Why do profitable private companies get public funds?


For decades, local development authorities and state economic officials have distributed hundreds of millions of dollars to help build skyscrapers, subsidize warehouses, and court out-of-state businesses. Why should private companies and well-funded real estate developers get a share of public funds?

How do the incentives work?
Incentives can range from property tax exemptions for years to direct cash grants to businesses moving to the city. The authority to grant these benefits rests with city, county and state economic development officials. The most active in the metropolitan area are Invest Atlanta and the Development Authority of Fulton County. Agency staff review applications from developers and companies, and a board of directors – which includes elected officials from that jurisdiction – has the final say on whether applications are approved or rejected.

Are incentives needed?
Development authorities and the companies that benefit from the benefits say (obviously) yes. Some projects need additional funding to make infrastructure improvements on projects that benefit communities, such as widening roads, repairing sewers and other remedies. Michel Turpeau, president of the DAFC, says the agency’s support for residential development in Peoplestown has led to the replacement of a 100-year-old sewer line, which has helped alleviate flooding problems in the region. district. Incentives can cover the cost of expensive land or help the developer obtain financing. In the long run, they argue, the new properties ultimately increase the overall tax base, which means more revenue for local governments. There are other advantages as well: Under an Invest Atlanta program, for example, developers of residential properties must market at least 20% of their homes to people earning less than $ 29,000, for a period of time. determined.

How many incentives are we talking about here?
According to Julian Bene, former Invest Atlanta board member and incentive critic, Atlanta lost about $ 32 million in tax revenue last year – money that could have helped pay for schools, la public safety and street improvements. This number is expected to increase as more property tax relief comes into effect. Critics call the practice corporate welfare and a race to the bottom, with cities and counties pushing each other for deals. “The fundamental question to ask is whether this project would have happened without the incentive,” says Bene. “Fancy buildings in Midtown, Buckhead and around the BeltLine? The answer is yes.”

Can we delete them?
The genie does not fit in the bottle. For all the talk about “equal opportunities”, incentives are now de rigueur across the country. One city and one county might gain the upper hand morally, but truly competitive deals and projects would simply go elsewhere. The smartest idea, argues Nate Jensen, a professor at the University of Texas and an incentive specialist, is for cities and counties to shorten the length of tax breaks or tie aid to clear goals that would encourage equity. Invest Atlanta recently began shifting its incentives to relocate more towards companies that would create more middle-wage jobs or commit to hiring in areas of the city with a higher percentage of low-income people. In other words, they want the incentives to create a clear public benefit.

This article appears in our May 2021 issue.

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