Surprise!

Client control is so difficult. 

The cities have infuriated legislators by giving multi million dollar incentives for retail stores to locate within their borders.  After all, the cities always claim that if they don't get every dime they are due from the state, they will be forced to lay off the police officers, fire the firemen, unplug the preemies and close the libraries.  Then some company from back east offers to build, say, a bass boat dealership and the mayors outbid each other to offer it $50 million in tax rebates.  Legislators have sworn to end the giveaways and the cities have promised to police themselves...if they can only have one more chance. 

The plea from the cities is working.  Rep. Rick Murphy and Sen. Ken Cheuvront have sponsored a bill to eliminate the giveaways but the bill is stalled in the Senate.  All the cities have to do is run out the clock.  Then...Surprise!

Last week the City of Surprise threw a wrench in the plans. 

The city of Surprise is facing criticism over a $240 million sales tax rebate it is giving Westcor to build a vast retail, office and residential project on farmland next to the planned Loop 303 freeway.

Just when that controversy was starting to die down, Surprise struck again. 

The city of Surprise is giving a tax break to a Michigan auto company that plans to develop a Toyota dealership and another auto facility along the planned Loop 303 freeway.

The United Auto deal is separate from a $240 million tax rebate Surprise is giving Westcor and its development partners to build Prasada, a sweeping project that includes shopping malls, office and medical buildings and thousands of houses.

That's right, let's pay Westcor $240 million to build a mall.  After all, why would a store want to locate in the fastest growing state in the nation?  Obviously they would not come here unless we paid them.  And what about the malls that have been here for years?  Maybe the cities should give a couple hundred million to Metro Center. 

Or maybe the Legislature should recognize that the cities need adult supervision.

Comments

[Joe]

What, you mean like a nanny state or something?

[Ken]

Greg, I think you meant "threw a wrench" -- small difference but it will make it easier to read. Thanks for your great work with this blog. It is often useful info that we don't see anywhere else (and written with insight and humor).

[PaulS]

Greg,

Actually, cities like Surprise need adults in leadership. That's one of the reasons I'm running for city council in Surprise.

While I agree that we need the jobs that Westcor's Prasada development will bring, I agree that there's no reason to give away the farm with these kinds of incentives when Westcor should be chomping at the bit to locate here. After all, the population of the city went from 30,000 on the 2000 census to an unofficial estimate of 110,000 today.

Frankly, that suggests to me that the city hasn't done as great a job of selling itself as it should. Think of it this way - what does it say about Surprise if we have to give a huge tax incentive like this? "Hey, we got nothing to offer except tax breaks"? Is that really what we want to project?

I also believe that Surprise needs to be aggressive in enticing companies to locate here and to build businesses here. After all, with a rapidly growing population, we do have something to offer. THAT'S what we need to sell - not giveaway tax incentives that will, ultimately, be paid for by the taxpayers of the city.

I do know that Westcor will front the money for infrastructure improvements, to be paid back once there is significant retail space occupied. That's OK, as far as I'm concerned - let them take the risk of building streets and putting in water and other infrastructure elements, and we'll pay them back if and when it starts showing results.

But tax breaks on top of that? Baloney! My goal is to keep taxes low for the residents of the city. To do that, we need to stop asking them to pick up the tab for development that would happen anyway. And to make THAT happen... we need leaders who aren't willing to say, "we'll give you a cookie if you play with us."

[BobH]

The problem with incentives of this type, and the reason a law is needed, is that the cities are caught in a sort of prisoner's dilemma: every city is afraid that if they don't offer incentives, their neighbor will. If Surprise doesn't offer a hot deal, then Peoria might. It's not at all an irrational fear, of course, and it allows the developers to set up an auction.

[ron]

Corporate welfare continues apace.....

[brian]

Greg, cities view their sales tax base as crucial to their well-being, and this is for good reason because they have to deal with seat-of-the-pants, revenue constraining bills that can come out of left field from this Legislature at any time. Many people here talk about what a strong and growing market this State is, and it's true. But that's because of hugh population growth, and that means demand for all types of public facilities and services is busting at the seams.

So, how do cities deal with this and mute the criticism about commercial tax rebates to protect a tax base? The answer is that they get serious about negotiating Shared Revenue Agreements with their neighbors. It's a win-win situation that puts an end to tax base giveaways. And, regardless of which side of Scottsdale Road a developer decides to put the next mega-commercial development on, as an example, Phoenix and Scottsdale need not be locked in an all or nothing battle. These agreements have been negotiated in many cities across the country with enlightened municipal government. Maybe we need that here.

[ron]

Brian, the key words in your comment are: "enlightened municipal government."

I wouldn't hold my breath waiting for 'enlightened municipal government.'

But hope does burn eternal, doesn't it?

[Nate Nesbit]

Business Journal publisher Don Henninger editorialized on Friday:

“I understand concerns over cities doling out incentives to spark development, but I have a tough time getting on Surprise for cutting a deal with Westcor to launch the Prasada project, which is likely to be city’s economic engine for most of our lifetimes.

The numbers are big, no doubt: $240 million to cover infrastructure costs. But so is the return: a 3,335-acre multipurpose development with retail, office, residential and a hospital on the drawing board.

When you get right down to it, it’s the building of a new city. Not all incentives are created equal.”