If you read the comment section in my previous post, you will gain insight from a conversation I had with Roger Musick. Roger is a highly respected business leader in Mitchell, as he rightfully gained the reputation as CEO of the very successful Innovative Systems. Roger is Treasurer of the Mitchell Area Development Corporation and also a South Dakota Chamber of Commerce board member. It should also be noted that Jacquelyn Johnson, wife of Dusty Johnson is Vice Chair of the Mitchell Development corporation, as it was on a post on Dusty where Musick first made a comment.
I will start with a comment Roger made that was critical of my position regarding public/private partnerships:
I am and have been for many years proud to be one of people serving on the boards you call “economic development special interests”. I have not seen any what you call “private projects funded with public dollars”. You must think that all the board members, elected officials and news people are unqualified to allow this to happen.
I think it is more likely that when the majority of the elected officials do not agree with you then you believe they are evil and corrupt. I would remind you that two good people can disagree.
I believe the fundamental problem in the US is the radical right and left and far to much very poor one sided reporting that pretends to be news.
I also believe we have far to little fact checking. I understand freedom of speech but when the speech is not based on fact it needs to be pointed out.
After I gave Mitchell's Cabela's store as an example of public funding going to a private entity, Roger responded with this:
Steve, you caught me, I should have include the word “their” so my quote would read “their private projects funded with public dollars.” You are right that sometimes public dollars are used to help make private projects possible for the benefit of the public but when you imply that those public officials making the decision are somehow benefiting is where you are wrong. I could not have picked a better example myself then Cabela’s. Cabela’s was from out of town and to my knowledge no public official benefited from Cabela’s moving to Mitchell. In this case we did provide some public or MADC money to encourage Cabela’s to build a store in Mitchell. I don’t know the exact numbers but I think everyone would say that was one of the best investments Mitchell has ever made. I would estimate the dollars Mitchell furnished to Cabela’s have been returned to the City many times over by the increase in sales tax alone not counting all the businesses that have grown up around Cabela’s that pay property and sales tax.
It is not my intent to marginalize you in any way. I like people who read and have their own ideas. What I am trying to provide you is the insight from someone who has been deeply involved in economic development and private/public partnerships in Mitchell for many years. There are usually 10 to 20+ people working together, some from the public sector and some from the private sector. They are working together for the benefit of Mitchell. They are all smart people that have Mitchell best interest in mind and would not tolerate any corruption or even the appearance of corruption. I have never known 10+ people that would be able to keep a secret if there was corruption. They often do not publicly defend themselves when they are accused of wrong doing because it just creates more publicity that they don’t want. The sad fact is sometimes people don’t run for public office because they don’t want the publicity and to always have to defend themselves.
You state “the fact that public/private partnerships often times result in public dollars getting into the hands of private sector special interests, thereby creating a system of legalized corruption.” I agree this is possible if the public and private officials are all corrupt and the news and legal systems are sleeping. It is also possible that a public body or private company can be corrupt but we don’t jump to the conclusion that they are corrupt just because it is possible. The public and private organizations that I have been involved with all have a conflict of interest rule and when there is a possible conflict of interest that person is not involved in the decision. If we eliminated anyone that could possibly have a conflict of interest from our public bodies and boards we would have almost no business or leadership experience.
I decided to respond with a separate post instead of a comment in order to detail some research on the Mitchell Cabela's store. I Googled up the Ball State research after finding it mentioned on a news report that brings forwards some of the concerns I have in regard to government involved so-called economic development. It questions, "Why Have So Many Cities and Towns Given Away So Much Money to Bass Pro Shops and Cabela's?" The report begins with this:
When Bill Winkler opened his small archery shop, he was prepared to compete against businesses large and small – but not against a government-financed competitor.
"The day Bass Pro opened here in Bossier, the number of arrows I sold dropped off by 50 percent," says Winkler.
A Bass Pro Shop opened in Bossier City in 2005 after city officials promised to give the retailer $38 million to pay for the construction of the 106,000-square-foot store in this Red River community.
Such deals are commonplace.
Both Bass Pro Shops and its archrival, Cabela’s, sell hunting and fishing gear in cathedral-like stores featuring taxidermied wildlife, gigantic fresh-water aquarium exhibits and elaborate outdoor reproductions within the stores. The stores are billed as job generators by both companies when they are fishing for development dollars. But the firms’ economic benefits are minimal and costs to taxpayers are great.
An exhaustive investigation conducted by the Franklin Center for Government and Public Integrity found that the two competing firms together have received or are promised more than $2.2 billion from American taxpayers over the past 15 years.
"Retail is not economic development. People don’t suddenly have more money to spend on hip waders because a new Bass Pro or Cabela’s comes to town," says Greg Leroy, executive director of Good Jobs First, a non-partisan economic development watchdog group based in Washington, D.C. "All that happens is that money spent at local mom and pop retailers shifts to these big box retailers. When government gives these big box stores tax dollars, they are effectively picking who the winners and losers are going to be."
Cabela's was what began the development along Mitchell's I-90 corridor. Then came Walmart and Main Street business, the north-side mall, and Kmart all took major hits.
The report also mentions the Mitchell Cabela's store:
In one of the more bizarre aspects of its agreement an economic development corporation established by Buda owns about 20 percent of the 185,000-square-foot store and one-third of the land on which it stands. Which means that a 30-foot artificial mountain, with taxidermied mountain goats and other wildlife, a 60,000-gallon, fresh-water aquarium and an exhibit of life-size African game animals all fall under the public ownership umbrella.
Reportedly, Cabela's will save $4 million in property taxes over the next 20 years because those non-revenue generating areas of the Buda store are publicly owned. This, of course, deprives the city of potential revenue and gives the store an advantage over competitors.
This type of public ownership of store amenities is a standard part of many of the development agreements Cabela’s enters into in communities ranging from Hamburg, Pennsylvania, to Mitchell, South Dakota. The retailer’s stuffed animal displays and aquariums are labeled as "museums" and its showrooms for used firearms are now called "gun libraries" as a sort of legal fig leaf to justify public ownership of the retailer's amenities.
"It’s almost like they are out to take advantage of the rubes,” says Michael Hicks, an economist at Ball State University in Muncie, Indiana. "Often these small town city councils aren’t the most sophisticated in analyzing an economic development proposal."
Convincing politicians that the store will be a tourist mecca is a critical part of Cabela's' and Bass Pro's spiel, says Stacy Mitchell, author of Big Box Swindle.
"When they go to these city councils they want to convince them that people will travel hundreds of miles just to shop at that store. They want them to believe it's not just a store, it's a tourist attraction," says Mitchell. "But just look at a map – these stores are everywhere. Why would you travel to one of these stores, if there is one in your hometown?"
The report mentions the research, that includes the Mitchell Cabela's store, that shows "no net gain in jobs":
In fact, Ball State economist Hicks studied the economic impact of seven Cabela's stores that opened between 1998 and 2003 and found that despite millions of dollars in economic development incentives given to the retailer, there had been no net gain in jobs detected in the communities one year after the stores opened.
"It’s not like folks suddenly have more money to spend on hip waders once a Cabela's opens up. What generally happens is that instead of buying those hip waders from an independent business, they go to big box store," says Leroy of Good Jobs First.
Cabela's CFO even admits the economic benefit is not there:
Cabela's Chief Financial Officer Ralph Castor says the construction of one of its "destination retail" stores can cause people to change their shopping habits by getting them to cross a city line or even a state border.
He notes that Cabela's' store in Wheeling, West Virginia, attracts customers from Pennsylvania and Ohio. But the city of Wheeling abuts the Ohio border and is only 11 miles from the Pennsylvania state line.
Castor concedes that it is a matter of debate whether municipal or state retail subsidies benefit the U.S. economy as a whole.
Cabela’s’ own data indicates the customer base of its stores primarily is people living in the communities where the stores are located.
With that I mind, I would like to bring up another comment made by Roger Musick:
If you were negotiating for Mitchell what would you think of the headlines “Steve Sibson saves Mitchell $X dollars but Cabelas decides to locate in Chamberlain.” Mitchell would have been very “penny wise and dollar foolish” if we had not offered the small public incentives and Cabelas would have built the store in another town. Often the public incentive is a small indicator to the company showing that the City is very excited about the new company. I think most people in Mitchell would say the small Cabelas incentive were the best investment Mitchell ever made. Maybe second to the water pipeline.
Based on the above research Cabela's would be lest likely to have chosen Chamberlain over Mitchell because Mitchell has a much bigger customer base, and Cabela's CFO admits, "the customer base of its stores primarily is people living in the ciommunities where the stores are located.". Roger's statement also supports the point that Cabela's was going to expand its retail operations anyway, so the question is, would Cabela's expanded its business without the public subsidies?
And if the goal is more jobs, as what is accepted as the true results, then the Ball State research says taxpayers are not getting what they are paying for:
The debate regarding the effectiveness of regional tax incentives and economic development competition is primarily confined to the policy arena, with research questions having mostly been resolved. Gabe and Kraybill (2002) test incentives on firm growth in over 350 recipient businesses in Ohio, finding no association between incentives and employment growth. Fisher and Peters‟ (2001) review of the literature on tax incentives report little evidence that the incentives lead to employment growth. More recently LaFaivre and Hicks (2005) estimate the impact of Michigan‟s state tax incentive program for manufacturing and warehousing establishments from 1995-2003. They find that the considerable state tax incentives associated with the MEGA program yielded no discernable impacts on the targeted industries. These authors did find that the tax incentives increased construction employment in the affected counties, but the cost of each new construction job was roughly $130,000 over an 18 month period. These studies leave little doubt regarding the efficacy of state and local tax incentives designed to increase employment and wages in targeted industries.
Roger was wrong regarding my positions on economic development policies not being based on "facts". The fact is that economic development via governmental subsidies is not truly economic development. The fact is some benefit from economic development projects, but not the working class and most taxpayers. The business leaders reap the benefits, which funds are provided via the taxing authority of government. This is simply a transfer of wealth from the blissful servants (and o few of us not s0 cherry taxpayers) to the master class that are found on Chamber boards.
We no longer have elected governmental entities at the local, state, and federal levels that represent the people. Instead we have oligarchies that form informal public/private partnerships on Chamber and Development boards that end up moving public dollars into the pockets of private entities. The general public benefit little, if at all. The big winners are the crony capitalists.
This happens whether it was intended or not. You don't have to be a corrupted individual to participate. You just need to become well liked among those who are board members of the Chamber and the various Development boards.
If what I described is not intended by those who are making the decisions, then my efforts to bring the truth should end such actions by making this system of legalized corruption illegal. Based on my experience, there is way too much money and power that stands in the way of making that happen.
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