multivariate<\/span> relationships”. Yes, the Feiock in both studies is the same guy (what a difference a year makes). [by the way Richard Feiock is one of the very best economic development researchers around–the issue is methodology. Different methodologies result in different findings].<\/p>\nExplain all this in your next interview with a TV\u00a0or newspaper reporter. Or better still, toss it out in your presentation at\u00a0your next\u00a0public hearing or legislative caucus.<\/p>\n
Things get a little wilder. Reese (the same Laura Reese as above) and Malmer (1994) arrive at the obvious conclusion that\u00a0if a community is to use tax abatement in the first place, the state constitution has to permit its existence. This finding is so obvious, you would think that future researchers would automatically incorporate that\u00a0most basic level conclusion into their methodologies? Not at all, it has been largely ignored by most studies which followed her research.<\/p>\n
The Curmudgeon,\u00a0after reviewing a\u00a0fairly large number of studies,\u00a0did not find one which either cited\u00a0Reese’s article or made any adjustment in their cost-benefit\u00a0analysis, estimates, or\u00a0assumptions to reflect whether or not all states offered tax abatement, or even\u00a0whether tax abatement was allowed at all. The normal methodology just makes an assumption, a calculation, an estimate\u00a0and automatically extends it\u00a0to all states. The findings, costs, estimates\u00a0and benefits flow ever onward divorced from the simpliest of realities. And these faulty estimates are usually accepted without question by subsequent researchers.\u00a0After all, the numbers are, what the\u00a0numbers are. Faulty numbers and estimates have a half life greater than uranium in the academic literature.<\/p>\n
The problem is that academic researchers either try to explain too much using aggregate data or the reader of such research too often applies-extends the finding without proof beyond the scope of the original research.<\/span>
\nAnother common problem is that academic researchers\u00a0either try to explain too much using aggregate data or the reader of such research too often applies-extends the finding without\u00a0proof\u00a0beyond the\u00a0scope of the original research. For instance, to lend support to the idea that what is really behind the use of tax abatement is politics, Reese (1991)\u00a0reports a “significant negative relationship between a mayor’s margin of (electoral) victory and the value (total amount) of total abatement granted.<\/p>\nIn English that means the closer the election, the more a mayor is inclined to use tax abatement, presumably to either appeal to the electorate or to avoid the perception he\/she is firmly addressing the economic development needs of the community. (P128 W&S). Interesting,\u00a0 the Curmudgeon agrees that politics is key to understanding tax abatements and their use, but\u00a0the Curmudgeon also wonders if this applies to city managers? Or County Executives?<\/p>\n
The reader may think the Curmudgeon silly for making these distinctions, but, the reader should realize that a finding regarding one form of government should not be extended without proof to other forms of government, or to other levels of government. It is not common sense to automatically extend one\u00a0research finding\u00a0\u00a0to\u00a0other related phenomena; it must be proven first.\u00a0The simple projection of a narrow finding\u00a0 derived from one form of government to all\u00a0forms of government at all levels of government is commonplace in academic research on tax abatement. Any finding on one type of tax abatement automatically extends to all forms of tax abatement in every state. Indeed, findings applicable to tax abatement are extended to loans and grants. Hey, its all related isn’t it?<\/p>\n
So much for the good reasons why academics have not been able to provide understanding of tax abatement–now onto the ugliest example of a research methodology which is constantly abused, distorted and turned into an ideological weapon: cost-benefit analysis.<\/p>\n
a Curmudgeon Tangent-Blather on Cost-Benefit Analysis.<\/h3>\n
A goodly number of academics have employed a specific methodology to the issue of tax abatement. That methodology is cost-benefit analysis. This is bad because in the opinion of the Curmudgeon the cost-benefit methodology has been used\u00a0 as nothing less than a weapon in their ideological wars.<\/p>\n
On a good day the cost-benefit\u00a0methodology is horribly complex and\u00a0imperfect. Cost-benefit analysis is usually\u00a0rescued from a well-deserved oblivion\u00a0largely because we have nothing better to replace it with (dangling participle).\u00a0Cost-benefit analysis\u00a0provides answers to questions we need to have answers for (another dangling participle). But,\u00a0unfortunately, the methodology allows us to set up the answer to reflect the conclusions we want. It is this\u00a0last problem that has bedeviled academics and tax abatement.<\/p>\n
The critical problem of tax abatement (and cost-benefit analysis) is that it is relatively easy (until you actually do it, of course) to count costs, and it is damned near impossible to measure the benefits.<\/span><\/p>\nThe critical problem of tax abatement (and cost-benefit analysis) is that it is relatively easy (until you actually do it, of course) to count costs, and it is damned near impossible to measure the benefits. In short, we are going to argue that a central problem underlying tax abatement is that knowing if it works is in essence UNKNOWABLE. Future benefits are known only\u00a0in\u00a0hindsight, and certainly unmeasurable in the present day.\u00a0The future is calculated by means of\u00a0rates and assumptions which\u00a0provide ample\u00a0opportunity for considerable distortion and outright manipulation–even if, sort of, unintended. Cost-benefit analysis is frought with danger when applied to tax abatement.<\/p>\n
There is another huge problem with cost-benefit analysis. We have to agree on the goal-the underlying purpose of what it is we are to study. The goal determines which criteria we shall select with which to judge whether the activity works or not. If we do not agree on the goals, we are not likely to agree on the measurement criteria. And what if there are multiple goals (reasons we use tax abatement)? Sorry can’t do multiple goals. Choose one!<\/p>\n
There is no real agreement as to why we use tax abatement. Worse, tax abatement comes in so many forms, each with their own set of alleged goals.What is it we are supposed to get out of a successful tax abatement to a firm: jobs? Ok , jobs! For whom–the poor and\/minorities, the unemployed (both of which might not pay a lot of taxes), residents of the community,\u00a0 good paying, living wage jobs, high tech jobs to keep your kid in town after college graduation. Or if it’s not jobs is it\u00a0more taxes for the tax base, revitalize the local economy, avoid further population decline, \u00a0grow a new industry or cluster, rebuild a deteriorated building or redevelop an old now vacant brownfield, diversify your economic base?\u00a0 All of the above? Some of the above? The simple, uncomplicated reality is that someone in your community believes your tax abatement should be accomplishing one or\u00a0some combination\u00a0of the above. That’s what “letters to the editor” are for! How can cost-benefit analysis accommodate all these goals? Simple, assume just one goal and move on!<\/p>\n
Or the academics can assume the root cause of tax abatement is crass politics and self interest. The best, most cynical, answer is political, the politician and bureaucrat gets to claim success and the former gets reelected and the latter gets to keep her paycheck. Maybe, the private campaign contributors talked the chief elected (devil made me do it, kind of argument) into it (with support of relevant labor union of course)? Somewhere in your community you can finds groups of people that\u00a0believe each of these things to be true?<\/p>\n
So cost-benefit analysis breaks down badly when you can’t define (1) what goal it is you seek to measure, (2) cannot agree on criteria (an measurable indicator) which is actually related to the goal to be measured, and (3) cannot find a consensus on what methodology to use to determine costs and benefits. It doesn’t help that benefits are not known until some time in the future (upon hindsight one may suggest) and that tax abatement programs seek to achieve multiple goals.<\/p>\n
But one more\u00a0final problem with academic research. Many academics hate tax abatement programs so much they have lost their ability to differentiate the many varieties and purposes of these programs in our states and communities. So, they put together databases containing all sorts of abatement programs, incentives and whatever else\u00a0the cat left in the litter box. States or sets of communities are chosen usually because they are near home or\u00a0eureka, an\u00a0easy, already assembled database was found. Toss into the mix SPSS and correlation statistics and the article writes itself.<\/p>\n
But unless we know what is in the database an r squared is essentially meaningless because we don’t really know why it’s all statistically significant. So we are free to attach our own reasons. Research on tax abatement must\u00a0distinguish among the\u00a0various\u00a0types of tax abatement, their differing recipients, their varying goals. Composite or aggregate databases\u00a0usually include all sorts of programs providing all sorts of benefits,\u00a0from several levels of government,\u00a0to different recipients, with different terms and conditions,\u00a0for different purposes and impose varying restrictions. To arrive at a finding that reflects any one of these elements is very unlikely.<\/p>\n
All the nitty gritty of understanding the variations and the conflicts within an aggregated database is, well, …., like, …. work to many an academic. To figure out if each of the individual pieces of data mean, what they are supposed to mean for each of the hundreds of cities in the databases, isn’t going to happen. The numbers are, what the numbers are. In their effort to be scientific, researchers must compare among a mass of municipalities in order to discern statistical associations and correlations–which for them gets an article published. A composite database is essential to the endeavor. A composite database, however,\u00a0is full of contradictory apples, oranges, and pears which often defy any attempt at analysis.<\/p>\n
So, please don’t use cost-benefit analysis and aggregate databases\u00a0to evaluate tax abatement! One way or another the conclusion arrived at was usually predetermined.<\/p>\n
But that hasn’t stopped anybody.
\nThat cost-benefit doesn’t really work has not inhibited its use by a horde of academics. For them, cost-benefit is not a methodology–it is a weapon. A weapon to be wielded against the evil-weevils of the world: American capitalism and their hack supporters, economic developers.<\/span>
\nSo let’s see this weapon and how it is used.<\/p>\nLet’s Apply Our Observations to Specific Academic Research<\/h3>\n
So let’s select an academic article and see how\u00a0it fits into our critique. [OMG! I must be the Wizard of Oz because I see a\u00a0straw man coming down the yellow-brick\u00a0road?]<\/p>\n
Alan Peters & Peter Fisher\u2019s, The Failures of Economic Development Incentives\u201d, Journal of the American Planning Association,<\/strong> Vol.70, No 1, Winter 2004. Both Peters\u00a0and Fisher (Graduate Program in Urban & Regional Planning, University of Iowa)\u00a0\u00a0have a\u00a0distinguished record of relevant publications in the matter of incentive evaluation (co-authored, State Enterprise Zone Programs: Have They Worked?<\/strong>, W. E. Upjohn Institute Press, 2002) and Industrial Incentives: Competition Among American States and Cities<\/strong>, (W.E. Upjohn Press, 1998). Both authors should be considered experts and specialists in the area of tax abutments and economic development incentives.<\/p>\nIn this article any reader ought to\u00a0know pretty quickly where the authors stand on tax abatement and incentives. If the title does not suggest a predetermined conclusion, the opening paragraph sets the tone:<\/p>\n
The provision of business incentives\u2026, one of the mainstays of economic development policy\u2026has been the target of the most intense criticism. Indeed, there are many prominent critics who believe that virtually all incentive programs should be banned. Nevertheless, indications are that spending on incentives has continued to expand. (P.27)<\/p>\n
(By the way, this review started with much the same observations: tax abatement are pervasive and no one likes them–Oops! The Curmudgeon)<\/p><\/blockquote>\n
For Peters and Fisher (P&F) the \u201cfundamental, yet unresolved question” regarding tax abatement\/incentives is whether they “are a cost effective<\/span> strategy for achieving economic growth” (P.27). Taken at their face value, the reader would think the issue at hand is whether relative to the\u00a0benefits of tax abatement and incentives, are the costs excessive or not?\u00a0The answer would seem\u00a0require a cost-benefit analysis. This is only partially correct however.<\/p>\nTo answer their overarching question, P&F construct the following evaluative criteria:<\/p>\n
\n- Do incentives cause states and localities to grow more than they would have without incentives?<\/li>\n
- Is the growth generated providing net gains to the poorer communities or poorer people or is it zero sum?<\/li>\n
- How costly are incentives relative to other alternative economic development policies?<\/li>\n<\/ol>\n
Each of the above\u00a0“criteria” or question may be fine and wonderful, and deserve to be answered. But the reader could probably think of other “questions” as well. And … are these evaluative criteria for a cost-benefit study OR normative questions framed into the language of evaluative criteria. A safe and reasonable answer is “maybe” but it would seem each criteria or question\u00a0requires it’s own individual cost-benefit analysis. That, however, is not to be.<\/p>\n
In any case, the small matter as to whether all, or any, of the individual\u00a0incentive\/tax abatement programs was intended, for instance to create jobs more for poorer folk than more affluent people, is ignored.\u00a0A tax abatement program might be trying to create manufacturing\u00a0jobs,\u00a0for instance, and be silent on who\u00a0acquires such jobs.\u00a0The possibility that we are judging, excuse me “evaluating”, these programs by substituting our “better” goals for the program’s “inferior” goals might be mentioned, but it is not.<\/p>\n
But let’s move on. We have more fish to fry. The incentives included in P&F’s database are: property and sales tax abatement, and tax credits, tax increment financing, corporate income tax exemptions and credits, grants, public loans and loan guarantees. The key concept for inclusion as an incentive is that the benefits go to a business, not a worker or work seeker.\u00a0P&F then\u00a0estimate, that\u00a0the total cost of this basket of incentives was $50 billion in 2002. That $50 billion will serve as the benchmark from which they will derive their conclusions.<\/p>\n
Any economic developer worth their salt understands this is a real basket of “stuff”. Some individual programs\u00a0are likely to\u00a0 be\u00a0Federal, others State or local.\u00a0TIF (which varies noticeably state by state) is it’s own can of worms. Loans (some of which presumably gets paid back) and guarantees which are paid out for any outstanding balance\u00a0only if the loan defaults are not tax abatement at all. What P&F are really measuring are a selected basket of economic development program obligations for 2002–not tax abatements. They are linking incentives with tax abatement and not differentiating between the two. Tax abatement could be very\u00a0cost effective, TIF less so, and incentives not at all. We will never know, however, because this is one big mulligan stew.<\/p>\n
Can individual programs, designed in various ways, intended for different clients for all sorts of purposes\/goals be simply collapsed into a one size fits all category called incentives?<\/span><\/p>\nLumping all forms of incentive (especially grants and loans) into a large amorphous package labeled \u201cIncentives\u201d implies more coherence and internal logic than could possibly exist. All these forms of \u201cmonetary\u201d incentives can be quite dissimilar not only in structure and eligibility, but also in purpose. Usually, since these programs are set up by each state, one should expect a considerable diversity of programs for specific purposes and clienteles, each operating in vastly dissimilar geographies and economies. Some may actually be justified in a decent cost\/benefit analysis, but are doomed in this methodology to be lost in a mass of irrelevant data.<\/p>\n
Somehow all this basket of programs comes out to a $50 billion dollar cost. How you ask? It seems another study (whose methodology is not provided or discussed) arrived at a $48.8 billion number in 1996. P&F updated this 1996 study in 2002 “using a variety of methods (unspecified) and using a conservative (?) definition of economic development (unspecified), we estimate a likely top-end annual state and local number of around $50 billion” (P.28). By the way, the reader should infer that P&F are estimating the total 2002\u00a0state and local incentive costs nationally.<\/p>\n
Cost\/Benefit Analysis: Whose Side is It On?<\/h3>\n
The Curmudgeon would never say this, but the methodology, despite a\u00a0its numbers,arithmetic, and occasional statistics, might be labeled by someone more irresponsible than he, as little more than “a back of the envelope” calculation (P&F would certainly disagree with this phrasing). And, since $50 billion would seem a lot of money in 2002 (not so today, we throw around trillions nowadays) one might wonder (again, not the Curmudgeon) that a number like this, reached on good faith and trust, might be a bit high and set the bar so high the final results are … perhaps … predetermined?<\/p>\n
Finally, there is no thought that the individual programs themselves could actually\u00a0be built around their\u00a0own terms and conditions, eligibility, duration, and, as alluded to earlier purposes or goals. Not to worry, an incentive is an incentive is an incentive-they all somehow average out. The thought that these programs could not only overlap, but actually conflict with each other, and that the variation among states and communities (remember Reese above)\u00a0could enter into the cost calculations (and benefit, of course) is nowhere to be found. The Curmudgeon believes, fallacy of composition notwithstanding, that while the basket of “stuff” as a whole may not prove “cost effective”, that finding of not being cost effective\u00a0could not automatically be applied to any individual program within the basket. Rather, it can only suggest that as a whole, they did not achieve financial break even. Each individual program is automatically tarred with the inevitable research conclusion, however.<\/p>\n
The astute reader (astute being defined as a reader that agrees with the Curmudgeon) might realize that previous to any of these three “criteria” or questions being answered or in any way addressed that the cost-benefit analysis that is to follow will arrive at a conclusion not too favorable to incentives and tax abatement.<\/p>\n
Yet we do know that in order to arrive at cost\/benefit’s monetary\/mathematical conclusions, any researcher must make assumptions (interest rates, discount rates, rates of growth, etc.) and must also calculate future costs and benefits, all of which is obviously a risky enterprise in and of itself. Given our earlier observation (non-neutrality) one might be wary as to how objective and fair these assumptions utilized may be and whether or not they are fully disclosed. In any case, culling from literature P&F select several and in effect incorporate the findings of these selected studies as the basis of their assumptions employed in this article’s cost\/benefit calculations. I must say that while reading this article’s literature\/assumption section, several very loud warning bells rang in the ever beclouded brain of the Curmudgeon.<\/p>\n
In Any Case, Let’s Cease this opinionated blather and resume the P&F review<\/h3>\n
As stated earlier, P&F posit three questions which would serve as criteria for determining whether or not the incentives\/abatement are cost effective.<\/p>\n
These three questions or criteria\u00a0are themselves culled from P&F’s\u00a0\u201cmeta-review\u201d (“a review of the reviews”) of pertinent literature they deem relevant to the topic. This meta-review works well enough, they feel, for the first question, but bogs down for the second question, and collapses completely\u00a0for the third question (P.29). \u00a0So their research method for discerning their three criteria has to be considered sketchy at best. But not to worry (again), P&F will instead of meta-review for the second and third questions, the authors will “focus on broader theoretical arguments and again some of our own recent findings, some previously published and some not.”(P.29) Say it in the Curmudgeon’s language “these criteria are what we think is important”!<\/p>\n
In regards to the first question (do incentives create jobs or investment), P&F, after the better part of three pages of often conflicting conclusions, finally wind up questioning\u00a0the utility of their own\u00a0database. \u00a0types of incentives, and methodologies of various studies they have selected and, with frustration, arrive at the following conclusion:<\/p>\n
The upshot of all this is that on this most basic question of all \u2013 whether incentives induce significant new investment or jobs \u2013 we simply do not know the answer<\/span>. Since these programs probably cost about $40-$50 billion a year, one would expect some clear and undisputed evidence of their success. This is not the case. In fact, there are very good reasons \u2013 theoretical, empirical and practical \u2013 to believe that economic development incentives have little or no impact on firm location and investment decisions. (P.32)<\/p><\/blockquote>\nThis paragraph in the Curmudgeon’s language is a mere assertion to the true believers reading this article. P&F are in effect saying “Incentives and abatement are just wrong and while\u00a0we not satisfied with the evidence that proves it’s wrong, we all know it’s wrong all the same”! “So let’s move on”.<\/p>\n
This paragraph in the Curmudgeon’s language is a mere assertion to the true believers reading this article. P&F are in effect saying “Incentives and abatement are just wrong! Although we could not uncover any proof or support for our position, we all know our position is correct. You, the reader, know it. So let’s go on”.<\/span><\/p>\nThe above quote\u00a0is so outrageous it deserves to be said again so the reader fully appreciates that P&F could not find sufficient support in the literature to justify their hypothesis.<\/p>\n
In the Curmudgeon\u2019s words,\u00a0P&F’s conclusion regarding the first criteria translates into: \u201cwe could not find conclusive evidence that such incentives are effective or ineffective. While we selected the\u00a0literature ourselves\u00a0and constructed the benchmark ourselves, we still could not arrive at a conclusion. But not to worry, we really all know that since\u00a0our\u00a0finding is\u00a0inconclusive, this in fact proves our case. The inconclusiveness of our finding is in fact a condemnation of\u00a0\u00a0incentives because if incentives were actually successful and effective,\u00a0our literature review\u00a0would have been conclusive. It was not. \u00a0So therefore, the literature indicates incentives are not effective in job and investment creation, but also ineffective for a new, additional factor\u00a0that we have not discussed at all but we toss in arbitrarily at this point: firm location.\u201d<\/p>\n
[EDITOR injects: that\u00a0by this point in the article\u00a0$50 billion annual cost\u00a0is\u00a0treated as\u00a0a fact, not an almost informal estimate, and also\u00a0notice a twenty per cent range in the $50B\u00a0is injected for no apparent reason.]<\/p>\n
A good summary of this line of reasoning, we might suggest, is that incentives and abatement are just wrong! We know it, you know it \u2013 who really needs proof.<\/p>\n
Moving on to the remaining questions, perhaps surprisingly, the literature reviews which the researchers compile conclude similarly as they did for the\u00a0first question: \u201cThe empirical literature on these questions is fairly skimpy\u201d and \u201cthe results have been mixed\u201d(P.32). Their conclusion regarding the second question (is growth targeted to poorer people or geographies?), for instance, is particularly cumbersome:<\/p>\n
Let us summarize our argument so far. In most states some portion of a state\u2019s economic development funding will be targeted at distressed areas; some (small) portion of that funding may actually be effective in inducing investment and jobs in those areas; some fraction, and probably not a large one, of those induced jobs (if there are any) will actually go to residents of that area; and some of those newly employed residents may actually be the poor or unemployed we were trying to help. And even this doubtful level of policy effectiveness may be difficult to sustain. (P.34)<\/p><\/blockquote>\n
What can the reader take away from that summary\/conclusion just presented? We are not sure, but somehow it supports their final observations contained in their conclusion presented below:<\/p>\n
On the three major questions \u2013 Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? \u2013 traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have the greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false \u2026 It seems to us that there is a need for a radical transformation of policy ideas on how we achieve local economic growth. (P.35)<\/p><\/blockquote>\n
We couldn’t have said it better. Incentives provided to business are wrong and we ought to stop them immediately, even if we can\u2019t provide conclusive evidence.<\/p>\n
More of the Same: Just Different<\/h2>\n
The P&F article is both characteristics of much of the academic literature on tax abatement, and is regarded by many as one of the more important review of tax abatement literature. The reader is urged to review and read (reread) P&F for themselves and make their own judgment as to the accuracy of our comments.<\/p>\n
Anyway, let’s wrap all this up. How can we summarize this longer than usual review? First, our starting point is that property tax abatement can work. It can achieve its desired ends–if we could only agree consensually what those desired ends are. We don’t usually agree so property tax abatement is roundly criticized. Nevertheless, it is our belief that property tax abatement is not only widely believed to be pervasive, and growing in use, precisely because those who actually abate the taxes believe it works and that it achieves their end purposes. Some of the user end purposes are noble, and others are not. To be a serial tax abater one is usually both saint and sinner simultaneously.<\/p>\n
Whatever the purposes of those who provide the tax abatement and those who receive them, it is also clear that property tax abatement is a tool which invites controversy and even outrage. Property tax abatement is, at its core, redistributive. It creates winners and losers and losers don’t like to lose, and winners are ingrates. What is more property tax abatement crosses a Grand Canyon-like ideological chasm (as we see in P&F) and into this chasm, the serial tax abater, much like Wiley Coyote, plummets inevitably to the bottom. There is no escaping the plummet. Controversy is built into this economic development tool, and that is why the economic developer gets paid the big bucks. So, you economic developers who use property tax abatement (or really any form of tax abatement), stop your whining. And above all, forget about this cost-benefit stuff.<\/p>\n
As to the ideological chasm. Both sides of the canyon will use tax abatement if the recipient is “ideologically correct”. The real issue in the ideological wars is who<\/span> gets the tax abatement–not tax abatement as a legitimate economic development\u00a0tool. The\u00a0 critic who\u00a0 attacks a tax abatement to a specific firm that is lured into your community will be the first to provide tax abatement to start a cluster or augment an existing one. A property tax abatement for a headquarters office building will be soundly attacked, but a tax abatement for green jobs, life sciences, eds and meds expansion,\u00a0or alternative energy will be applauded. Don’t expect logic and consistency. An economic developer is not paid to be naive. She is paid to be brave. She is paid to make decisions in which she is both sinner and saint. You do your best and move on.<\/p>\nThe best thing that can be said about cost-benefit studies concerning property tax abatement is that if done right it can only be done in hindsight. The choice in the setting of “assumptions” so essential to cost-benefit are unknown when the property tax\u00a0 abatement is made. Requiring cost-benefit assessment previous to a decision is to invite abuse. The goals associated with property tax abatement are many, and there is, as stated above, no community-wide consensus as to what they should be. Future consequences and benefits (and costs)\u00a0are fictional guesses no matter how elaborate or sophisticated the methodology. Cost-benefit studies are a weapon whose conclusions, at least in the property tax abatement arena, are predetermined. Play that game, use that weapon at your own risk.<\/p>\n
Those who would employ property tax abatement should recognize they are in for a fight from the start. Know what it is you seek to achieve and make it clear. If you can’t tell the truth why you are providing an abatement, then probably it shouldn’t be done. The effects, or the proof that your decision is\/was correct will usually be murky and will last for only a short to an intermediate time period. Property tax abatement are not a forever thing. Times change and firms grow and lose jobs as one moves from one business cycle to another. Be wary of trying to accomplish too much with any specific tax abatement. If you use a tax abatement to keep a firm from moving, don’t require it to create “green” or “living wage” or “jobs for residents only” on top of your original purpose. Keep it simple, as few moving parts as possible. Social agendas on top of job creation is a recipe for failure–even if you succeed in one goal, the non-attainment of others will justify criticism.<\/p>\n
The thing is–property tax abatement can work. Just don’t expect applause. And don’t expect any success you achieve by means of tax abatement to be long-lasting. It will work for awhile, but in a world of what have you done for me lately, don’t be surprised if things change.<\/p>\n","protected":false},"excerpt":{"rendered":"
There’s nothing more controversial in the life of an economic developer than to provide a property tax abatement to a company. Yet, it is done more and more and is a central tool in just about all our economic development strategies. In his most recent review, Confessions of a Serial Tax Abater, the Curmudgeon provides some perspective, analysis, critique and guidance. He also vents and critiques a prominent review in the academic literature on tax abatement. Not to be missed, check out and read all the sordid details about property tax abatement in Confessions of a Serial Tax Abater.<\/p>\n","protected":false},"author":6,"featured_media":394,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"post_folder":[],"_links":{"self":[{"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/posts\/1681"}],"collection":[{"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/comments?post=1681"}],"version-history":[{"count":2,"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/posts\/1681\/revisions"}],"predecessor-version":[{"id":4921,"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/posts\/1681\/revisions\/4921"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/media\/394"}],"wp:attachment":[{"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/media?parent=1681"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/categories?post=1681"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/tags?post=1681"},{"taxonomy":"post_folder","embeddable":true,"href":"https:\/\/journal.c2er.org\/wp-json\/wp\/v2\/post_folder?post=1681"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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