-profit owner's bottom line.

Want to know what I'm for? That's what I'm for. You already know what I'm against.

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Anonymous said...

As is often the case, State29 is right

As is more often the case, State29 writes things like this:

Byrd, like too many irresponsible criminal black men, has spread his seed all over the place. At 23, he already had three children by two different women. Hello, Social Security!

Somehow, Hansen turns this farce into a "let's weep for the children" column. It's not like that guy was ever around his children. He was too busy getting drunk in bars, loading guns, shooting people and keeping it real.

Hey Nick, as an intellegent, thoughtful, respected social critic, *please* stop giving State29 credit. Simply because he occasionally arrives at the same place you do does not mean he took the same path to get there. He rarely adds anything constructive to the public debate.

Anonymous said...

I would agree State 29 can be a callous, bigoted, crude jerk. His characterization of Rakhu Basu as 'the widow MILF' was particularly offensive.

Having said that, he seems to have cleaned up the act somewhat lately. If State 29 can stick to muck-raking, he is interesting to read.

Anonymous said...

Untrue. Anyone who can't embrace diversity and see past State29's purposeful shock and awe have self-filtered themselves from the debate.

State29 is easy to dismiss. Anyone who has has done so at a risk to their own understanding of the future. I have yet to find an Iowa pundit who has prognosticated more broadly, and more accurately than state29.

State29 is batting a thousand, months, sometimes even a year, ahead of time. If you wanted to be informed Slottery Machines, Clarke McLeod, local taxation issues, etc., State29 has consistently over time been the most accurate and farthest sighted local pundit.

Conversely, you can call him an idiot.

Just don't forget the second part.