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Are Economic Development Subsidies Good Public Policy?

Few questions provoke similar responses from left-leaning groups like the Center for American Progress (CAP) as well as right-leaning ones like the Mercatus Center at George Mason University.

From CAP:

Economic development incentive deals frequently occur under the radar…. [F]ar too often, economic development incentives are irrelevant to [the receiving entity’s] decision-making, fail to meet promised results, take away from existing or potential public services, lead to zero-sum competition among governments, and lack appropriate oversight. The Realities of Economic Development Subsidies," 11-1-18

From Mercatus:

The general conclusion of academic research suggests that targeted economic development subsidies don’t lead to broad-based economic growth or improvements in community welfare when measured against comparison cities….

Moreover, targeted subsidies are most often used to benefit large, highly-visible corporations rather than small local businesses. As a result, struggling local businesses must pay higher taxes to fund public subsidies for politically well-connected larger corporations.  —“Amazon HQ2 Is the Only Competition Where the Losers Are Winners: Why Economic Development Subsidies Hurt More than They Help,” 11-13-18

This time, we’re not questioning past subsidies — $23 million in cash promised to Amazon or the $16 million in taxpayer largess donated to Nestlé. Today’s Sun Gazette article reveals a new $11.5 million, under-the-radar, rent subsidy for the U.S. Drug Enforcement Agency (DEA), which occupies over 500K square feet of space on Army Navy Drive in S. Arlington:

Arlington County Board members next week are slated to vote on an incentive-grant package totaling that amount handed out over the course of 15 years and aimed at reducing rental costs for the agency….

Despite the immensity of the possible cash handout, the item currently rests on the County Board’s “consent agenda,” and will only be pulled off for public discussion if a board member makes the request. —“Arlington may shell out big bucks in effort to retain DEA,” 4-17-19

Analyzing the fiscal justification of reducing the DEA’s rent for the next 15 years is difficult to manage in a short blog post. The crucial point is this item’s placement on the “non-public” portion of the County Board’s April 23 consent agenda (Item 32). Unless a board member (prompted by a citizen’s request) pulls it from the consent agenda, this incentive package will be approved automatically without any public discussion.

Doesn’t an incentive package worth $11.5 million (the Gazette calls it $12 million) deserve more scrutiny? This Arlington-taxpayer-funded grant isn’t simply a bonus for the federal government; it directly benefits Clarion Partners, the owner of the space DEA is occupying. On the same consent agenda (Item 33), Board members also will hand over $862,500 to Gerber Products Company from the state’s Commonwealth Opportunity Fund.

TAKE ACTION: Contact the County Board if you want greater scrutiny of Arlington’s economic development subsidies. Ask Board Chair Christian Dorsey to pull Item 32 from the board’s consent agenda. Then, pose your questions directly to board members via email or in person at the Board’s recess meeting on April 25. —The Reality Chick


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