EEZs Are An EZ Path To Corporate Welfare

In a very funny 1983 episode of “Family Ties,” the father, Steven Keaton, reads an FBI file describing his mild 1960s activism as participation in “left-wing attempts to overthrow the government.” Keaton angrily confronts an FBI agent about the charge. “Oh, don’t take it so personally,” the agent airily responds. “It’s just a bookkeeping thing.”

That is pretty much how Columbia city leaders responded to objections to the recent Enhanced Enterprise Zone (EEZ) designation declaring more than half of Columbia as blighted.

“The word ‘blight’ is just semantics,” the Columbia mayor told a crowd.

“Blight” is not semantics. In this context, it is a word loaded with hidden meaning that the mayor and others do not want to discuss. It does mean that Columbia is taking a major step toward much heavier use of taxpayer subsidies for all types of commercial activity. Once you have blighted more than half the city, it is a short step to the point where almost every development receives some type of subsidy. That is not a “maybe.” That is the current reality in Saint Louis and Kansas City.

The dirty little secret that Regional Economic Development, Inc. (REDI), the local media, and Columbia city officials do not want you to know is that EEZ, Tax Increment Financing (TIF), Community Improvement Districts (CID), and other subsidies do not work. They do not succeed in growing the local economy. “Call me blighted and give me the money,” as one city councilman stated, may be an oafish example of out-of-control government, but even worse is the abject economic ignorance it displays.

The panoply of subsidies that come into play when a large area is declared blighted have a number of adverse side effects. They shrink the local tax base, encourage more government planning of the economy, and increase the chances of eminent domain abuse.

As a famous Swedish economist once said, “It is not by planting trees or subsidizing tree planting in a desert created by politicians that the government can promote . . . industry, but by refraining from measures that create a desert environment.”

The Columbia supporters of the EEZ, the same group that supported the recent TIF projects and the downtown Columbia CID, say that other cities have used these tools with great success (for example, an editorial in the Columbia Daily Tribune, Aug. 13, 2009). In this, they are completely wrong. They might as well stare you in the face and tell you the sun rises in the north. The City of Saint Louis has been using urban redevelopment tools such as Enterprise Zones and many others for half a century. How has it worked out? Mapping Decline, a 2008 book by Colin Gordon, documents the decline of the city of Saint Louis. The book’s research is exhaustive. The dominant theme is the use of urban renewal tools and tax subsidies (including EEZ) – and their absolute, total failure. From the conclusion:

The overarching irony, in Saint Louis and elsewhere, is that efforts to save the city from such practices and patterns almost always made things worse. In setting after setting, both the diagnosis (blight) and its prescription (urban renewal) were shaped by — and compromised by — the same assumptions and expectations and prejudices that had created the condition in the first place.

I can already hear readers in Columbia saying, “But we’re not Saint Louis.” You are right, you are not; so do not follow a path that will make your city repeat Saint Louis’ mistakes. It is one thing for Saint Louis to try to these projects and have them fail. It would be even worse for a city like Columbia to follow that example with the knowledge that the entire process has failed. At least the trailblazer who takes the wrong path has an excuse.

David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.