Joe Minicozzi and I enjoying some subsidized tacos.

Joe Minicozzi and I enjoying some subsidized tacos.

Modern economic development practices are the result of some incredibly perverse incentives. As a society, we lament short-term thinking yet, again and again, we demand of our economic development staff: what have you done for me lately? Where is the growth?

In what has become a somewhat famous case study -- at least in the circle of people working on these issues -- I wrote years ago about the Taco John's in my hometown. This is a remarkable example because, not only did the project lower the overall tax base of the city, it did so with a 26-year tax subsidy. We made ourselves poorer and paid a generation's worth of revenue for the opportunity.

Yet our local economic development team still cites it as a success story and works to replicate the result elsewhere.

Sheila Haverkamp, Brainerd Lakes Area Economic Development Corp. executive director, and Chris Robinson, BLAEDC economic development officer, have both watched the changes in west Brainerd. Their newly renovated offices and those of the Brainerd Lakes Chamber of Commerce are accessed from Highway 210 just west of the Mississippi River in the Tyrol Hills Shopping Mall near the remodeled Ace Hardware.

"I think the westside has really rejuvenated itself," Haverkamp said, noting the momentum is visible. She pointed to earlier work to construct a new Taco John's restaurant on Highway 210 in Brainerd's east side and even renovations at McDonald's.

Why? They can do the math. They are thoughtful people. They care about this place. What do they see here that we don't?

I think the answer is simple. They are responding to two things. First, they need to do something each year -- have some success -- that they can put in their annual report. It's not good enough to say that they planted the seeds for long term prosperity. Local politicians and power brokers demand results. Now! This creates a lot of pressure to make things happen.

The second follows the first directly: shiny and new looks like an improvement over the old and blighted. It feels like things are getting better. We can see it. It's real to us.

A change in accounting standards will force cities to report the amount they give away in tax breaks. This will be as much news to city officials as it will be to taxpayers.

Posted by Strong Towns on Wednesday, September 16, 2015

From that same article:

In recent weeks, Royal Tire demolished its former building and secured development plans for tax-increment financing with the city of Brainerd to construct a new facility at the site. A smaller, more efficient building will be constructed at the same site on Highway 210 with green space and off-street parking.

"It will be a nice catalyst for economic development and redevelopment near Sixth and Washington (streets)," Robinson told the city council during a meeting in June. "It will eliminate a blighted building, create additional jobs and would also increase tax base in the city."

It will be "efficient" -- one of our American happy words -- and eliminate blight. Our minds shut off at this point and just accept the assertion of additional jobs and more tax base with a smaller building and larger parking lot, despite what the data shows on other, similar attempts.

"It feels like the success is starting to roll and our community will be on a line for increased growth in the area," Haverkamp said.

We had some passionate discussion over on Facebook about the GASB requirements for tax subsidy disclosure. Some were defensive about subsidies. They would say things like we have to do them because everyone else is and it creates jobs and growth in other places that can't be directly measured.

There is no real counter-argument for this because these are not arguments based on information. They are based on beliefs. Feelings.

And as long as we can find the cash flow to instantly turn the old and blighted into the shiny and new, it is going to be the rare, sophisticated and thoughtful place that can resist the temptation to do so.

Let's take a Strong Towns approach instead.

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