Acceptable, Available, Affordable Housing

Note: An edited excerpt from this blog post (primarily the "Is there a right to housing?" section) was published by The Gazette on August 1, 2017 ("Health Care, Housing Rights?") and reproduced below.

And see, Addendum: "Why Do So Many Christians Believe Lack of Effort is Cause of Poverty, or Jesus Would Oppose Government Social Programs?"

And, for a little good news on this subject, Lee Hermiston, "Shelter House Gets $2.7 Million for 'Housing First' Project in Iowa City; Construction Could Begin in October," The Gazette, August 4, 2017, p. A1.

Excellent and data-loaded: Editorial, "Locked Out: All Counties in Creative Corridor Lack Affordable Homes," The Gazette, August 6, 2017, p. D1 (not yet available online; link will be added when available; excellent data for 7 Iowa counties: population, persons in poverty, percentage who earn less than 30% of median income, number of affordable units for that population, percentages spending more than 30% of income on housing, increase since 2007 in rent for two-bedroom unit compared with percentage increase in median household income, number in 2016 who were homeless and sought emergency services.)

Contents
Is there a right to housing?
Whom are we talking about?
What are their needs; what are the solutions?
Housing in context
What's "affordable"?
Capitalism
Data
Conclusion
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Housing policy is, as President Trump once said of healthcare policy, "an unbelievably complex subject. Nobody knew that [it] could be so complicated." [Michael A. Memoli, "Trump: 'Nobody Knew that Healthcare Could be so Complicated,'" Los Angeles Times, February 27, 2017.]

[For details on polling results and trends regarding the number of Americans who support universal single-payer health care, see Kristen Bialik, "More Americans Say Government Should Ensure Health Care Coverage," Pew Research Center, January 13, 2017 (e.g.: "Currently, 60% of Americans say the government should be responsible for ensuring health care coverage for all Americans, compared with 38% who say this should not be the government’s responsibility.").]

Is there a "right" to housing?

At the outset of discussions of any social program is the threshold issue of "rights": to what extent do we have (legally) or feel (morally) an obligation to care for those beyond our own family, community or "tribes" (variously defined)? To what extent do others have a "right" to expect such care from us?

Obviously, if a majority of us believe, and act as if, others have no "rights," and we have no "obligations," that's pretty much a conversation stopper. So let's first try to figure out what we believe about "rights" in general, by considering some comments from others before returning to the matter of "rights" to housing.

"Right. That which is consonant with equity or the light of nature; that which is morally just or due."
-- Oxford English Dictionary (Compact Ed., vol. II, 1971), p. 669, Right, 3.

"Health care is not a right. Housing is not a right. A job is not a right. College is not a right."
-- Joe Walsh, May 4, 2017 (syndicated radio host; former member of Congress)

"Thou shalt love thy neighbour as thyself." . . .
"Verily, I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me."
-- Jesus, Matthew 22:39, 25:40 (KJ)

"[W]e can see the TRUTH of the true religion of God woven like a GOLDEN THREAD throughout all faiths whose origin is from Him in the form of the GOLDEN RULE."
-- Bahai, Universal House of Justice (with quotes and citations from 16 major religions; emphasis supplied)

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."
-- Declaration of Independence, July 4, 1776

"Everyone has the right to a standard of living adequate for . . . health and well-being . . ., including food, clothing, housing and medical care . . .."
-- United Nations Universal Declaration of Human Rights, Article 25, December 10, 1948

There remain differences among us as to whether our obligations to others should be fulfilled through governmental programs or non-governmental organizations' efforts. But as we see, virtually all the world's great religions, and nations (UN), are agreed that we do have at least some obligations to fellow members of our species. (Indeed, some would extend this to other animal (and even plant) species as well. Why? For answers see, Frans De Waal, Are We Smart Enough to Know How Smart Animals Are?" (W.W. Norton, 2016), and Peter Wohlleben, The Hidden Life of Trees (Greystone Books, 2016).)

And yet, among Americans, Joe Walsh (above, "Housing is not a right") speaks for the majority.

This is somewhere between ironic and inexplicable, given that over 50% of Americans say "religion is very important in their lives" (the highest of any wealthy nation). How can we square "I've got mine, Jack," shouts of "Get a job," and denying healthcare to tens of millions of Americans, with the Golden Rule and caring for "the least of these"? How can we explain that "57% of Americans disagreed with the statement 'Success in life is pretty much determined by forces outside our control,' a higher percentage than in any of the European nations polled. . . . [Or that] 73% said hard work is very important for getting ahead in life compared to a European median of 35%. . . . [And that] nearly six-in-ten in the U.S. (58%) believe allowing everyone to pursue their life’s goals without interference from the state is [most] important [, whereas] majorities in all European nations polled in 2011 said guaranteeing that nobody is in need is more important." [Richard Wike, "5 ways Americans and Europeans are Different," Pew Research Center, April 19, 2016.]

In a nation in which a majority holds such beliefs, a nation willing to trust its democracy to a political process fueled (and therefore largely controlled) by the largest campaign donors, it can't be shocking that many elected officials share some donors' belief that "my right to a tax cut trumps (so to speak) your right to come in out of the cold."

Thankfully, there are also thousands of knowledgeable, caring individuals in Iowa and throughout our nation who are trying to do something about insuring every American has decent housing. This blog post is dedicated to them, and addresses the challenges they face.

Whom are we talking about?

Many of us are relatively well housed. Of America's 135 million dwelling units, about 60% (in Iowa and the nation) are single family, detached houses. Others live in condo units or rented apartments. When it comes to housing, these are among the most fortunate, notwithstanding their occasional difficulty paying mortgages, rent, taxes, and utility bills. Thus, with rare exception, housing is not much of an issue for those in the top 20% (annual income $111,000 or more).

["Stats for Stories: American Housing Month," Housing, U.S. Census Bureau, June 2017 ("The 2015 American Community Survey counts almost 135 million housing units in the U.S.: 61.4% are detached single-family homes and 6.3% are mobile homes.") "Most Americans Make It To The Top 20 Percent (At Least For A While)," Planet Money, National Public Radio, May 5, 2014.]

It's a little different story for the homeless -- those roughly 500,000 Americans with no place to call home on any given day. Some have shelter, others are on the streets, or otherwise unsheltered. Some are individuals, including children on their own; some are part of homeless families. They may be chronically homeless or only temporarily so. [Photo credit: unknown.]

Of course, some of those "sheltered" may be couch surfing, or otherwise living in overcrowded conditions shared with other families or friends.

Others may be in a shelter considered unhealthy or otherwise dangerous substandard housing. ("About six million homes in the United States are substandard by American Housing Survey (AHS) standards, a statistic that has seen little change over the last two decades." Dwellings considered substandard have "interior and exterior leaks, signs of pests, and other factors collected by local public health and code enforcement agencies." ["Substandard Housing," National Center for Healthy Housing.

And see, "What Is Substandard Housing?", HomeGuides.sfgate.com ("Substandard housing . . . , often in severe disrepair, [is] housing that poses a risk to the health, safety or physical well-being of its occupants . . . associated with increased risk of disease, crime, social isolation and decreased mental health. . . . Some cases of substandard housing are not so visible. Outdated or dangerous electrical systems, rusting or loose pipes and gas leaks . . . might go unnoticed until an accident happens.")]

Housing can be unsafe for other reasons, such as spousal abuse, or neighborhoods with relatively high levels of violent crime.

The remnants of Americans' prejudice can make it more difficult for some to find housing -- those of a given race, religion, country of origin, new immigrants, or former convicts who've served their time and are trying to reenter society -- regardless of their ability to pay.

But some of those most at risk for becoming homeless are living in "poverty" (defined as an individual with $12,060 annual income or less; $24,600 for a family of four). [Kimberly Amadeo, "Federal Poverty Level: Definition, Guidelines, Chart,"The Balance, February 2, 2017.] Note that "poverty" can result not only from steady employment at a low wage, but also from unsteady, seasonal, or otherwise occasional income (regardless of hourly rate) that doesn't reach an annual total in excess of poverty levels.

The unemployed are an at risk group for housing. "The share of prime-age [American] men (ages 25-54) who are neither working nor looking for work has doubled since the 1970s. . . . [One] in six prime-age men in America are either unemployed or out of the workforce altogether -- about 10 million men" -- one of the highest rates in the world. [Derek Thompson, "The Missing Men," The Atlantic, June 27, 2017.]

Another category are those paying over 50 percent of their income for housing. "When more than 50 percent of a poor household’s income goes to paying rent, that household is experiencing what is known as severe housing cost burden. [These are] households . . . more likely to have an unexpected event -- such as loss of employment or unexpected medical costs -- result in . . . homelessness." [The State of Homelessness in America (2016), pp. 48-49, endhomelessness.org.]

[For one of the best collections of data regarding the financial challenges confronting nearly all Americans regardless of income and net worth, presented in 24 pages of graphics and very readable text, see "On Track or Left Behind? Findings from the 2017 Prosperity Now Scorecard, July 2017 Prosperity Now.org, released July 25, 2017.]

What are their needs; what are the solutions?

Although "categories" are listed above, most of those with housing needs have stories that are somewhat unique -- as are the solutions, to the extent possible.

An abused spouse or children may not be lacking shelter; their problem is not a leaky roof, it's the violence to which they're subjected. They need an alternative shelter, or safe house -- along with some legal assistance -- until they can relocate (or the abuser is imprisoned). There may be other reasons why temporary, rather than permanent, housing is the solution.

For those with a "severe housing cost burden," or without the resources even if they used all their earnings for rent, there may be public housing, "affordable housing" required of landlords, or subsidies such as "Section 8." [Housing Act of 1937, as amended, 42 U.S.C. §1437f.]

Housing in context

As with medical specialists who are less aware of a patient's related conditions, so it is with housing. By contrast, some doctors actually make "house calls" -- not to see the patient, but to see the house, and how it might be contributing to the patient's condition.

For example, in addition to the occasional relationship between housing and healthcare, there is often a relationship between housing, educational level and unemployment.

There can be a relationship between housing, poverty and public transportation (or access to a reliable vehicle). If businesses would build housing close enough to their stores or factories that their employees could walk or bike to work -- with rent they could afford on the hourly wages they were paid -- it would solve both the housing challenge and eliminate employees' costs of commuting from the distances necessary to find affordable housing (as well as improving workers' health and the environment). Public buses or trains that run every 10 or 15 minutes (rather than half-hour or hour), and don't require two or three changes from home to work, would help.

Child care, on the job site or nearby, could sometimes make the difference.

Of course, social workers and others are aware of these interrelated needs and solutions -- as they are aware of not having the necessary resources to do what they know needs to be done. Just as there are IEP's (individual education plans) for K-12 students with disabilities, it would help when addressing individuals' "housing in context" challenges to create a plan for every individual who comes into the system that addresses housing, healthcare, nutrition, transportation, training, childcare and whatever other needs and services are relevant.

What's "affordable"?

There is much reference in discussions of housing to so-called "affordable housing," defined as housing that one can obtain for 30% or less of one's income.

"Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. An estimated 12 million renter and homeowner households now pay more than 50 percent of their annual incomes for housing. A family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a two-bedroom apartment anywhere in the United States." ["Affordable Housing," Department of Housing and Urban Development.]

"Affordability" is not a very precise concept at best, and is certainly subject to, among other things, almost unlimited potential multiple variables.

Income. Thirty percent of what? What do we count? What do we deduct? Is it what's left after taxes? Which taxes (i.e., federal and state income tax; FICA; sales tax)? What about essential fixed expenses?

Fixed expenses. The minimal, essential expenses for a family of four (or more) will be both different, and far exceed, those for a young, childless single person. Childcare expenses can be significant if there's no grandmother to volunteer. A family paying for grandparents' nursing home costs, or services for a person with a disability, or a mortgage, will have far less for food and other expenses than someone who does not.

Absolute dollars. No one can eat a percentage. Someone in the top 20%, earning $200,000 a year, has $140,000 left over after paying 30% ($60,000; $5,000 a month) for housing. Someone earning the minimum wage ($7.25 an hour) and lucky enough to work 40 hours a week for 50 weeks a year ($14,500 a year) has $10,150 ($846 a month) left over after paying 30% ($4,350, or $362.50 a month -- if such apartments even exist) for housing.

Capitalism

Like a bull in a china shop, or a pig in the parlor, there's nothing inherently wrong with capitalism -- so long as it's kept in its proper place. To protect competitors, employees and consumers some government regulation is often necessary, but "free private enterprise" and "marketplace competition" can produce greater incentives for innovation, productivity and efficiency by business, along with greater choice and lower prices for consumers.

But just as there are some sectors of the economy in which government ownership and operation may not be the optimum approach, there are also other sectors of the economy that seem inappropriate for capitalism.

There are some who seemingly want to privatize everything. But there appears to be at least a significant minority, if not majority, of Americans who recognize the advantages of public ownership and operation of K-12 schools; libraries; national, state, and local parks; and the Interstate Highway system.

Profit-maximizing businesses can have conflicts of interest when providing public goods. Experiments with private ownership of prisons, for example, show that there is an inherent conflict of interest between public policy goals of shorter sentences and alternatives to incarceration and the prison owners' goals of profit maximization: the more people convicted and incarcerated, and the longer their sentences, the greater their profits.

There are doctors and dentists who volunteer in free clinics and elsewhere to provide healthcare to those who otherwise would have to do without. But for the most part healthcare is a private, profit-maximizing industry. As those urging a form of universal, single-payer healthcare say -- a form of healthcare available to citizens in most industrialized countries -- there is a big difference between "health insurance" and "health care." The statistics on such measures as years of life expectancy, or rates of infant mortality, suggest that we are paying more while getting less and serving fewer than those countries. We joke about medical students who want their specialty to be "diseases of the rich," but the fact is that in a capitalist healthcare system everyone from medical professionals, to Big Pharma, to hospitals, to insurance company shareholders and executives would like to be paid more.

Admittedly, there is no more agreement regarding public housing than there is about healthcare. The UN may say, as quoted above, that "Everyone has the right to a standard of living adequate for . . . health and well-being" (including housing and healthcare), but there are still individuals who believe that even those without shoes should simply "pull themselves up by their bootstraps." [United Nations Universal Declaration of Human Rights, Article 25, December 10, 1948.]

Home builders and realtors will, when necessary, build, remodel, sell, or rent homes and condos to those scarcely able to pay. But when their income is calculated as a percentage of the price of their sold homes, or the square footage of those they've built, large, expensive homes for the wealthy are clearly to be preferred over those for the poor. Segregation in our communities is largely perpetuated by housing policies, which are often driven in part by what the upper 20 percent believe to be "the best schools."

A builder of a city center high rise full of condos, who can sell them for a half-million to a million dollars or more, has zero economic incentive to include units that college students, or minimum wage workers, could afford. Of course, a city government that is gifting the builder a portion of construction costs (say, a TIF that reduces the owner's property taxes) has a lot of leverage -- if it will use it -- to insist on some cheaper units. But that's little more than a tiny one-off contribution to the community's housing needs for the poor and working poor.

Which brings us to "data."

Data

Schools don't just open their doors, let children wander in, and go to whatever room they please. Enrollment is limited by the numbers of classrooms, teachers, and desks. And there are precise records of each child, with information about parents or guardians, address, and perhaps special needs.

Successful businesses startups have business plans. The owners have at least some sense of traffic flow as well as revenue flow, the potential population from which they will draw, the competitors who will be offering the same or similar services.

It's not that those giving their lives to providing housing for the poor aren't aware of the value of comparable information about housing, or that they aren't making efforts to try to create it -- sometimes creative, impressive efforts. It's that they are simply not provided the resources they need to gather all the necessary data. They know, better than I, what they need. But here's how it looks from here.

Take Johnson County, Iowa, as an example. It's helpful to have another Habitat for Humanity house here, a shelter house there, a TIF requiring some below-market units in a condo project. But if we really want to get everyone housed, it's not enough to just "do something." We need some basic data about "supply" -- an inventory of what housing we have (whether occupied or not), such as, how many one-, two-, and three-bedroom apartments there are, with their locations and rent.

The Census Bureau does a pretty good job of counting and reporting housing units. But apparently the landlords and developers are sometimes reluctant to reveal their rental rates and the number of vacancies.

Equally important, is information about "demand" -- especially regarding persons who can't afford any housing available in the county, and those who are suffering from "severe housing cost burden" (rent exceeding half of their income).

It is the demand side that is the most problematical. Ideally there would be enough social workers that every individual in the county in need of one or another form of assistance would be identified, regularly visited, and assisted in finding, or improving, their housing. Unfortunately, in today's political climate that's not likely to happen anytime soon.

However, gathering one county's housing supply and demand is not a "big data" project -- like the recent White House effort to create a database record of every person registered to vote in America, along with their personal data.

There are only 62,000 housing units in Johnson County, and 59 percent of them are owner-occupied -- presumably most of them by owners who are not in need of housing assistance. The remaining 40 percent would be a number that could fit in a single Excel spreadsheet on anyone's laptop computer.

Conclusion

Meanwhile, four things might help. (1) Think about a county's housing challenges as a whole, rather than one dwelling unit, and occupant, at a time. (2) Prioritize the need to gather as much detailed data as possible about the county's housing supply and demand. (3) Recognize that housing is but one of many interconnected challenges for those in need that can most effectively, and efficiently, be met by recognizing how they are connected. (4) Manage the undertaking with measurable goals, timelines, and public accountability in the form of management information reporting systems.

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Here is The Gazette's edited excerpt from this blog post (primarily the "Is there a right to housing?" section):

"Health Care, Housing Rights?"
Nicholas Johnson
The Gazette, Insight Guest Opinion, August 1, 2017, p. A5
There’s been discussion recently about housing (locally) and healthcare policy (nationally). Unlike government-funded programs used by all, these are programs for those most in need.

Developing public policy for social programs seems to be, as President Trump famously said, “an unbelievably complex subject. Nobody knew that [it] could be so complicated.”

That’s not precisely accurate. We are blessed with thousands of knowledgeable, caring individuals who do know how complicated it is.

Do you and I have (legally) or feel (morally) obligations to care for those beyond our family or community? To what extent do others have a "right" to expect such care?

Former Congressman Joe Walsh unambiguously put in his answer: "Health care is not a right. Housing is not a right. A job is not a right. College is not a right."

If healthcare is a product and housing is a privilege; if a majority believe, and act as if, the needy have no "rights," and we have no "obligations," that pretty much ends the discussion.

Where to find insight?

Religion? Jesus said, "Thou shalt love thy neighbor as thyself" and "Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me." The Bahai Universal House of Justice cites 16 major religions espousing the Golden Rule.

Founding documents? "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

Virtually all the world's great religions, and nations, agree we have some obligations to fellow members of our species. And yet, Walsh speaks for many Americans.

That's somewhere between ironic and inexplicable, given more U.S. citizens say "religion is very important in their lives" than people elsewhere. How can we square denying healthcare with caring for "the least of these"?

Could it be our “representatives” have adopted their major donors’ belief that "my right to even bigger tax cuts trumps (so to speak) your right to come in out of the cold"?
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Nicholas Johnson is a former FCC commissioner and law professor who maintains the blog, FromDC2Iowa.blogspot.com. Contact: mailbox@nicholasjohnson.org

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Addendum: "Why Do So Many Christians Believe Lack of Effort is Cause of Poverty, or Jesus Would Oppose Government Social Programs?"

Since the publication of this column in the Gazette two categories of responses to my genuine puzzlement (how can our country be both the world's most religious, and so many believe that social programs are "not a right") have come to my attention. One is the disparity between the religious and non-religious regarding the cause of poverty (circumstances vs. lack of effort): Julie Zauzmer, "Christians Are more Than Twice as Likely to Blame a Person's Poverty on Lack of Effort," Washington Post, August 4, 2017 ("53 percent of white evangelical Protestants blamed lack of effort while 41 percent blamed circumstances, . . .. In contrast, . . . Americans who are atheist, agnostic or have no particular affiliation [31 percent blamed lack of effort while 65 percent] said difficult circumstances are more to blame when a person is poor . . ..")

The other came in the form of emails insisting I had misinterpreted Jesus' teachings. Advocating from a WWJD ("what would Jesus do") position, they seemed to be arguing that, (1) were Jesus around to state his case today, he would oppose, or at a minimum not encourage, government programs to help the poor. (2) All Jesus ever said was that individuals should care for "the least of these" -- something that many individuals and churches are doing.

I view this difference of interpretation as analogous to the "original intent" arguments around the "meaning" of the U.S. Constitution. The Constitution refers to an "army" and "navy" but makes no mention of an "air force." Yet no one I know of argues that the Air Force is unconstitutional. To the best of my memory the New Testament has little to say about governmental social programs for the needy -- the existence of such programs during Jesus' years, or even their proposal and rejection. If this was something beyond anyone's imagining at the time (even Jesus' imagining), one can't really fault him for a failure to advocate it.

Were Jesus around today he would probably be denied immigration status, and thus the issue would never arise. But if he was permitted to enter the U.S., it's not unreasonable to suspect -- given what he is credited with saying about caring for others, and the problems flowing from great wealth -- that he would adapt his role of activist to our culture, likely be a Bernie supporter, only be televised on Democracy Now!, and probably advocate for more (rather than less) taxpayer-funded programs for the poor.

# # #

Why Net Neutrality is Your Friend

[Note: This blog post was later published by The Gazette as Nicholas Johnson, "Why Net Neutrality is Our Friend," "Insight,"The Gazette, June 2, 2017, p. A6]

[Graphic credit: ACLU]
President Donald Trump kept his promise. He said he’d “drain the swamp” in Washington. He has. What he didn’t tell us was that he would then fill his administration with the creatures that crawled out.

The news media and late night shows have reveled in their good fortune. Trump has provided them a daily flow of stories both entertaining and terrifying to move their audiences between tears and laughter.

But as a result, that 99 percent-plus of the federal government that’s not in the White House is mostly ignored by the media.

Farmers worry over the loss of overseas markets from Trump trade agreements. Public schools must deal with the loss of revenue from school vouchers. The oil and gas industry cheers a removal of regulations that rivals the Teapot Dome scandal that sent one of President Warren Harding’s cabinet members to prison.

And my old agency, now Trump’s Federal Communications Commission, is going about repealing the consumer protection called Network Neutrality. You don’t need to know anything about computers or the Internet to understand that one.

You do need to understand monopoly capitalism.

Most cities of any size have an abundant array of restaurants from which to choose – locations, menus, prices, and atmosphere. Aside from health concerns, “marketplace forces” provide adequate consumer protection.

By contrast, with rare exception most neighborhoods in those cities have no choice among monopolist internet service providers, such as Mediacom.

It’s the business of business to maximize profits by increasing prices and cutting costs (quality and services) until both reach optimum levels.

In a conversation with Chicago economist Milton Friedman he used the example of corporate pollution of rivers. “You are appealing to them to be ethical,” he said. “They can’t afford to be ethical. They can afford to comply with a law that’s also applicable to their competitors. Your answer is in Congress and state legislatures, not preaching in the streets.”

If an Internet service provider (ISP) also profits from distributing content it owns, it can make more money by censoring a competitor’s content, charging more for it, or slowing its delivery to your TV. If it doesn’t own content providers, it can bargain with those who are, providing them unfair advantages for the right price. And ISPs will set customers’ charges at the optimum profit maximizing level.

Harm to consumers will be limited only by the ISP’s imagination.

Once cities have as many ISPs as restaurants we can talk about “marketplace regulation.” Meanwhile, common decency requires that the FCC retain the consumer protection of Network Neutrality.

# # #

Tussling Over TIFs: Pros and Cons

April 13, 2014, 8:25 a.m.

NOTE: For 40+ additional discussions of these issues, 2006-2015, see "TIFs: Links to Blog Essays."

Tough TIF Talk

Introduction: For years, TIFs have been controversial. ("Tax Increment Financing," by reducing a developer's property taxes, or directing them solely to his or her project, has the effect of transferring taxpayers' money to the bottom line of private, for-profit ventures.) Proponents cite a "benefit" -- essentially the existence of the developer's project -- while skeptics list a rather substantial list of the costs and burdens they believe more than outweigh any such benefit under any rational benefit-cost analysis.

The Gazette for Sunday, April 13, 2014, led its "Insight & Books" section (editorials, guest columns) with two guest columns taking opposite sides regarding the merits of TIFs: "Weighing the Pros and Cons of Tax Increment Financing; Talking TIF" -- found on the Opinion Page of The Gazette's Web site, and in hard copy as: Nicholas Johnson, "Costs Outweigh Possible Benefits," pp. A9, A12, and Chad Heiman, "TIF a Necessary Tool for Growth" pp. A9, A12.

Talking TIF: Costs Outweigh Possible Benefits

Nicholas Johnson
The Gazette
April 13, 2014, pp. A9, A12
http://thegazette.com/costs-outweigh-possible-benefits-20140413
[Submitted as: TIFs’ Multiple Costs Outweigh Any Possible Benefit]

There are many reasons why further enriching the backers of for-profit, private ventures with taxpayers’ money is a really bad idea. [Photo credit: Patrick McDonough.]

In 2006 I began a blog. Dozens of its 1000 essays deal with reasons to oppose TIFs. See “TIFs: List of Blog Essays,” http://fromdc2iowa.blogspot.com/2014/03/tifs-links-to-blog-essays.html.

Any one of them is reason enough to reject a TIF. To approve it, proponents need to show why none applies.

The issue is not whether a TIF has a single benefit. Benefit-cost analysis requires we total all the costs and burdens of that TIF and weigh them against its individual benefit.

Few if any can pass that test.

Ideological hypocrisy. How can those supporting free private enterprise, capitalism, and marketplace forces, who think “government is the problem” and want it “off their back,” justify taking money from the public collection plate?

Anti-democratic. City councils need voters’ approval of bonds for legitimate government projects. Yet they can give our money to their friends’ private projects on a whim.

Lowered credit rating. TIFs can impact credit ratings. Coralville went from a Moody Aaa credit rating, the highest, to a “lower medium grade” Baa2 in two years.

Opportunity costs. Spending money on one thing costs the lost opportunity to spend it elsewhere. Johnson County Supervisor Rod Sullivan once found a diversion of $700 million of property off the tax rolls. As a result, either we pay more taxes or Supervisors cut needed programs.

Unfairness to neighbors. The TIF-granting body’s neighbors often lose out as well – other communities and school districts with less money in their budgets.

Unfairness to competitors. TIFs tilt the playing field. They unfairly upset a free market, punishing honest competitors and benefitting no one except the TIF recipient.

Risky business. Money’s always available for good deals. If an entrepreneur, family, friends, investors, venture capitalists, and banks aren’t willing to fund a project, maybe taxpayers shouldn’t either.

TIFs complicate taxes. We don’t deserve more tax complexity and even less transparency.

“Money can’t buy love.” Why compete with bribes? A business that needs port access to the Pacific Ocean isn't coming to Iowa. If it did, it would leave for a bigger bribe. Maytag, offered $100 million to stay, left anyway.

TIFs are unnecessary. The Corridor is one of the fastest growing, lowest unemployment areas of Iowa. We already have what businesses want: skilled labor, transportation and communication infrastructure, quality education, cultural attractions and outdoor recreation.

TIF grantors’ poor skills, record. The subsidy-grantors' record is not great. Elected officials are more skilled at keeping contributors and constituents happy than at evaluating taxpayer-funded business proposals. TIFed projects have gone belly up, missed deadlines, and new jobs goals. With reasonable follow-up and transparency we’d know about many more. But TIFs in Iowa have more lenient provisions, and less oversight, than in most other states.

“Need” is unknowable. Many projects will go ahead without subsidy. If tax breaks are available, of course developers will say they need them. Maybe this is blackmail. Maybe they need to look harder for funding. There’s no way to know.

At a minimum, here are questions to ask before approving TIFs:

What is this government’s past record, when we compare promised results with ultimate return or loss?

Why is this project needed?

Why does that need exceed all conventional needs for public funds?

What will other government units lose? How much more will their taxpayers have to pay?

Of all possible TIF projects, why is this one a top priority?

Who benefits: all citizens, a small segment or primarily the recipient?

How much money is involved?

Why are those who will profit unwilling to invest what is needed? Are their reasons equally applicable to taxpayer funding?

Does the business plan indicate financial success, or reveal risks of failure?

If and when the recipient fails, skips town, goes bankrupt, or misses deadlines, how will taxpayers be protected?

What relationships are there between the potential recipient and the officials approving the funding?

How will the recipient’s unfunded private competitors be harmed?

TIFs shouldn’t be used at all. If used anyway, let’s do the wrong thing better:

Leave the tax code alone. Taxes are taxes, gifts are gifts – through appropriations, fully disclosed and audited.

Don’t privatize profits and socialize losses. It’s our money. Don’t give it. Loan it or invest it. Earn us some interest – with a City or State Bank. Invest our tax money; take an ownership share. Give us at least a gambler’s chance at occasional profit. Publicize the details.

We don’t have a fascist state, just a fascist economy, government and private enterprise blended to more resemble a purée than a stew with identifiable ingredients.

In Washington, D.C., it’s billions of tax dollars; in Des Moines hundreds of millions; in Iowa’s cities, TIFs. Without a taxpayer revolt, it’s unlikely to change.
_______________
Nicholas Johnson of Iowa City maintains www.nicholasjohnson.org and http://FromDC2Iowa.blogspot.com.

# # #
TIF a necessary tool for growth

Chad Heiman
The Gazette
April 13, 2014, pp. A9, A12
http://thegazette.com/tif-a-necessary-tool-for-growth-20140413
The 21st century global economy we live and work in is consistently evolving. The rapid pace by which business owners must adapt to meet market demands has never been more challenging.

As a community and region it is critical that we promote public policy that allows companies the option to not only operate their business under the status quo, but create an environment that promotes capital investment, company expansion and job creation.

MISINFORMATION

On the local level, the key tool to aid in doing this is Tax Increment Financing (TIF). There has been misinformation about TIF; specifically, how it works and the side effects of the tool being used. Marion has chosen to be forward thinking and responsible in using TIF as an incentive for companies to do business in our community.

It has been written that TIF incentives are awarded by a City Council without any public approval process; this would violate Iowa Code. A public hearing before the City Council is required for any new TIF project before it gets approval.

An additional public hearing must take place before an amendment to the Urban Renewal Area (designated area in which TIF project occurs) is approved. The process is public and allows for citizen involvement.

How do cities protect their investment? TIF incentives are financed through new property taxes that are generated by the development; current public funds are not used to finance the TIF incentive. An estimate is provided in the development agreement, but the actual TIF award is determined by the assessor. Taxpayers are protected because whoever has title to the property will be subject to pay the associated property taxes. With new development, no existing revenues are lost because of TIF.

ESCO GROUP’S TIF

The ESCO Group in Marion was awarded a TIF incentive package for construction of its new corporate headquarters in Marion’s Tower Terrace Road corridor. The ESCO Group is a Marion-based company that provides plant automation, electrical construction, power engineering, testing and safety training. The City of Marion provided ESCO with a $200,000 grant and an annual 60 percent rebate on their property taxes starting in 2013 and expiring in 2022, The total rebate will not exceed $1 million, per the agreement.

Because of this incentive package, ESCO chose to locate in Marion and brought a capital investment of $5.8 million for the community. The expansion is leading to the creation of 25 new, highly technical, quality jobs in the corridor. A law of economics states that people respond to incentives. The ESCO Group responded by building in a newly developing region in Marion and the commercial property tax base is expanding because of it. Many projects would not have happened without the economic development tool of TIF.

Before the development of the ESCO headquarters, the 2.85-acre piece of ag-land that ESCO now sits on would bring an estimated $4,000 in property taxes. Following development of this land, the estimated property tax bill will stand at an estimated $130,000 annually. I think we can all agree that a 1,315 percent increase in assessed value is a quality return on investment for Marion, our schools and our citizens.

The return on investment is magnified when one considers that new employees in the community will need places to live, stores to shop and restaurants in which to dine. Existing private business benefits because of TIF. The positive impact of this economic development tool is felt well beyond the brick and mortar involved with new construction.

ESCO CEO Ray Brown told us: “By opening up this valuable development area, Marion has great opportunity to expand its tax base to more commercial-light industrial, helping ease the tax burden of residential while also creating quality of life opportunities within this development.”

FAIR PLAY DEALS

Positive community development is everyone’s goal. One recent opinion was that “trying to move businesses from one community to another with competing TIF bribes is a lose-lose game,” and I would agree with that assessment.

That is why the communities in the Cedar Rapids metro area have signed fair-play agreements with each other establishing guidelines for communities when creating TIF incentive packages in the Corridor. When Marion experiences expansion, the Corridor as a whole benefits; the same can be said about business growth in the entire Cedar Rapids metro area.

Marion is one of the fastest-growing communities in Iowa, and that presents challenges, but we are growing our commercial and industrial tax base in a responsible manner. Making policy decisions or sweeping generalizations about TIF without facts, and based on one occurrence or anecdotal evidence, is dangerous.

TIF is anything but a lose-lose tool — it is the tool that allows private enterprise to flourish while giving communities the opportunity to realize its true economic potential. It’s a win-win for everyone.
_______________
Chad Heiman is Communications Manager for Marion Economic Development Company. Comments: chad@medcoiowa.org

# # #

TIFs: Too Many Negatives

March 25, 2014, 9:25 a.m.

Introduction: There has been a little spurt of TIF (tax incremental financing) stories and comments recently.

On March 18 an op ed column of mine was published by the Press-Citizen: Nicholas Johnson, "TIF: If You Can't Beat 'Em, Insist on More Transparency," Iowa City Press-Citizen, March 18, 2014, p. A7, embedded in "TIF Apology," March 18, 2014. Its assertions regarding the categories of reasons to oppose TIFs were supported by the earlier, "TIFs: Links to Blog Essays," March 16, 2014. [Photo credit: Patrick McDonough.]

The point of the March 18 blog essay/column was that TIFs are merely a natural instrument within a fascist economy. The reason they are the wrong thing to do lies within the nature of our economy rather than the nature of TIFs. Like other mixes of government and private money, however, they can better protect the interests of taxpayers (whose money it is that funds grants to business) if the money is loaned and invested rather than gifted -- thereby producing a return of interest and dividends, like any other conventional transaction.

The Gazette continued with articles that, in part, were efforts to justify TIFs and tax breaks to for-profit buinesses as a legitimate part of a capitalist economy. Chelsea Keenan, “The Benefits of Tax Breaks,” The Gazette, March 23, 2014, p. D1, online as “Are Tax Incentives an Effective Economic Development Tool?.” Rick Smith, "The Upside of TIFs," The Gazette, March 15, 2014; online as "TIF Incentives Can Bring Happy Endings; New Jobs, Infrastructure Improvements, Advancement in Shovel-Ready Sites Grow with Help of Incentive Programs."

I continued to take issue with those arguments for TIFs in the following letter to the editor:

Too Many Negatives, Too Little Upside to TIFs
Nicholas Johnson
The Gazette
March 25, 2014, p. A6
Your “The upside of TIFs” (March 15) needed what Paul Harvey used to call “the rest of the story.” No one I know argues there has never been any benefit from any tax increment financing deal, anywhere, at any time.

But that’s not the issue in a rational benefit-cost analysis.

There are 10 to 20 categories of reasons why all TIFs are a bad idea (See http://fromdc2iowa.blogspot.com/2014/03/tifs-links-to-blog-essays.html). And I have yet to see any TIFs benefit that could begin to outweigh all of those categories of disadvantages.

Here’s an example:

There would be “a benefit” to letting elementary school students simply roam freely throughout the community without parental supervision or need to attend school. They might better develop their natural curiosity and sense of self-reliance.

But the costs of that proposal — lack of student safety and education among them — would so heavily outweigh its potential benefit that no one seriously would propose it.

So it is with TIFs. An occasional “upside?” Of course. But hardly ever enough to outweigh the multiple downsides.

Nicholas Johnson
Iowa City

# # #

TIF Apology

March 18, 2014, 7:20 a.m.

Note: And see "Addendum: If North Dakota Can Prosper from a State-Owned Bank, Why Not Iowa?" at the bottom of this blog essay/op ed column; and "TIFs: Too Many Negatives," March 25, 2014.

Note: The following was submitted to the Iowa City Press-Citizen with the headline, "TIF Apology," and was published this morning with the headline below. That headline's use of the word "transparency" is somewhat misleading. The column is not calling for governments to be more forthcoming and transparent regarding the details of their gifts to for-profit enterprises under the current system. [See, e.g., "TIFs: Too Many Negatives," March 25, 2014.] It is calling for a different system, a recognition of the reality that ours is a blended corporate-government economy, one that should substitute investments by taxpayers for what are now simply gifts. Taxpayers should get an ownership share, and a return on their investments. (The hard copy version also had a link to a nonexistent site. As reproduced in this blog essay the link is correct.) -- N.J. [Photo credit: Patrick McDonough.]

TIF: If You Can't Beat 'Em, Insist on More Transparency
Nicholas Johnson
Iowa City Press-Citizen
March 18, 2014, p. A7
I now realize that the dozens of my columns and blog essays over the years, itemizing in detail the evils of TIFs, grew out of a faulty premise.

It is not easy to admit a mistake, especially when one has made it so often. But you are owed that admission – along with a fuller explanation.

We’ve heard that “seeing is believing.” However, it is also true that “believing is seeing.” And what my upbringing and early education imbedded in my brain was a belief that colored my vision like the rainbow from a prism in the sun.

And what was that belief? It was that we have a capitalist, free private enterprise, market economy. Oh, sure, we had socialist enterprise as well: the Interstate highway system, national and state parks, libraries, public schools and universities. But business did business and government did government.

Now comes the realization that what I once saw so clearly was but a child of the ignorance born of ideology. It was the believing that made possible my seeing -- like the lines from the poem, “Last night I saw upon the stair/A little man who wasn't there.” (Hughes Mearns, 1899.)

I was believing in, and seeing, an economy that wasn’t there.

That’s why TIFs were seen to be an aberration, a cancer simultaneously attacking both capitalism’s foundation and taxpayers’ pocketbooks. (For numerous links to sources, see “TIFs: Links to Blog Essays,” http://fromdc2iowa.blogspot.com/2014/03/tifs-links-to-blog-essays.html.)

Like "Amazing Grace," I was blind, but now I see: We don’t have a capitalist system. We probably never did.

So how should we describe our economy? The word “fascism” carries too much baggage from World War II -- dictators, suppression of opposition, aggressive nationalism, and even racism. “Fascism” doesn’t describe America today. But from Washington, D.C., to cities, counties and states all across America, in terms of an economy, ours is the economy of fascism.

The more acceptable word today, “corporatism,” is less accurate. Because the economy we have is a blend, more resembling a purée than a salad or a stew with identifiable ingredients.

Cities’ taxpayers who cannot afford the tickets to an NFL, or even college football game, invest billions in stadiums, given as gifts to attract the billionaires who own teams of millionaires.

States have multiple funds of taxpayers’ money used to compete with other states by giving it away to attract businesses.

Washington is essentially an open bazaar, awash in money gladly given and generously rewarded.

Is this system corrupt? Of course. Welcome to the real world. All economic systems can have corruption – communist, socialist, capitalist, or our fascist.

Is our fascist economy less efficient than a true capitalist economy? Absolutely. Everybody is handling other peoples’ money. Is it less humane than a socialist system might be? Of course. When it comes to minimum wages or safer working conditions, our fascist economy is still driven by the character Gordon Gekko’s belief, in the movie "Wall Street," that “Greed is good.”

Folks, in the words Walter Cronkite used to sign off the CBS Evening News, “And that’s the way it is.” That’s the system we have. Get used to it. The beneficiaries love it. The victims don’t revolt.

What can we do? Tweak the system. Insist our governments invest our money rather than giving it away; that they take a share of the ownership – and the profits. Insist on detailed accounting of the return on our money they’re investing.

If a fascist economy is wrong, but intractable, we can at least try, as John Carver bemoans in another context, to “do the wrong thing better.”
_______________
Nicholas Johnson maintains the website www.nicholasjohnson.org and blog http://FromDC2Iowa.blogspot.com.

_______________
Addendum: If North Dakota Can Prosper from a State-Owned Bank, Why Not Iowa?
It only makes sense, so long as we're committed to a fascist economy, that we should try -- as the last line of the op ed column suggests -- "to do the wrong thing better."

One of the most obvious positive tweaks to our fascist economic system would be for governments to enter the banking business. (a) Instead of putting such balances as cities, counties and states have into commercial banks, or credit unions, they could earn more on our money by doing the banking themselves. (b) As a part of a proposal that financial aid to business favor loans over gifts (or what would hopefully become "investments" earning a return) the governmental unit could make loans to the favored businesses from the government's own bank.

Think this is a crazy idea? Think again. It's a fascist economy that's the crazy idea. City, county and state-owned banks are a big improvement over what we have, in our effort to do this "wrong thing better."

But who would ever do such a thing? How could you ever find a government willing to take on its local, commercial bankers?

Take a look at North Dakota: Robb Manelbaum, "What North Dakota’s Public Bank Does for Small Businesses," New York Times, March 13, 2014

North Dakota uses the bank to funnel deposits from state agencies back into the state’s economy through . . . loans, teaming with local private banks that initiate the transactions with borrowers. The state-owned bank typically takes half of a business loan, and the interest rate on the state-lent portion is normally one or two percentage points below the market rate.

In January, the Bank of North Dakota played a bit part in an ideological skirmish in the blogosphere after a young activist, Jesse A. Myerson, suggested putting a public bank in every state as one of “Five Economic Reforms Millennials Should Be Fighting For.” The piece led to some interesting discussions, including this response that Mr. Myerson’s suggestions were actually conservative reforms — and that the state-owned bank was responsible for there being more small-business loans in North Dakota than in neighboring states. . . .

[P]ublic banking advocates point most hopefully to efforts in Vermont. Last week, 15 Vermont towns passed resolutions urging the state legislature to establish a public bank. It could be very beneficial to the small community banks and the state. Even big cities could do this . . ..

North Dakota, Vermont -- why not a "City of Iowa City Fascist Economy Public Bank"? How about it Councillors? # # #

TIFs: Links to Blog Essays

From the time this blog began, in 2006, a recurring topic of the blog essays has involved the variety of ways in which governments transfer taxpayers' money to the bottom line profit of various businesses.

Categories of reasons why these transfers are bad for taxpayers, consumers, competitors of the recipients, the general economy, neighboring communities and governments have been repeatedly identified and illustrated -- all with about as much impact as an oak leaf in October, falling upon a lake, and slowly drifting to the bottom. Nonetheless, it seems worthwhile to maintain this single site of titles and links for any who share the author's concern. -- Nicholas Johnson, March 16, 2014.

2015
"Chauncey's TIF," June 8, 2015

"TIFs -- Chauncey -- For the Record," May 25, 2015

2014
"Sycamore TIF Unnecessary," Iowa City Press-Citizen, November 23, 2014, p. A5, embedded in "Lucky's Gets Lucky: $1.7 Million of Taxpayer's Money," November 23, 2014

"From Earmarks (D.C.) to TIFs (I.C.): America's Fascist Economy; TIFs -- Therrre Back!," July 15, 2014

Nicholas Johnson, "Talking TIF: Costs Outweigh Possible Benefits," The Gazette, April 13, 2014, pp. A9, A12 [submitted as "TIFs' Multiple Costs Outweigh Any Possible Benefit," and embedded in "Tussling Over TIFs: Pros and Cons; Tough TIF Talk," April 13, 2014

"TIFs: Too Many Negatives," March 25, 2014

"TIF Apology," March 18, 2014

2013
"A TIF Discussion; Evolution of a Family's TIF Policy Position," June 9, 2013

"TIF Towers; Giving TIFs the Sniff Test," April 9, 2013

"Crony Capitalism's Failures: Iowa City Style; Gone With the Wind," April 8, 2013

"First Step to Reducing National Debt; Sunlight is the Best Disinfectant," April 4, 2013,

"Repealing Corporate Welfare: Step One; The Journey of a Trillion Dollars," March 25, 2013

2012
"Big Boxes, Little Bookstores and Taxpayers; We'll Leave the Prairie Lights on For You," June 6, 2012,

2011
"TIFs Wealthy Relatives; $7 Trillion Secret Giveaways to Banks; Marlins' Stadium," December 6, 2011

"TIF Impact Statements; The Questions We Should Insist Officials Ask First," November 29, 2011


"SSMIDs, Taxes and TIFs: The Lessons; Say 'No' to Tax Increases, 'Yes' to SSMIDs?!" November 3, 2011

"The True Price of TIFs," October 1, 2011

"The Religious Indictment of Republicanism; Catholic University Professors Say Republican Budget Violates Basic Catholic Moral Teachings," May 14, 2011,

"Brother, Can You Spare a TIF? TIF Helps the Rich Get Richer," April 25, 2011

2010
None.

2009
None.

2008
"Taxpayer Rescue; The Way Free Private Enterprise is Supposed to Work: Thinking and Acting Globally and Locally," September 15, 2008

"Growing Iowa's Economy the Right Way," April 27, 2008

"Bush and Giveaways to Sheraton; Who's Best Bush? And, Raising Taxes to Increase Corporate Profits," April 25, 2008

"Call the Cops, Robbery in Progress," April 24, 2008

"Golden Rules & Revolutions: A Series - VIII," April 19, 2008 (with links to prior 7)

"Football, Skating and Corporate Welfare," January 25, 2008

2007
"Understanding TIFs," October 5, 2007

"Courage, Councilors," October 3, 2007

"TIFing Your Doctor," September 12, 2007 (with TIF lyrics for "Folsom Prison Blues")

"Public Money, Private Profits," August 24, 2007

"Cable, Coralville, Coal and Consultants, August 17, 2007 (subsection headed "Desperately Trying to Put a Good Face on TIFs")

"The Terrible TIFs; They're Back: The Terrible TIFs," July 26, 2007,

2006
"Riverside's Deeper Gambling Debt," November 11, 2006

"Riverside's Tax to Nowhere," October 31, 2006

"It's Not About 'Taxes,'" October 24, 2006

"More on Corporate Welfare from 'Hat's Off' Winner," October 22, 2006

"Call the Cops: $3.755 Million Robbery in Progress," October 18, 2006

"Why Do They Hate America?" October 4, 2006

"Press-Citizen Says 'Tough TIF,'" September 22, 2006

"Supervisor Sullivan Says 'TIF, TIF, Tsk, Tsk,'" September 16, 2006

"TIF-ing My Toolshed," September 2, 2006

"Coralville's Hotel: 'Trust But Verify,'" August 16, 2006

"Are TIFs 'Corporate Welfare'?" July 22, 2006

"More: Justifying Corporate Welfare," July 13, 2006

"Neutral Principles, Anyone? Justifying Corporate Welfare," July 12, 2006

# # #

Crony Capitalism's Failures: Iowa City Style

April 8, 2013 12:13 p.m.
Gone With the Wind

"Two years ago, we were among those cheering the good news that a [wind-energy-focused] Maryland-based company — North American Ductile Iron Company (Nadicom) — had big plans to locate its first North American foundry in Iowa City . . . promising to bring 175 jobs to the area by the second quarter of 2013 . . ..

"But over the second half of last year, a good deal of wind went out of wind energy’s sails (and sales). The industry nationwide began to wobble on shaky ground . . ..

"Nadicom CEO Prasad Karunakaran recently told the Press-Citizen that . . . it’s already the second quarter of 2013, and not only are there no new jobs on the immediate horizon, but Nadicom officials basically have had to go back to the drawing board as to what type of facility would still make the best use of the land available at the park.

"At best, they won’t be able to move on anything until 2015. At worst, that starting date will be a permanent question mark."

Editorial, "'Shovel ready,' but no one's digging anytime soon," Iowa City Press-Citizen, April 8, 2013, p. A7.

The State of Iowa and City of Iowa City bet $14.2 million of your money and mine on this gamble -- without checking with us first. Now it looks like we'd all be better off if they'd just taken that money to the Riverside Casino and tried their chances.

"Tough TIF Talk" outlines 20 categories of reasons why this kind of "business deal" with taxpayers' money is a bad idea.

Today's Press-Citizen editorial is a classic example of just one of those categories: "All ventures have risk. TIFs have more, because public officials with little business experience and no skin in the game make more mistakes than experienced investors watching their own money."

The Nadicom venture discussed in the editorial also fails most of the other 19 categories of reasons why corporatism is a bad idea. But this blog essay is just going to concentrate on that one.

As the editorial reports, the City spent "$2.4 million [of taxpayers' money] to purchase 173 acres" for Nadicom. Believing that to be insufficiently generous, it then passed along an additional "$9.5 million to extend roads and utilities," following which the State, feeling flush as well as generous with other people's money, chipped in "$2.3 million for rail and additional road work."

The road to "economic development" is littered with billions of wasted taxpayers' dollars -- federal, state, county and city taxpayers' dollars. Thousand of projects that may have once looked promising to politicians end up belly up. Capitalism is supposed to meet our economy's needs with the ventures of private investors -- individuals who are willing to risk the possibility of great loss because of what they see as the probability of great gain.

Bear in mind, I'm not objecting to this project. I think renewable energy resources are the Planet's only long term hope. I don't object to permitting clean industry to locate in and around Iowa City -- the right projects, in the right locations. I'm not worried about the shadow Nadicom's structures would cast over Scott and Highway 6.

Indeed, if there was no taxpayer money involved I would not even complain about a failed business. After all, roughly half of all new businesses fail within their first five years. As has been said of Silicon Valley's hopefuls, "in this California cradle of Internet startups . . . failure is accepted, or even welcomed, as a guide for future success." Failcon.

No, my concern has to do with the risks for taxpayers when our local officials do the equivalent of taking our money to the Riverside Casino and gambling it away; and then, when questioned, try to justify what they've done by saying (a) it creates jobs, and (b) "Gee, you know, we might even have won." When governments are cutting the investment of public dollars in legitimate, traditional public functions of benefit to all Americans -- in the name of "cutting taxes" -- is no time to be gambling with those very same tax dollars, betting on private ventures that ought to be funded with private dollars.

And that's just ONE of the 20 categories of what's wrong with corporatism (the blending of government and business). Read the other 19 in "Tough TIF Talk." Go down the list. Can you honestly tell me you disagree with every single one of those 20 categories of reasons why crony capitalism is a bad idea?

# # #

Tough TIF Talk

February 3, 2013, 10:20 a.m. [Looking for the Feb. 1 "Pat Paulsen on Guns" blog entry? Click here.]

Like Death and Taxes, TIFs and TIFing Seem Here to Stay

Nicholas Johnson

Iowa City Press-Citizen

February 3, 2013, p. A7

Considering all the downsides of tax increment financing (TIF), you have to wonder why public officials continue to use it. Is there that much joy in playing Santa with other people’s money?

Whatever the reason, like death and taxes TIFs are here to stay. Officials and their lucky beneficiaries love them, and the public doesn’t seem to care — at least not enough to make an organized, political difference.

Nonetheless, it’s worthwhile to remind ourselves from time to time why they are such a bad idea. Here’s a summary.

• Roads and schools are traditional government undertakings. Funding private enterprise is not.

• TIFs are backwards: voters must approve bonds for legitimate public projects, like the justice center, but private TIFs are awarded without public approval, often over taxpayers’ objections!

• They’ve lost their way. Initially designed for urban renewal and low-income housing, taxpayer-funded TIFs are now used to build upscale condos.

• It’s ideological hypocrisy to praise free markets while coming to city hall tin cup in hand.

• Telling taxpayers, “I’ll keep the profits, you cover the losses,” conflicts with capitalism’s gamble of risks as well as rewards.

• TIFs intertwine government and business in something that’s neither socialism or capitalism. It’s called “corporatism,” and combines the worst qualities of both.

• TIFs distort the market.

• Even if distortion of market forces was desirable, governments have more effective tools than TIFs that don’t require taxpayers’ money — zoning regulations and building codes among others.

• It’s inexcusably unfair to fund one business person while leaving his competitors on their own.

• TIFs take money from schools and other government units, causing either cuts in programs or increased taxes.

• Even if TIFs would produce taxes many years from now, and they often don’t, are ever-increasing taxes (and budgets) an appropriate metric for measuring good government?

• TIFs aren’t needed. There are plenty of investors for sound, profitable business plans. If they and bankers won’t fund a project, why should taxpayers?

• Many TIFed projects would have gone ahead anyway; it’s virtually impossible to know if the beneficiary’s professed “need” is genuine.

• All ventures have risk. TIFs have more, because public officials with little business experience and no skin in the game make more mistakes than experienced investors watching their own money.

• Trying to move businesses from one community to another with competing TIF bribes is a lose-lose strategy.

• Businesses pick cities for reasons other than TIFs: workforce, local economy, schools, transportation, communication, quality of life.

• Telling officials to TIF “prudently” is as effective as beer ads urging University of Iowa binge-drinking students to “drink responsibly.” TIFs can be as addictive as alcohol.

• When officials give millions in taxpayers’ money to private, for-profit businesses, the temptations for good-old-boy corruption are great — and virtually impossible to uncover.

• TIFs are, for a taxing authority, what impulse buying is for the rest of us — an expensive, unbudgeted, one-off “I’ve got to have that!” moment, often followed by buyer’s remorse.

• TIFs can devastate a government’s credit rating, thereby increasing the cost of future legitimate projects.

These concerns are relevant for any city.

But Iowa City has another reason to avoid TIFs: We don’t need them. Businesses here will thrive; others come because of what we offer. We’re ranked near the top of the nation’s cities in numerous categories.

I know our officials will continue dropping millions of taxpayers’ dollars to the bottom line of for-profit, private ventures. But it still doesn’t hurt to ask from time to time, “Why?”
__________
Nicholas Johnson, a former school board member, teaches at the University of Iowa College of Law and maintains www.nicholasjohnson.org.

# # #
For discussion of the taxpayer subsidy of a previous Moen project, along with footnote documentation, and links to a sampling of other prior TIF discussions, see "TIF Towers; Giving TIFs the Sniff Test."

P&L: Public Loss From Private Profit

May 3, 2010, 7:30a.m.

[If you're looking for the 12 prior blog entries about the ICCSD superintendent search see, "The Beat Goes On, But Music's Out of Tune," May 1, 2010, and 11 items linked from "Superintendent Murley's Calm Seas, Smooth Sailing," April 29, 2010.]

Capitalism Pours More Than Oil on Troubled Waters
(brought to you by FromDC2Iowa.blogspot.com*)
And see the more recent, related, "Big Oil + Big Corruption = Big Mess," May 10, 2010.

A series of national disasters, legislative and otherwise, but all with ties to Washington, have caused me to realize that there's more than oil creating America's troubled waters.

On March 31 of this year the President went to Andrews Air Force Base to announce:

[A]s we transition to cleaner energy sources, we’ve still got to make some tough decisions about opening new offshore areas for oil and gas development in ways that protect communities and protect coastlines. . . .

[T]he bottom line is this: Given our energy needs, in order to sustain economic growth and produce jobs, and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable, homegrown energy.

So today we’re announcing the expansion of offshore oil and gas exploration, but in ways that balance the need to harness domestic energy resources and the need to protect America’s natural resources. Under the leadership of Secretary Salazar, we’ll employ new technologies that reduce the impact of oil exploration. We’ll protect areas that are vital to tourism, the environment, and our national security. And we’ll be guided not by political ideology, but by scientific evidence.

"Remarks by The President on Energy Security at Andrews Air Force Base," March 21, 2010.

So, oil industry executives, Republican "drill-baby-drill" cheerleaders, oil-funded Democrats -- oh, and you, Mr. President -- how's that scientific protection of tourism and the environment working out for you? Because it's not working worth a damn for the rest of us. We haven't seen much of BP's $5.6 billion in first quarter profits (an annual rate over $22 billion) trickling down to us so far, any more than we did from those of our dollars you gave to Wall Street. And it looks like this "we" to which you refer, you and BP, are on the verge of wiping out a significant portion of the economy of at least three southern states.

The disaster was predictable -- even if no one predicted it would come as soon as a month after the President's repetition of BP's reassuring words regarding its commitment to "reduce the impact of oil exploration" and protection of "areas that are vital to tourism [and] the environment . . .."

Why predictable? Consider the record:

The 2005 explosion at a refinery in Texas City, Tex., killed 15 workers and injured hundreds more. The Occupational Safety and Health Administration fined BP a record $87 million for neglecting to correct safety violations.

Only a year later, a leaky BP oil pipeline in Alaska forced the shutdown of one of the nation’s biggest oil fields. BP was fined $20 million in criminal penalties after prosecutors said the company had neglected corroding pipelines. . . .

Last year, when the federal Minerals Management Service proposed a rule that would have required companies to have their safety and environmental management programs audited once every three years, BP and other companies objected. The agency is also investigating charges by a whistle-blower that the company discarded important records from its Atlantis Gulf platform.

Clifford Krauss, "Oil Spill’s Blow to BP’s Image May Eclipse Costs," New York Times, April 30, 2010.

It's just another example of the consequences of the partnership and interlocking ties between corporate capitalism and Congress, known as a "corporatist" form of government (or that, in another time and place, were known as Italian fascism). Because, even if you happen to be a fan of fascism (which I am not), in its American incarnation the allocation of power and control is grossly out of balance in terms of the disproportionate influence of the capitalists on what ultimately emerges as "government policy." And while the Republicans are thought by some to be the party of big business, that is only because the Democrats were initially somewhat slow and clumsy in figuring out that "business is our friend." After all, the "self-regulation" of offshore drilling began under President Clinton and his pro-business Democratic Leadership Council -- including the regulation of those causes of disasters that are not "acts of God," or failures of technology, but rather the failures of top management.

"We are not supportive of the extensive, prescriptive regulations as proposed in this rule," wrote Richard Morrison, BP's vice president for Gulf of Mexico production. "We believe industry's current safety and environmental statistics demonstrate that the voluntary programs implemented since the adoption of [voluntary standards] have been and continue to be very successful." . . .

But when it proposed the rules, MMS said most accidents and spills can be traced to human error or organizational failures and said companies need to ensure safe and environmentally sound operating practices (Greenwire, June 16, 2009).

MMS regulations historically have focused on proper equipment operation, but the agency said at the time that equipment failure is rarely the primary cause of incidents.

An MMS review last year found 41 deaths and 302 injuries out of 1,443 oil-rig accidents from 2001 to 2007. The agency's analysis found a lack of communication between the operator and contractors, a lack of written procedures, a failure to enforce existing procedures and other problems.

"The MMS believes that if OCS [outer continental shelf] oil and gas operations are better planned and organized, then the likelihood of injury to workers and the risk of environmental pollution will be further reduced," the proposed rule said.

The voluntary approach was adopted in 1994 during the Clinton administration.

Mike Soraghan, "BP, Other Oil Companies Opposed Effort to Stiffen Environmental, Safety Rules for Offshore Drilling," Greenwire/New York Times, April 27, 2010.

. Regulators make strange bedfellows You do recall the Minerals Management Service don't you? "Government officials in charge of collecting billions of dollars worth of royalties from oil and gas companies accepted gifts, steered contracts to favored clients and engaged in drug use and illicit sex with employees of the energy firms, federal investigators reported yesterday." Derek Kravitz and Mary Pat Flaherty, "Report Says Oil Agency Ran Amok; Interior Dept. Inquiry Finds Sex, Corruption," Washington Post, September 11, 2008. Noelle Straub, "GAO Audit: MMS Withheld Offshore Drilling Data, Hindered Risk Analyses in Alaska," New York Times/Greenwire, April 7, 2010 -- roughly three weeks before the current disaster.

. Moreover, "The [Department of the Interior] inspector general said that these relationships have cost taxpayers $4.4 million in lapsed collection fees, but due to the sloppy administration at MMS, the real cost may go undiscovered. In a separate report, the Government Accountability Office (GAO) found that MMS is plagued by inefficiency in collecting royalties, and that there is no way to backtrack and figure out how much has actually been lost. Currently, oil companies submit their own data and MMS simply takes them at their word, rather than independently confirming that the numbers are correct — what the inspector general has referred to in a letter to Secretary Dirk Kempthorne as a “Band-Aid approach to holding together one of the federal government's largest revenue producing operations.” A separate GAO report found that the United States is not collecting fair market price for royalties on public resources — which may be seriously limiting the amount of money taken in by MMS, and hence, the taxpayers." "Broken Government," Center for Public Integrity.

Apparently no one knows precisely how much oil is now flowing into the Gulf of Mexico. Originally estimated at 1000 barrels a day, then 5000, some are now saying 25,000.

So how much total oil are we talking about? Two of BP's underwater fields in the Gulf are estimated to hold over 3 billion barrels of oil equivalent -- each. Clifford Krauss, "BP Finds Giant Oil Field Deep in Gulf of Mexico," New York Times, September 3, 2009.

How can we put this daily flow into an understandable perspective? Try this: Have you ever held a can of oil while it slowly drained into your car? Let's split the 5000-to-25,000 barrels a day into a conservative 10,000 barrels a day, OK? A barrel contains 42 gallons. A gallon contains four quarts of oil. So 10,000 barrels is 1,680,000 quarts of oil. There are 86,400 seconds in 24 hours of 60 minutes each. Let's say it takes 10 seconds to drain a quart of oil; that would mean one person, working continuously, with no breaks, 24 hours a day, could drain 8,640 quarts a day. At that rate, it would take 195 people on a large boat, filled with quarts of oil, working round the clock, each emptying a quart of oil into the Gulf every 10 seconds, to equal the 1,680,000 quarts of oil BP is dumping into the Gulf every day.

So the 11 lives lost on the offshore drilling rig explosion and fire very likely could have been avoided if government had not given in to the notion of "self-regulation." The impact on the coastal economy and environment and wild life could have been prevented. The economic cost of the clean up would have been saved. And hopefully someone will follow up by reviewing the accounting after this all is over to see if the President's reassurance that BP is going to pay for it all -- including the taxpayers' share of the massive government expenses on BP's behalf -- ever happens.

Coal

Meanwhile, an almost idential story played out in a West Virginia coal mine less than a month earlier.

[T]he explosion of the Upper Big Branch mine two weeks ago, a disaster that killed 29 miners, rattled West Virginia and, once again, raised questions about Massey’s safety practices . . . with federal investigators saying they suspect that a buildup of methane and coal dust led to the explosion . . ..

Four years ago, in another southern West Virginia coal mine owned by a Massey subsidiary, a preventable fire broke out two miles below the surface. A faulty conveyor belt that should have been better maintained ignited some coal spillage that should not have been allowed to accumulate, federal investigators found in a report compiled after the incident.

One of the miners hurriedly tried to connect a fire hose to a nearby water valve, but this was futile; the threads of the coupling and the outlet were not compatible. The miner then tried to open the valve — just to get water on the fire — but the line was dry. And things only got worse.

The miner belonged to a crew working in Massey’s Aracoma Alma mine. In a memorandum issued three months before this fire and widely disseminated in 2006, Mr. Blankenship, the company’s chief executive, ordered subordinates to run coal and ignore everything else.

Dan Barry, Ian Urbina and Clifford Krauss, "2 Mines Show How Safety Practices Vary Widely," New York Times, April 23, 2010.

Here is a company that had been written up literally dozens of times for safety violations, and did little if anything to remedy its miners' working conditions. The regulatory agency had the power to shut down such mines, but refused to do so.

A systemic problem

Chris Mathews has a feature he calls "Tell me something I don't know," on his MSNBC program "Hardball." My guess is that if you're a regular reader of this blog you already know what I'm about to tell you. But it bears repeating from time to time anyway.

We've recently seen the consequences -- in human life and the environment -- from the disproportionate allocation to corporations of the business-government partnership of power. These examples happened to involve corporations in the oil and coal industries. But the problems they illustrate are systemic.

Consider unsafe workplace deaths and injuries alone:

In recent weeks and months there have been a series of workplace tragedies that have heightened concerns—the coal mine disaster at the Massey Energy Upper Big Branch mine in West Virginia that killed 29 miners, an explosion a few days earlier at the Tesoro Refinery in Washington State that killed six workers, and the explosion at the Kleen Energy Plant in Connecticut in February that also claimed the lives of six workers.

In 2008, 5,214 workers were killed on the job—an average of 14 workers every day—and an estimated 50,000 died from occupational diseases. More than 4.6 million work-related injuries were reported . . ..

Federal OSHA can inspect workplaces on average once every 137 years; the state OSHA plans once every 63 years. The current level of federal and state OSHA inspectors provides one inspector for every 60,723 workers. OSHA penalties are too low to deter violations. The average penalty for a serious violation of the law in FY 2009 was $965 for federal OSHA . . ..

Death on the Job: The Toll of Neglect, April 2010.

But the adverse impact of our corporatist form of government on our citizens is not limited to their preventable injuries and death.

Healthcare It's the reason that "universal, single-payer health care," the care provided most of the world's people lucky enough to live in progressive, industrialized countries, and provided at significantly less cost than here, could not even make it onto any table in Washington. It's the reason that the "public option" was quickly shoved off the table, fell to the floor, was swept up and thrown in the trash. It's the reason the pharmaceutical companies got a secret closed door meeting at the White House -- and promises they could continue to gouge America's ill. It's the reason "health care" was quickly redefined as "health insurance" -- essentially a subsidy for the health insurance industry. And it's the reason why the lessons Atul Gawande taught us were ignored: how it is that some cities in America have higher quality medicine than others -- at half the cost. Atul Gawande, "Annals of Medicine: The Cost Conundrum; What a Texas town can teach us about health care," The New Yorker, June 1, 2009.

Financial regulation There are two obvious first steps, whatever else we may do, to bring common sense to Wall Street. One is what we did during the 1930s, and then repealed during the Clinton Administration: the Glass-Steagall Act (Banking Act of 1933). Glass-Steagall Act, Wikipedia ("The Banking Act of 1933 . . . introduced banking reforms, some of which were designed to control speculation. . . . Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm–Leach–Bliley Act."). The other is to break up the biggest, multi-trillion-dollar banks into banks with assets of $100 billion or less. This is not an antitrust issue; there may or may not be antitrust problems associated with the biggest banks (many economists say there are not). This is simply the smartest response to the "too big to fail, taxpayer bailout problem." You don't try to "regulate" to prevent the most obvious risks -- especially when that "regulation" will quickly come under the control of the regulated anyway -- you simply eliminate any possibility of the "too big" problem by making them smaller.

Sadly, like universal, single-payer health care, neither is even on the table, as Congress pretends to fashion regulations of derivatives and other creative casino games, regulations that will be creatively worked around by Wall Street's "masters of the universe" just as quickly as music-loving computer geeks create new ways to share copyrighted music illegally.

National Broadband Plan The FCC, commendably, wants more Americans to have access to broadband Internet connections at faster rates and lower prices. We need to be more competitive with other countries in the world. But once again, it looks like the cable television and telephone company influence in Congress may prevent the one thing that has enabled other countries to provide more of their citizens a faster service at significantly cheaper rates than American companies make available. It's called "open access" and "net neutrality" -- in other words, "competition" -- something heralded in a corporatist state only up to the point where it threatens to move in next door.

Nutrition Two generals who were former chairs of the Joint Chiefs of Staff are now telling us that Americans' obesity has reached not only epidemic proportions, it has become a threat to our national security. John M. Shalikashvili and Hugh Shelton, "The Latest National Security Threat: Obesity," Washington Post, April 30, 2010 ("Are we becoming a nation too fat to defend ourselves? It seems incredible, but these are the facts: As of 2005, at least 9 million young adults -- 27 percent of all Americans ages 17 to 24 -- were too overweight to serve in the military, according to the Army's analysis of national data. And since then, these high numbers have remained largely unchanged.").

Once again, any remedies must confront the money to be made, and the political ties it creates, from selling sugar-sweetened sodas in schools' vending machines, "sweet-grease-salty-grease" in fast food dispensaries, and pushing tobacco and alcohol addiction on our teenagers.

The Remedies

Why do we call the money corporations give to government officials a "bribe" when it's done in other countries, and a "campaign contribution" when it's done here?

The costs of running for office are a personal expense -- as are the upfront costs of establishing any other kind of business (which a seat in Congress certainly is). If you want to run you have to pay to do it. You have to pay for your food, clothing, housing and transportation while you're running. And you have to pay as many campaign advisers, workers, and media consultants as you think you can afford. Money is fungible. If you will pay for all of my food during the campaign there will be more of my personal income I can spend on the campaign. If you will pay some of my campaign costs I may be able to send my kid to a more expensive college. The super-wealthy do end up paying for a larger percentage of their personal campaign costs. It's certainly a personal expense for them. And it's also a personal expense for those candidates who beg for bribes from the corporate representatives who seek their votes.

How much money are we talking about? Try $5.3 billion -- for federal elections alone in 2008. "U.S. Election Will Cost $5.3 Billion, Center for Responsive Politics Predicts," Open Secrets Blog, October 22, 2008 ("The 2008 election for president and Congress is not only one of the most closely watched U.S. elections in years; it's also the most expensive in history. The nonpartisan Center for Responsive Politics estimates that more than $5.3 billion will go toward financing the federal contests upcoming on Nov. 4."). And that figure, of course, excludes the additional costs of lobbyists, said to run as much as a million dollars a day for Wall Street alone in its current efforts to block any meaningful reforms.

And what do the contributors get in return? Can you multiply $80-a-barrel oil times a 3-billion-barrel field?

Fourteen years ago I did the math -- not just for oil, but for a variety of industries. It turns out that bribing members of Congress pays even greater returns than Wall Street cons. The payback runs something between 1000-to-one and 2000-to-one. Give a million, you'll end up a billion dollars richer in return. Nicholas Johnson, "Campaigns: You Pay $4 or $4000," Des Moines Register, July 21, 1996, p. C2.

The payback can take a variety of forms: a tax break, price supports, defense contract, bank bailouts, tariff protection, subsidies, pet project earmarks -- or, as we've recently seen, permission to drill in formerly forbidden multi-billion-dollar offshore oil reserves, notwithstanding the economic and other risks to others and the relatively slight impact on our insatiable and wasteful demands for environmentally destructive energy.

As pointed out in the headline on that column, public financing of campaigns might cost every American $4. But with the 1000-to-one return the contributors are now getting that might be one of the best bargains we've ever been offered.

Because it is we who end up paying for the campaigns now. How? We pay as both taxpayers and as consumers. It's the excess taxes we pay to fund the weapons manufacturers' profits from weapons we do not need, and other transfers of taxpayers' money to corporations. And it's in the increased prices we pay those who have made the contributions, in the cost of everything from automobiles, to pharmaceuticals, to airline fares, to gasoline, to food -- in total, probably well over the $4000 I predicted.

What we've learned this past month is that we pay in other ways as well: those who provide our seafood who have lost their way of life as well as their source of income, those who enjoy the Gulf beaches who have lost their favorite vacation spot, those who've lost their homes, all of us who have lost the wetlands and wildlife they sustain -- and let us not forget the 11 BP employees and 29 Massey Coal employees whose loss was that of life itself.

Capitalism may have its virtues, but when it dictates public policy as well, the price it exacts from all of us is enormous.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
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