Morning Must Reads: The Economic Development Ghosts of Christmas Past, Present and Future

ScroogeIn the holiday spirit this morning, I decided to go with a Charles Dickens theme. What follows are three stories in order which I would characterize as the Ghost of Christmas Past (north Kensington, Philadelphia), the Ghost of Christmas Present (Carlisle Borough) and the Ghost of Christmas Future (Charlotte, North Carolina).

The Philadelphia Daily News this morning profiles north Kensington the poorest place in the city of Philadelphia.

They live in north Kensington, an area of the city with the largest cluster of people living below the poverty line, according to a Daily News analysis of census estimates being released today.

The 2006-10 American Community Survey shows that in the area bounded roughly by B, Amber and Venango streets, and Lehigh and Castor avenues, about 57 percent of the population lives in poverty — about 18,500 people.

That represented a staggering 29 percent rise in the number of people living in poverty compared with 2000 census estimates...

Salzman and others say one major reason for the poverty is the loss in manufacturing over the past 50 years: 'Back in the day, this area was the textile capital of the world. When the jobs left, people were left without jobs.'

Meanwhile, 125 miles west of north Kensington, the Borough of Carlisle is considering a proposal to extend a half million dollars in Section 108 Loan Guarantees to the developers of the site that used to house the manufacturer Carlisle Tire and Wheel. The 800 jobs that used to be at that site were moved to Jackson, Tenn. in 2010. The developer plans to buy the property from the manufacturer and then through a complex set of maneuvers get the taxpayer to pay for the cleanup of the pollution on the site. Here is how the deal was described in October:

Once RE Invest acquires the property, it will convey the property to the Cumberland County Redevelopment Authority, which will make it eligible for state funding for clean-up under the industrial site re-use plan, [RE Invest developer Brad] Maurer explained.

The redevelopment authority will own the site and RE Invest will manage it. Once the environmental clean-up is complete, it will be conveyed back to RE Invest, according to Chris Houston, authority executive director.

The company could receive up to $1.2 million for the clean-up, but the exact amount is unknown.

The developer plans to convert the facility into medical offices. The shift from manufacturing to medical services means the site will go from providing good middle-class manufacturing jobs to providing low-wage service-sector jobs. Outside of physicians, medical offices provide jobs which pay less well than manufacturing jobs. Is it the best use of scarce public dollars to facilitate such a transition?

Whether it is a sound approach or not, a story this morning in the Pittsburgh Post-Gazette (reprinted from the Charlotte Observer) on state economic development subsidies suggests the future will involve a lot more of these kinds of deals.

The $22 million in local and state incentives used to entice Chiquita's headquarters to Charlotte — and other payouts like it — are critical in the fight to create jobs, recruiters say.

But the bets, using taxpayer money, don't always pay off. Critics say incentives might have little influence on a company already planning a move or do little more than shift workers from one state to another. And when government money is a deciding factor in the decision to relocate, some worry the company will flee to another state when the agreement expires.

That has left some wondering how long the Charlotte-Chiquita marriage will last.

'I don't know what Charlotte's deal is,' former Cincinnati Mayor Charlie Luken said last week. 'But I guarantee when it's up, [Chiquita] will be looking for the next highest bidder.'

Communities desperate to avoid the fate of north Kensington give away millions to private companies with little oversight and accountability.

The Keystone Research Center (KRC) partnered with Goods Jobs First in early 2010 to demonstrate that this kind of tax break competition between states is a fruitless strategy for economic development.

If communities want to avoid a grim future of endless tax breaks which siphon off vital public resources with little benefit for local residents, they should consider a different approach to economic development. Consider the key economic development principles we laid out in Good Jobs, Strong Industries, A Better Pennsylvania:

  • First, instead of handing out checks to lure new businesses to the state (or retain existing ones), a dominant practice to date, Pennsylvania should strengthen its efforts to grow its own companies by investing in the public goods of a 21st-century economy. These 21st-century public goods start with education and traditional infrastructure but also include technological infrastructure and amenities, cultural assets, and natural endowments that make Pennsylvania an attractive place to live and work. Today’s public goods also include institutions that support specific industry sectors, such as training partnerships and sector-specific innovation centers that build on Pennsylvania’s higher-education institutions.
  • Second, any future distribution of subsidies and tax breaks to individual businesses must be accompanied by commonsense accountability. Since most companies don’t receive special subsidies from state or local governments, those that do must comply with transparency requirements, pay decently, and deliver on jobs and wages promised.
  • Third, Pennsylvania should focus its job-creation dollars on already-developed rural towns, inner-ring suburbs, and cities, where new jobs will rely on existing infrastructure and be accessible to families and communities that most need good jobs.

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