Crony Infrastructuralism

Last night, the Antiplanner dreamed that Apple, the company with the highest market capitalization in the world, was spending some of its $97 billion in cash on roads, bridges, and other local infrastructure. A crazy idea, I know, but then, in the dream, some politician says, “What a great idea! Let’s create some TIF and special assessment districts so other corporations can help our infrastructure too.”

Somewhere between dreamland and waking up, I tried to explain why this was a bad idea. Suppose a town has two business districts, I said, and one is doing poorly compared to the other, possibly because it is older. Shops, restaurants, and other tenants turn over frequently, vacancy rates are high, and the shops that do exist tend to be downscale, including thrift stores and antique malls. The other district, perhaps because it is newer, is doing much better.

Suppose the city creates a special-assessment district around the older area and uses the funds to update the infrastructure. Unfortunately, the assessments, i.e., taxes, paid by the property owners in the district force them to raise rents, which causes even more turnover. The other district will probably complain and demand its own infrastructure improvements, which the wealthier property owners will more easily afford and thus give that district an even greater advantage over its rival.

If the city uses TIF instead of SADs, property owners won’t need to raise rents. But people city wide are likely to experience either a reduction in urban services or an increase in taxes, either of which is going to hurt the city more than it will help.
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By now fully awake, I soon learn from Victoria Taft that Portland is using TIF and other subsidies to redevelop five neighborhood business districts. The boundaries of these districts are strangely gerrymandered, leading the Antiplanner to wonder what the local politics were of including one property in a district while excluding its neighbor.

In any case, each district will get about half a million dollars in grants over ten years to make locally determined improvements. In at least one case, the TIF money was awarded as a sort of consolation prize for not getting selected as a “Main Street,” one of nearly a dozen government programs the city has to boost local business districts.

“It all comes down to jobs,” the city says. In fact, it all comes down to faith in government, a belief that government planners can pick winners and make sure they win. It won’t be long before everyone in Portland is subsidizing everyone else, and then the question become, where do the subsidies come from?

One obvious answer, of course, is the federal government. Coincidentally, last week President Obama created a “Strong Cities” program aimed at tilting federal programs in favor of cities, as opposed, apparently, to suburbs and exurbs. Obama thinks this is so important that he appointed his entire cabinet to the “White House Council on Strong Cities.” I’m sure they will give it their utmost attention.