Citizen Reporter Proposes New Economic Development Message

December 17, 2013

Inside Insight

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money down the drainHere in South Carolina, we’ve created a monster. It’s called government-driven economic development.

The ugly monster raised its head in a cozy public/private partnership relationship for the first time when the South Carolina Budget and Control Board voted in February, 2010, to give Oconee County the authority to issue up to $5.5 million in special source revenue bonds to pay for the infrastructure for student housing, retail and commercial projects for Pointe West, a student housing development near Clemson University. The developer of Pointe West was given $3.5 million from the Oconee taxpayers. While the buildings were going up, the developer returned to the County Council and said the project needed to be changed because he was having a problem in getting additional financing. Rather than the county receiving property tax money from Pointe West housing to help pay for fire services, sheriff services, solid waste, etc., the property tax money was diverted to pay back the $3.5 million special source revenue bond while the property owners took a free ride on taxpayers’ backs while they took county services without payment. Just when county government become a lending and financial institution isn’t clear.

The monster again made its appearance in Oconee when the Hampton Inn of Seneca was built.  Taxpayers have handed over $2 million in cash and another $1 million in tax incentives, and so paid for 30 percent of the project’s cost.

How many jobs were brought to the County and the City of Seneca with such a grand deal? One hundred? Fifty? Nope. Just 22. That’s a lot of money for 22 jobs.

Did the county and city do this deal because Oconee County and the City of Seneca had no hotels? No – the city already had three. Money that could have been spent on roads or a fire station was instead handed to a hotel chain so that it could compete against the three existing hotels in Seneca, run by taxpayers who are now subsidizing their own competition.

Our local government leaders have used these “partnerships” to give grants, tax favors, and other special deals to accomplish what the unaided private sector could accomplish at no cost to the taxpayer. Can anything be done? Yes, but it won’t be easy.

First: state, county, and local governments need to take care of their responsibilities. They need to take care of their core functions – roads, bridges, law enforcement – and leave investment banking to investment bankers.

That step alone would allow us enormous freedom. We could build a road without going into debt and forcing the next generation to pay it back with interest, and we could be talking about eliminating the gas tax rather than raising it to 13 percent.

Second: these governments should even out their tax codes. Some companies are now getting breaks simply for expanding – as if they would have no incentive to expand without a special tax favor – while businesses that have been here longer get no breaks.

All this happens in the name of “economic development.” But there’s a far more powerful economic development message we could send, if we wanted to. It’s this:

“In South Carolina, we have the lowest corporate taxes, the lowest real estate taxes, the lowest sales taxes, no state income tax, and the least onerous regulatory code in the nation. We won’t be able to give you any special incentives, but if you come here, we can give you a 100 percent guarantee that your competitors won’t be able to get ahead by using government favors. You’ll be free to compete however you want, and pay less in taxes than you will anywhere else in the country.”

Excluding politicians and public officials in the “economic development” sector, who could possibly object to that message?

Editor’s Note: Brit Adams is a Nerve Citizen Reporter who lives in Seneca.