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Corporate Welfare / Subsidies

Give An Inch, Not A Mile

By Kacie Barnes (Galbraith) on Oct 15, 2012

We all know the old saying, “if you give an inch, they’ll take a mile.” Cities seem to skip the “inch” part and give commercial developers a mile right away. What if they thought about ways to only give an inch? Better yet, what if they did not “give” anything, but simply performed the necessary roles of government as quickly and inexpensively as possible?

Many cities conduct economic development with offers of tax incentives to commercial developers in hopes of bringing them to their neighborhoods. Offering these subsidies is often bad practice for many reasons.  Discounted taxes for the select few means marginally higher taxes for everyone else.

Last week, the Kansas City Star reported about property developer Nathaniel Hagedorn’s success in placing a tenant in a 200,000-square-foot building in Riverside, Mo. Riverside did not provide subsidies or incentives to attract this business. The city’s government simply did its job in an efficient and business-friendly manner.

Hagedorn reported that Riverside was the only city in the metro area that took just two weeks to provide all permit approvals for the building project — a valuable feature for businesses. Very few businesses want to sit around and watch the leaves turn while they wait to open a new space. Time is money.

A few months ago, the Society for Industrial Office Realtors (SIOR) and a group of real estate students at the Bloch School of Business at the University of Missouri-Kansas City completed a study of the typical time and cost of having a commercial real estate building project approved. They analyzed 17 municipalities in the Kansas City metro area and found that the average length of time to approve a project is about nine and one-half weeks. This study is very interesting and I hope someone does similar work for Saint Louis.

Shortening the time it takes to approve developments is a simple fix cities can make to improve their business climate. Instead of pulling out the big guns with popular programs like TIF (Tax Increment Financing), TDD (Transportation Development District), and Community Improvement District (CID), municipalities could make small changes that would benefit all new businesses, not just a select few.

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Kacie Barnes (Galbraith)

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