KOZ Will Get Easton Silk Mill Project Built Faster

Eric Weisz has been holding it down defending Easton’s KOZ application for the Silk Mill.

Bernie has a bunch of dumb objections to it, despite supporting the worst TIF ever for the Chrin Interchange. That’s a development that’s not needed at all, and that Chrin previously said he could build using only his own money, without any government subsidies larded on. It is easily the worst possible use of development subsidies I have yet to encounter in my two years of blogging.

I’ll agree with Bernie on one thing – good projects succeed and bad projects fail, subsidies or no subsidies.

But that’s a case for electing people who can tell the difference between good projects and bad projects, not scrapping development subsidies altogether. You need to look at this stuff on a case-by-case basis.

In the case of the Silk Mill, the KOZ is helping a very good project get built sooner, in 5 years instead of 10, according to Sal Panto.

I’ll just note once again that all of these different acronym districts are trying to do exactly the same thing: lower the money/risk cost to developers, to induce them to build something.

The only political question in play here is whether you support government subsidies for development in general.

If you’re against development subsidies, that’s not a crazy position, but once you’ve decided there’s a role for government to play, the only questions left are technical, not political.

There are good technical reasons to prefer different tools for different projects, but to say you like one or dislike another for political reasons is just plain weird. They all do the same basic thing.

Arguably, all these different districts are just trying to mimic the effects of a land value tax. In the case of the Silk Mill I think the land value tax would work better. Split the millage rate into separate rates for land and building, lower the tax on buildings to zero, and raise the tax on land rents to whatever.

From the one side you’re enticing developers to build by totally removing the any tax disincentive to build, and from the other side you’re raising the cost of not building.

Comments

  1. GDub says:

    “But that’s a case for electing people who can tell the difference between good projects and bad projects, not scrapping development subsidies altogether. You need to look at this stuff on a case-by-case basis.”

    I think that paragraph is where you go wrong. If it is a weak plea for technocracy, I don’t see where you draw your sense of optimism that it could ever happen.
    Look at Allentown now. Is it guided by people who can tell “good” from “bad”? You have a mayor who absolutely insists, with no examples, that a minor-league hockey arena will be the anchor of a revitalized downtown–a position that perhaps 10 or fewer economists in the entire United States would agree with. You have a technically complex trash-to-energy proposal that is studied by non-experts for nearly no time at all and is strongarmed through a union-led pressure campaign, ending in a packed meeting.

    The “right” way to do it is to probably take sensible taxation proposals as you lay them out and apply them generally with minimal exceptions or discretion–the model that is used in Sweden, Finland, and other low-corruption places. The reason that doesn’t happen in Easton and Allentown (and other places) is because these projects are supported because they “deliver” for constituencies (like the unions above) and not because they make sense in a theoretical framework judged by wise experts.

    Making little islands of exceptions, like KOZs, is exactly the problem with the way politicians hand out favors.

    • Jon Geeting says:

      If we were talking about first-best policy options, I would agree with all of that. But I think we are dealing with second-best options. My view is that the way PA finances municipal government and school districts creates distortions that put cities at a big disadvantage for attracting development projects. The relatively hands-off approach you prefer, and that I would support in an area with a regional tax base and regional land use planning authority, would, I think, leave the core cities at the back of the line for new development. I have a political interest in seeing the core cities develop more densely, so I think the second-best policy option is to give cities tools like these acronym districts to help level the playing field with the suburbs. It’s not ideal, and it sometimes results in bad projects, but I think it’s preferable to what a more laissez-faire approach would produce under the current fiscal arrangements.

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