Economic Incentives A Question Of Fairness

October 3, 2005
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The economic development world is holding its breath, waiting for the U.S. Supreme Court to act on a lawsuit that is the “biggest thing” to happen in that arena ever.

At stake are the economic development tools — the incentives — states offer businesses to keep/lure them, tax abatements and brownfield redevelopment grants being chief among them.

If the U.S. Supreme Court goes one way, those methods are gone for good. If it tilts the other way, everyone plays on with basically the same set of rules.

So what changes?

Maybe not much.

West Michigan is blessed with some stalwart economic developers and some municipalities that certainly are development minded.

The concern, then, is about the rules, not the results of a court case. If the rules, whatever they may be, are applied fairly to all states, West Michigan remains a player in the game and may even benefit from such a decision (at least nationally, but probably not globally).

Regarding those concerns, The Right Place and other economic developers have said they will use all incentives provided by the legislature, regardless of perceived flaws.

A similar attitude was seen this fall in Caledonia Township, where the municipality was persuaded to adopt a tax abatement policy for the first time.

“I think the fact that we haven’t needed one is indicative of the demand for companies to move here,” said Township Manager and Planner David Zylstra. “But there was a lot of pressure to come into conformity with what other communities are doing.”

The same competition among states is seen at the local level. For every Lacks Enterprises, which had scouted locations in Indiana and South Carolina, or Emerald Graphics (Wisconsin and Texas), there is a small business playing one municipality against another.

Tom VanRee, owner of Legacy Precision Molds, formerly of Wyoming, told the Grandville City Council that he would relocate if council members approved his company’s Recovery Zone designation. The first company in Greenville’s newly expanded industrial park, located in the new Electrolux Renaissance Zone, was Grand Rapids Tooling Center.

“Tax abatements were developed to give the stressed communities a level playing field,” Zylstra said. “When everyone just started offering tax abatements, it took the tool away from the communities that the legislation was originally intended to benefit.”

So again, it’s a question of fairness. Whatever the rules of the economic development game become, they should be applied fairly to every jurisdiction.

Now, whenever a public official speaks out against an incentive — as Grand Rapids Mayor George Heartwell did during the first round of Recovery Zones, and City Commissioner Jim Jendrasiak did during the Alticor hotel decision — they do so alone.

“The problem is that, until everybody is required to stop, no one can afford to stop,” Terry Lodge, one of the co-counsels in the lawsuit going before the Supreme Court, told the Detroit Free Press.

Is that fair?    

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