Should the city create a business incentive fund??

[metro]

Fund sought to lure new employers

By Steve Lackmeyer
Business Writer

Oklahoma City voters may be asked this winter to support creation of a $75 million economic development fund as a replacement for depleted federal grants used to lure new employers.



The General Obligation Limited Tax bonds — called GOLT bonds — if approved by the Oklahoma City Council, would increase a bond issue vote proposed for Dec. 11 to a total of $830 million.

Assistant City Manager Cathy O'Connor told the council Tuesday the city has "exhausted” traditional sources of economic development incentives just as the city has become a top contender for new employers considering expansion or relocation in Oklahoma City.

"We have many more leads and prospects that we're visiting with than I've seen in the past eight years I've been doing economic development with the city,” O'Connor said. "We're working with several prospects out there on the possibility of coming to Oklahoma City. It's a very competitive environment, a very competitive marketplace to get the investment in your community.”

Roy Williams, president of the Greater Oklahoma City Chamber, urged the city council to add the GOLT bonds to stay competitive with other cities across the country.

"No one philosophically likes incentives,” Williams said. "But unfortunately, we can't ignore the reality that economic incentives are important to getting a development. ... In reality, Oklahoma has slid on the scale of being competitive in luring these projects.”

Williams said special tax elections, such as those attempted in the early 1990s to lure airline maintenance plants, are no longer sufficient in an age of fast-moving deals.

"We would be the first major city in the United States to do this,” Williams said. "Cities elsewhere have done this in bits and pieces, but none have done this to this extent. We would be the first, best and the only city in the U.S. to have a strategic fund to address jobs and economic development.”

City council members questioned whether a countywide vote should be considered or whether neighboring suburbs should be included in the initiative. Williams said a change in state statutes would be needed to allow Oklahoma City to partner with suburbs in "economic districts.”

Ward 4 Councilman Pete White recalled Oklahoma City once believed it only could attract new employers by throwing cash at them. He reminded Williams that the failure of approved sales taxes to lure airline maintenance centers led to the city's decision to invest in itself with the 1993 Metropolitan Area Projects and the follow-up MAPS for Kids overhaul of schools.

"I don't want us to ever go back to that pre-MAPS idea that the only way to get business to come to Oklahoma City is to buy it. Only by reinvesting in ourselves did we get to where we are today. I don't want us to lose that perspective.”

Williams agreed with White — but added that incentives have remained a key component in luring employers such as Dell and Quad Graphics.

Williams said hundreds of Texas cities have established their own incentive funds that, combined with state matches, top what can be offered by Oklahoma City. He said Oklahoma City's transformation is attracting interest from companies elsewhere, but the city still must compete with what is being offered by other markets.

"Companies are always looking at how to close a sale, whether it's rebates, pricing or anything else,” Williams said. "And that's what this is — it's about making the sale. ... This just makes us competitive.”

Including the economic development fund on the ballot could translate into an increase in either the length of the bond issue or in the property tax level to 18 mills, from what now stands at 16 mills. In the past three bond issue elections, the city has been able to promise a "yes” vote would result in no increase to property taxes.

An increase from 16 to 18 mills would result in an increase of $248 to $279 a year for a $150,000 home. An increase in the length of the bond issue would delay when the city could introduce a new bond proposal.

The city council will decide in October whether to include the $75 million in the bond issue election.

"I'm not hearing anyone here saying they are not in favor of job development,” Mayor Mick Cornett said. "I think we're in a consensus on that.”

Related Information
HOW THE BONDS WOULD WORK
For the past decade, Oklahoma City has relied mostly on state and federal funding to lure employers. Options included federal Community Development Block Grants, state incentives including the Quality Jobs Act, tax abatement and tax exemptions, and local incentives in the form of job creation grants, land assembly and infrastructure improvement.
Federal grant funding has been reduced the past few years, and city officials say they've "exhausted” what funds remained with projects ranging from the Dell Business Service Center and American Indian Cultural Center along the Oklahoma River, and renovation of downtown's Skirvin Hilton Hotel. If the "GOLT bonds” are approved by voters, Oklahoma City City Manager Jim Couch said $10 million in bonds could be sold at first, and additional bonds would only be sold as needed. Couch said a trust authority, similar to one that oversees expenditures of MAPS for Kids sales taxes, would control the GOLT bonds. He expects the proposed authority and its members would be announced prior to the Dec. 11 election. Couch said guidelines would govern how the bond money could be used, and that it would not be used for employee or corporate retention.

The incentives would be capped at $75 million.



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Hits and misses:
Oklahoma City has used incentives to spark several economic developments the past decade. Some deals brought new jobs and development to town, while others fell short of expectations.
Hits:

•$2.7 million was provided to Quad Graphics for assembling land for a printing plant. The plant employs 430 people.

•$22 million was provided toward the $54 million renovation of the Skirvin Hilton Hotel. The 96-year-old landmark reopened in February.

•$24.2 million was provided toward land assembly, infrastructure and job creation grants for the Dell Business Service Center on the Oklahoma River. The company employs 2,200.

Misses:

•$2 million in federal Community Development Block Grant funds was provided to Tower Tech in 1999 to cover financial losses following the company's relocation from Chickasha to Oklahoma City. Then-Mayor Kirk Humphreys argued against the grant citing the company's woes and warned the grant money could be lost. The city council voted for the grant anyway. The company later filed for bankruptcy and the city lost the federal funds.

•The city agreed to five years of ad valorem tax rebates for construction of a Corning fiber optics plant in 2000. The company planned to employ up to 1,000 people. The company scrapped the project after constructing a steel superstructure, and the property remains unfinished today.

[kmf563]

I'm not okay with it. Why should we have to pay people to come here? Use that money to fix the problems or reasons they would give for NOT coming here in the first place. I don't mind giving my taxes to making the school system better, teacher raises, health care, roads, etc. but I don't want to work my butt off to pay someone else to work! Just my opinion.

[betts]

I'm all for an incentive fund if we are competing for business relocations against other similar cities with incentive funds and losing. Also, we don't have the ocean or mountains here, nor do we have perfect weather, so it's possible we have to do a little extra to compete.

[Easy180]

I'm all for an incentive fund if we are competing for business relocations against other similar cities with incentive funds and losing. Also, we don't have the ocean or mountains here, nor do we have perfect weather, so it's possible we have to do a little extra to compete.

I'm with betts...We really don't have anything that would just hit a company looking for relocation over the head and make them say that's the only place we want to be

We might as well just admit that OKC likely needs to overpay to compete with cities that do have natural beauty or just simply have more relocation appeal for their employees

Hopefully that will no longer be the case 10 years from now, but for now this fund makes complete sense

[Midtowner]

I'm for it so long as the fund cannot be used to retain companies already in the city. Otherwise, I could easily foresee that OKC's existing businesses would pull a Saint Anthony's -- in other words, threaten to leave/move if they aren't paid a handsome bribe to remain.

I'd extend the deal to include subsidiaries or partly owned entities of Oklahoma companies as well. You may recall the stink of the Bass Pro Shops deal, E.K. Gaylord, of course had a substantial stake in the Bass Pro operation. I'm sure he benefited handsomely due to Oklahoma City's generosity regarding that boondoggle.



As long as the fund could only be used to lure in NEW business, I'm for it.

[NE Oasis]

I'm for it so long as the fund cannot be used to retain companies already in the city. Otherwise, I could easily foresee that OKC's existing businesses would pull a Saint Anthony's -- in other words, threaten to leave/move if they aren't paid a handsome bribe to remain.

I'd extend the deal to include subsidiaries or partly owned entities of Oklahoma companies as well. You may recall the stink of the Bass Pro Shops deal, E.K. Gaylord, of course had a substantial stake in the Bass Pro operation. I'm sure he benefited handsomely due to Oklahoma City's generosity regarding that boondoggle.

As long as the fund could only be used to lure in NEW business, I'm for it.

Sign me on as a supporter too, with Midtowners restrictions and adequate oversight. I support this at the county level since that gives MWC, Spencer, Edmond, etc a stake in the risks and rewards. We as a society depend too much on federal grants, which always come with strings attached.

[metro]

Not to mention this doesn't necessarily have to cost us taxpayers more in property taxes as was mentioned in the article. We could vote for it to be repaid partially this way, but we can also and if approved, probably won't be repaid through property taxes. Heck, I'd even support raising the hotel/motel tax yet again, even though we just did about 2 years ago. Our hotel/motel tax is still wayyy below the national average, and yet it doesn't cost locals a dime unless you stay in a local hotel/motel. It's mainly paid by visitors, and in turn benefits the local economy, hence the ongoing improvements to state fair park. If we'd raise it again now, (we have the room to almost double it and still be on par with the national average), and we'd have millions to fix roads, beautify highways, build a tourist attraction, build new highways, etc.

[kmf563]

Not to mention this doesn't necessarily have to cost us taxpayers more in property taxes as was mentioned in the article. We could vote for it to be repaid partially this way, but we can also and if approved, probably won't be repaid through property taxes. Heck, I'd even support raising the hotel/motel tax yet again, even though we just did about 2 years ago. Our hotel/motel tax is still wayyy below the national average, and yet it doesn't cost locals a dime unless you stay in a local hotel/motel. It's mainly paid by visitors, and in turn benefits the local economy, hence the ongoing improvements to state fair park. If we'd raise it again now, (we have the room to almost double it and still be on par with the national average), and we'd have millions to fix roads, beautify highways, build a tourist attraction, build new highways, etc.

I vote for that. I think that's a great idea and could work to everyone's benefit.

[Kerry]

Oklahoma should join Texas, Florida, Tennessee, and 7 other states and abolish the state income tax and replace it with a state sales tax. That would go a long ways towards bring in new companies.

[metro]

Yes, Kerry, but we should not join those states and have a much higher property tax.

[Midtowner]

The money for all these great civic projects has to come from somewhere. We can only tax tourists and cigarettes so much.

Also, the biggest problem as I understand it with abolishing one tax is that we have to approve another one. To add a tax requires a vote of the people. I'm not so sure about the abolishment of one.

Bills can only embrace one subject.

Someone correct me if I'm wrong, but assuming both of these bills went to the people, we could end up abolishing the income tax but not creating a new tax to replace it.

[Kerry]

Not sure how it would work from a legislative standpoint. I do know this though, the state income tax is the #2 reason I don't live in Oklahoma. For those who are interested, I am married to reason #1.

[betts]

Not sure how it would work from a legislative standpoint. I do know this though, the state income tax is the #2 reason I don't live in Oklahoma. For those who are interested, I am married to reason #1.

They get it from you somehow, though. If it's not income tax, it's property or sales tax. My father in law was paying twice the property tax in New York twenty years ago that we are paying now, and his house was smaller than ours and in a less desirable neighborhood.

[Midtowner]

Yeah.. property tax can be a real killer if you run a business. Especially in fast-growing cities like OKC. Income tax can always be predictable, but sometimes, if you own a cherry piece of property, your property tax can destroy your business.

I know a lot of fraternity houses in Austin, for example are currently looking at having to sell their lots which some have occupied for close to a century due to property taxes in the tens or hundreds of thousands of dollars.

[metro]

Kerry, exactly as betts and Midtowner have pointed out. I wouldn't let the state income tax stop you from moving to Oklahoma, or anywhere for that matter. As they mentioned, you're paying for it somehow elsewhere whether it be a much higher property tax (which still affects you if you rent, a landlord has to cover his costs and hopefully make a little something). If not property taxes, you're paying a state sales tax or something. State's don't get funded for free, they'll get it out of you one way or another. And a perfect example as Mid had said, property taxes are literally putting business owners out of business by the day in other "progressive" states because they can't afford the exorbant inflation of their property taxes every year. I like the current system Oklahoma has regarding taxes.

Mid, I do agree/disagree with you on one thing you mentioned above. I think it was in regards to my idea of raising the hotel/motel tax. While I agree with you that we can only tax tourists so much, despite the fact we recently raised this tax, we're still about half of the national average. I believe we raised it to 5.5 cents on the dollar. The national average is around 10 cents on the dollar. We're not talking about alot of money to a hotel guest, however multiply this by thousands of rooms in OKC a night times 365 days a year and that equals alot of additional revenue for OKC that most tourists won't even know the difference.

[Midtowner]

adequate oversight

That's really key. Such a fund would probably have to be managed by some sort of public trust.

You may recall back in the late 70's/early 80's, we had the Oklahoma Industry Authority which was essentially the same sort of creature as that which you describe here. The fund was administered by the old money big businessmen in the city. Funds were used largely for the benefit of those same owners. Even today, the old downtown underground is a reminder of those days. That underground was built with taxpayer money to provide a benefit to the buildings these guys owned.

Those guys really thought they were above the law. They refused to cooperate with the Attorney General's open records requests, they were the ones who promised GM that they wouldn't have to pay property taxes (when clearly they didn't have that kind of authority), unfortunately, one of their more influential members, E.K. Gaylord saw to it that Mike Turpin defeated the Attorney General in the primary. Otherwise, we'd remember E.K. Gaylord and many of his ilk as criminals who had to spend time in prison rather than the heroes of industry who are celebrated today.

The history books are written by the conquerors, eh?

[Kerry]

[QUOTE=metro;109809]Kerry, exactly as betts and Midtowner have pointed out. I wouldn't let the state income tax stop you from moving to Oklahoma, or anywhere for that matter. As they mentioned, you're paying for it somehow elsewhere whether it be a much higher property tax (which still affects you if you rent, a landlord has to cover his costs and hopefully make a little something). If not property taxes, you're paying a state sales tax or something. State's don't get funded for free, they'll get it out of you one way or another. And a perfect example as Mid had said, property taxes are literally putting business owners out of business by the day in other "progressive" states because they can't afford the exorbant inflation of their property taxes every year. I like the current system Oklahoma has regarding taxes.
QUOTE]

That would be true if Oklahoma had a single income rate tax, but it doesn't. The Oklahoma system is progressive meaning the more I earn the higher the percentage is. Put another way, not only do I get spanked by the state more often, but each wack is harder. My income would put me in Oklahoma's top brcket (7%). No sure about the rest of you but I wouldn't move to another state to take a 7% pay cut. Yes I know I still pay sales tax and property tax in Florida but I can control how much and where I pay it.

[cityguy]

This whole thing of incentive funds to lure business to Oklahoma City. Let's call it what it really is: CORPORATE WELFARE. Giveaways to the already rich and powerful. The fact that Michael Dell used our State Tax Credits to help pay his payroll is disgusting. When will the people wake up and realize that corporate America is fleecing us at every turn, whether it be "incentives" (welfare) for basketball, multi-millionaire computer moguls and now, some want the City itself to pony up bribery money and welfare handouts to these corporate bandits. I vote NO.

[Easy180]

So cityguy...Would it be safe to say the hundreds of people employed at that Dell center are sort of happy about those tax credits

IF it's the only way to attract particular businesses then it is a necessary evil

Maybe if we could get every other state to agree to not use incentives to entice companies to move we could get away from this, but we all know that ain't gonna happen

[Midtowner]

That would be true if Oklahoma had a single income rate tax, but it doesn't. The Oklahoma system is progressive meaning the more I earn the higher the percentage is. Put another way, not only do I get spanked by the state more often, but each wack is harder. My income would put me in Oklahoma's top brcket (7%). No sure about the rest of you but I wouldn't move to another state to take a 7% pay cut. Yes I know I still pay sales tax and property tax in Florida but I can control how much and where I pay it.

What % of your income do you pay in property tax? Does the state care whether the assessor turns in an estimate for your property's value which places the tax at a rate you find unfair? At least with an income tax, you know that the amount you are taxed is going to be the same from year to year. Property tax? No way. Just look at what businesses are going through in downtown Austin right now.

If you look at Oklahoma's average amount taxed per individual, you'll find it's far lower than most. Before you write off Oklahoma, look at the whole picture -- what do you pay in property tax where you are versus Oklahoma? Sales tax? Other taxes? Unless you're in just a very small handful of states, Oklahoma will win that contest.

[kmf563]

This whole thing of incentive funds to lure business to Oklahoma City. Let's call it what it really is: CORPORATE WELFARE. Giveaways to the already rich and powerful. The fact that Michael Dell used our State Tax Credits to help pay his payroll is disgusting. When will the people wake up and realize that corporate America is fleecing us at every turn, whether it be "incentives" (welfare) for basketball, multi-millionaire computer moguls and now, some want the City itself to pony up bribery money and welfare handouts to these corporate bandits. I vote NO.

amen. So we don't have mountains or an ocean. Ever been to Davis? We DO have some very pretty areas. Why don't we focus on selling the part of Oklahoma most people don't know about. We have mountains, we have natural springs, we have waterfalls, we even have a desert...what is missing? Make one of it's selling points the fact that it is the nation's crossroads. Our housing is low, our pay rate is low - (for companies that's a bonus, lower wages means higher profit). What are the other states doing - the ones without oceans and mountains? Most of them don't have these things either. I just think the entire concept is like giving free orange juice to Oprah.

[Midtowner]

amen. So we don't have mountains or an ocean. Ever been to Davis? We DO have some very pretty areas. Why don't we focus on selling the part of Oklahoma most people don't know about. We have mountains, we have natural springs, we have waterfalls, we even have a desert...what is missing? Make one of it's selling points the fact that it is the nation's crossroads. Our housing is low, our pay rate is low - (for companies that's a bonus, lower wages means higher profit). What are the other states doing - the ones without oceans and mountains? Most of them don't have these things either. I just think the entire concept is like giving free orange juice to Oprah.

We have to do it because everyone else is doing it. If you want to compete, you have to play on a level field.

[kmf563]

Who's everybody? There are a lot of things "everyone else" is doing that we don't do. How about national wage averages, state tax amendments, more than 3.2 beer weight, liquor specials for happy hour, hell - bars in other towns are open until 5am, casinos, porn sales, decent music venues, domestic violence laws, etc. It could go on and on...why do we have to convert to what everyone else is doing on this level in order to "attract" companies? It's not attracting them, it's bribing and buying them! Paying someone to be your friend and having friends are two completely different things and both have completely different behaviors. I still say we need to fix the things that are not drawing them here in the first place. An old friend of mine once told me "don't worry about finding mr. right, you just concentrate on being mrs. right and let him find you." I think the same concept works in this scenario. If we fix the things that are wrong with this state and make them right, people would want to come here on their own.

[Midtowner]

Who's everybody? There are a lot of things "everyone else" is doing that we don't do. How about national wage averages, state tax amendments, more than 3.2 beer weight, liquor specials for happy hour, hell - bars in other towns are open until 5am, casinos, porn sales, decent music venues, domestic violence laws, etc. It could go on and on...why do we have to convert to what everyone else is doing on this level in order to

It'd be great if we could have some of those things. I'm not sure what a state tax amendment is and I'm not sure what a 3.2 beer weight is, and we already have domestic violence laws.

"attract" companies? It's not attracting them, it's bribing and buying them! Paying someone to be your friend and having friends are two completely different things and both have completely different behaviors.

So would you oppose the city investing 75 million dollars in attracting a company which would expand the tax base by 150 million dollars? Businesses are in business to make money. If someone else is offering an incentive to a business to relocate, that business will certainly factor those incentives in with other things. Natural beauty and outdoor recreation are certainly part of the package.

I still say we need to fix the things that are not drawing them here in the first place. An old friend of mine once told me "don't worry about finding mr. right, you just concentrate on being mrs. right and let him find you." I think the same concept works in this scenario. If we fix the things that are wrong with this state and make them right, people would want to come here on their own.

Trying to equate attracting a mate with attracting businesses to a city is about the most square peg/round hole analogy I've ever heard. You can't attract a mate (a very good one anyhow) by offering bribes. Such has been shown to be extremely effective, however, when attracting business.

[cityguy]

So, it seems everyone thinks it's wrong but we have to do it because everyone else is doing it. The courage displayed in that reasoning is just really mind-blowing. Towering examples of morality and ethics.

If the old saying, "Two wrongs don't make a right," is true, then 5 wrongs, 50 wrongs, 500 wrongs, 5000 wrongs CERTAINLY don't make a right. It is sad to see so many jump on the bandwagon of corporate welfare and believe that it's a city's responsibility to help capitalize and pay the payrolls for private business.

To the poster who said the workers at Dell probably like it that Dell used those tax credits. Well, yeah. So what? I bet the bridgebuilders who built the so-called "Bridge To Nowhere" in Alaska were happy too. Does that make it right?

I happen to think we can build a great city without relying on public funding, in any fashion, to bring corporate whores to our fine city. Yep. Give it some thought, that's exactly what they are ---- nothing more than boardroom bandits using bribery and public money to line their corporate bordellos of insatiable greed.