Government shouldn’t roll the dice to create jobs

Victor Joecks

Here’s one of Oscar Goodman’s arguments for a new city hall for Las Vegas – one that will likely be named after himself.

“This is the time that the government’s supposed to step up. This is the time for us to create jobs.”

The City Council is scheduled Wednesday to vote on pursuing the project, provided the financing meets the city’s projections. If approved, construction of the building would take about two years.

Timeout, Mayor Goodman. It isn’t the government’s role to create jobs. The local governments’ role is to provide essential services, like roads, police and fire protection. In providing those services, jobs will be created, but the government’s motivation should be to provide the service, not to guarantee employment for certain workers (or employ more workers just for the sake of “creating jobs”).

Also, Mayor Goodman admits that there is a possibility (and I would argue it’s a strong possibility) that Las Vegas taxpayers will be on the hook for this $185 million project.

Officials predict revenue from the new projects, and sales of city land could cover the costs of a new City Hall.

The most recent economic forecast also projects that the city will return to pre-downturn revenue levels by 2014 or 2015, but also predicts that growth will be much slower than what the city has had in the past.

“Can I guarantee those things are going to happen? No, I can’t,” Goodman said.

You have to be careful whenever government officials predict something. As I’ve written before, “Officials” and “experts” are often wrong.

Las Vegas Sun headline: “How did so many experts get their forecasts so wrong? Difficulty, missed signs and lingering boom-time euphoria all contributed to inaccurate predictions”.

And that’s exactly why it isn’t the government’s job to pick winners and losers. There are no sure things. Every business decision involves a degree of risk.

And when politicians try to “create” jobs using TIF, STAR bonds or tax incentives, they are taking a risk, a chance, a gamble with taxpayers’ dollars.

Legislators and governors aren’t elected to try to win money for the taxpayers. They should create a uniformly low tax and regulatory burden that allows businesses to succeed or fail on their merits, not their ability to play politics, woo politicians and gain taxpayer subsidies.

Now, business men and women make predictions, too. And they are often wrong as well. The difference is that when a business fails, only its investors and employees are hurt. If (or when) the city hall project starts to lose money, all taxpayers in Las Vegas will be on the hook.

And as Geoffrey Lawrence, an NPRI fiscal analyst, pointed out in his study, Rolling the Dice on the Taxpayers’ Dime, these types of arrangements help politically connected businesses at the expense of the poor.

Over the past three decades, local governments in Nevada have recognized that extensive use of onerous zoning and other restrictions have had the unintended consequence of discouraging private developers from investing in downtown areas. To overcome these government-imposed obstacles, local governments have established redevelopment agencies with the charge of revitalizing urban areas. Redevelopment agencies attempt to lure private investment back into city centers by offering taxpayer-funded incentives through a method known as tax-increment financing.

Tax-increment financing systematically channels tax dollars away from school districts, police departments and fire departments, for example, and into redevelopment agencies. Redevelopment agencies use those tax dollars to make payments on bonds that have been issued in order to construct elaborate public facilities or to provide financial incentives for private developers to invest in city centers.

This approach has incurred a new and potentially worse set of unintended consequences. It exposes taxpayers within redevelopment zones, who are often low-income families, to burdensome amounts of debt in order to subsidize large-scale developers. It further creates opportunities for corruption by making public officials responsible for taxpayer funds that are explicitly designated for disbursement to private developers. Moreover, redevelopment agencies in Nevada are designed to endow local officials with powers that are not legally vested in them by the voting public and can insulate the actions of local officials from public scrutiny.

These impacts are particularly egregious given the fact that they are completely unnecessary for the purpose of encouraging investment in city centers. City officials in Anaheim, Calif., have recently demonstrated that redevelopment can be accomplished much more effectively and without adverse consequences simply by easing the barriers which have impeded development in the first place.