Fall is the season for professional conferences and I just recently returned home from a major economic development conference, this one heavily attended by both competing cultures of the economic development world: the urban, “city center-oriented” folks and the suburban, “sprawl-oriented” folks.
Both sides are locked in a fierce battle to attract your company, along with its jobs and tax base, to their neck of the woods. This battle has been going on for decades — actually centuries — and shows no sign of abating any time soon. In fact, it not only pits city against city, it also pits state against state.
If you want to know who’s winning and who’s losing, all you have to do is listen to who’s complaining.
It’s absolutely breathtaking to listen to a city mayor complain that the reason a manufacturing facility left his or her downtown is because of the incentives offered that company to relocate out in the suburbs (or down South, or wherever). The implication is that, but for a scandalous bribe on the part of those no good, lying, thieving scoundrels, that facility would still be downtown.
If you get enough like-minded people in the same room, they’ll all nod their heads and agree that that’s definitely what the problem is ... and that the solution to the problem is to eliminate incentives, thereby ending this destructive behavior on the part of businesses and their cohorts.
Not once in the conversation does the subject of high taxes, high wages and onerous regulations — all of which cause a company’s operating costs to soar – have anything to do with the decision to move. Rarely does the subject of antiquated equipment and facilities – and the difficulties restrictive regulations place on correcting the problem – ever come up. Nor do environmental regulations and their possible liabilities that could ultimately bankrupt and destroy a company whose due diligence was not quite good enough.
The problem with this attitude is that it ignores the fact that companies compete against one another, just as communities and states do, and that not everyone comes out a winner. In business, score is kept using the balance sheet.
No, it’s always those darned incentives. And if only we could do away with them, or at least offer our own, then things would go back to how they once were.
The problem with this way of thinking is that incentives have nothing to do with a company deciding to relocate a facility. That decision is based upon the business climate of the current location, and how it relates to the company’s bottom line. If it’s bad enough, that facility in your community will soon be history, and the only way that you can fix your problem of “fleeing businesses” is to fix your noncompetitive business climate.
On the other hand, if you continue to believe that if only your competitors would realize how unfair the current system is to you, they would show some civic responsibility and back away from trying to bring that business to their community.
Unfortunately, that’s not how the business world works, and a community pulling itself out of the running for a new facility succeeds only in pulling itself out of the running for that new facility. It doesn’t make that facility stay in its current location.
Only a competitive business climate can do that.
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