3. Competition without a Level Playing Field: The developer who cannot tap that taxpayer funding source is at a clear competitive disadvantage, due to his higher cost of capital. When I served as a Lehigh County Commissioner, we saw a project outside of the NIZ that a developer had to completely rework because he could no longer compete with the office rents available in the tax-subsidy zone. His proposal for a residential development did not meet a market need, but was the best he could do after politicians changed the rules mid-game — changed the rules not only to favor his competitors, but actually to fund them.
4. Decisions without Information: Meddling in the market by wise civic panjandrums, even if their motives were wholly altruistic, cannot keep pace with the millions of decentralized daily decisions in the any given marketplace. That’s why government subsidies inevitably lead to “unintended consequences.” They may be “unintended,” but they’re not unanticipated. Perhaps it would be better to call them “natural consequences ignored (or glossed over) by interested parties.” Each person in town thinks she knows “what this town needs.” However, give her monarchical powers and the Queen would soon find that her town is a complex, adaptive, rebellious, living organism that will turn her glorious solution into a wealth of new problems. Of course, if the solution, nevertheless, benefits the Queen and harms others, this is not a problem for Her Majesty.
The carnival barkers who sell such taxpayer-subsidized incentives typically crow about the triumph of “public-private partnerships.”
More often than not, the benefits of that triumph redound to a close circle of interested parties — leaving the taxpayer holding the now-depleted bag.
*[Full disclosure: The state senator and several of the developers contributed to my campaigns for county office when I lived in Lehigh County, although county government has no influence over the NIZ.]