Saturday, February 12, 2011

What 'conservatives' think government is good for

It's a clear symptom of our collective focus on material consumption that the big news of the week revolved around a possible retail grocery opening and what we're willing to do to get it. The Courier covered this in three news stories (here, here and here), an editorial and Tim's Friday column.

Both opinion pieces were fully supportive of having the City empty its capital improvement fund -- the account from which we normally expect to pay for roads, water infrastructure, public building additions and remodeling, like that -- to buy a piece of land that it will then lease to a developer who will in turn lease it to the funky/trendy Trader Joe's grocery chain.

Many of the city folk who've moved here over the past fifteen years have clamored for TJ's, and periodic rumors of it placing a store here have raised anticipation levels eclipsing the Second Coming.

Council and the editors seem to agree that attracting the chain will only add to the City's tax base, and using the capital fund indicates they think it's necessary infrastructure. Let's say I'm skeptical of both ideas.

They also assert that this is a perfectly ordinary use of public funds, that cities do it all the time. As evidence Tim cites spending for infrastructure improvements and sales-tax relief offered in several large retail deals.

For starters, those deals did not in any way bet the expended funds on the success of the retailer. This one does, and it's a key difference. If TJ's doesn't make its targets it will pull up stakes with little warning and move to greener pastures, as we saw as recently as three years ago in the Phoenix environs, where it closed three stores and left empty mall pads -- during boom times for retail, I might add. In that event the developer is left holding the bag on the lease, likely to lead to a bankruptcy of its no doubt carefully firewalled operation, dumping the improved but empty property on the City to remarket.

Other commenters have brought up the obvious question: if this is such a good deal, there ought to be several banks happy to step up to lend the necessary dosh. It's called a mortgage. Nowhere in the coverage have I seen any justification for usurping the customary role of capitalism in this, or, worse, for taking on that role where private capital won't.

In the not-unlikely event of a default, the City moves from the banker's role into that of the developer and landlord. And I'm fairly sure most readers are familiar with just how easy it is to rent out retail space in Prescott right now.

Council members seem enamored of the idea of "making money" on public investment, promising a big return over something up to thirteen years or so. I guess this is unintended fallout from spouting the idea of "running government like a business," and it has to require a certain amount of mental contortion for people who complained bitterly about the automaker bailout to support this.

I'm not against seeing cash return on investment per se, but that should never be the core purpose of applying public funds. Profit derives from risk, and that's the opposite of what we should be doing with public resources.

Another important aspect is our already crowded retail-food market, which has been shedding players in the recession. How is it fair to use public money to give advantage to a new competitor for businesses that have had to find their own capital and paid their taxes (including into that capital fund) in many cases for decades? Does Council imagine that it will have no effect on existing business, that you and I will all keep buying just as much from everyone else and simply eat more? No, there will be fewer sales elsewhere, and likely slim-to-no net increase in jobs, which is the key driver of economic health.

People who identify across the political spectrum get this, it's not a left-right issue. In the sparkling eyes of its boosters we see the the real force driving 'conservative' politics in this country, and that's greed. If a certain core group of Republicans can find a way to apply your tax dollars to help a corporation make money, they're all over it. That is their idea of the best function of government.


Anonymous said...

Steven –
You and I are on different ends of the political spectrum, but I have to tell you that you have beautifully and articulately (as usual) summed up this local issue. You even zeroed in on some of the specific flaws in this “agreement.” I am far from naive, but even I have been stunned by how badly the deck is stacked on this one. The only thing that I can add to your analysis is that this action does NOT represent conservatism. Conservatism is, more than anything else, a philosophy of governance. It’s about the role of government and the limitations of government. This action is also not “pro-business.” It amazes me that the C of C members are blind to that. I would engage in a lively debate with you about conservatism, but at this particular point, my heart just isn’t in it. I’m a lifelong conservative (an actual conservative) and at this moment, I’d vote for the ghost of Karl Marx if it would unseat one of our Council incumbents. (Don’t even get me started about how disappointed I am with the Courier’s role in this!)

Anonymous said...

I'm glad you weighed in on this issue, Steve. The whole deal really smells fishy and just like the clubhouse renovation, it appears to be a done deal regardless of public outcry.

While I'm sure the city has been given all sorts of rosy sales projections from the developer that show how it can easily afford the lease payments, you pointed out the big risk--what is TJ doesn't meet sales goals and simply closes up shop? The developer gets to declare bankruptcy, leaving the City of Prescott holding onto another failed retail space.

The City should not be using precious capital improvement funds as investment funds, and especially not for investing in real estate in a down market. There's an old saying in investing: don't invest unless you can afford to lose it. Can the City truly afford to lose $2.2 million?

dovh49 said...

It's called mercantilism at the city level. The core problem is that it's not right that one business subsidizes another business against their will. It's outright theft. It goes along the same lines as clean elections. The government subsidizes it's "choice" of candidates whether the public agrees with that candidate or not and in the end props up incumbents.

Steven, you again fail to see the faults of your own political favorites (the democrats). Who supported the auto bailouts? The democrats. Who supported the bank bailouts? The democrats and republicans. This is what is wrong with the ideology of both parties. They both believe government is there to support their own ambitions and interests. This is called statism. As long as statism exists the government will be corrupt.