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Time to reform economic development

By Jim Sack

Fort Wayne Reader

2016-02-09

In the late 70s, a city worker showed me the first computerized spreadsheet of vacant industrial sites in Fort Wayne. The nation was going through a downturn and the city had decided to get in the economic development business. Green letters danced on the black CRT screen.

A few years later the city jumped feet first into local economic development under Mayor Win Moses; local and state incentives were offered in abundance to International Harvester to save jobs on Bueter Road. IH played us off against other bidding cities before finally moving to Springfield, Ohio. The loss of IH ushering in a fire sale of homes on the southeast side, leaving thousands of highly skilled workers with no good options.

A year or so later Mayor Moses and a collection of state and county leaders again pulled together a package of “incentives” to bring GM to the area to the benefit of… Roanoke.

Over the years, the local economic development effort has grown from those two city workers and a database to a collection of quasi-governmental organizations and government divisions with bundles of incentives tasked to create jobs, increase the average wage, and renew the community.

The recent announcement by Greater Fort Wayne, GFW — one of those quasi-governmental entities — of a state $42 million dollar incentive package to match $1.4 billion in projects can be seen as a culmination of that EcDev effort, but the “award” has left many leaders between uneasy and downright fuming.

Over the past decade the question has been increasingly asked whether abatements, TIFs and other incentives have really created jobs and lifted wages. On the first question, statistics are so murky as to prove nothing, while on the latter question wages have remained well below the national average and have not closed the gap. Wages in Fort Wayne, until Harvester left, were above the national average.

A prime example of the shift in sentiment on council for abatements is a recent application by a service company to cut hundreds of thousands of dollars from their tax bill. It failed — a rarity, indeed. In this case, council members saw the creation of an economic revitalization zone on some of the most expensive ground in all of Allen County as a charade. Secondly, the failed applicant was a service business wholly dependent upon the local populace for its clientele, whereas council had clearly voiced a desire to lure here new businesses, such as factories that bring new wealth into the community — exporters, if you will — and could locate anywhere in the country.

Why does it matter? First, incentives can bring important new businesses to Fort Wayne, but they also do cut away at the tax base. Downtown Cityscape Flats, for example, owned by the head of GFW, Eric Doden, will not be taxed for 10 years! Abatements cut millions of dollars annually from schools, roads, sewers, sidewalks, public safety and the other functions of government. Over recent years nearly a billion dollars has been lost to abatements and millions more have been diverted through TIFs.

You either make up the difference in higher taxes, as were levied a couple of years ago in the form of LOIT, or repairs are delayed.

The Regional Cities award leaves a lot of leaders combative, as they see new taxes and borrowing as a condition of the comparably small state award of $42 million, 3%, against $1.4 billion in proposed projects.

Eighteen local lawmakers recently sent a letter to GFW president Eric Doden expressing their discomfort with the way the Regional Cities process is unfolding. The money is insignificant, they say, compared to the full cost and the resulting shift of control from local offices to Indianapolis. When that many politicians can agree on a matter we should all take note.

City Council President Russell Jehl wants a thorough review of the economic development system in Fort Wayne. With two new allies on council, he has the votes. Greater Fort Wayne, Inc., the publicly financed economic development entity vehemently opposes his efforts. Doden has told Mr. Jehl and other councilmen in no uncertain terms to back off.

Mayor Henry is also a bit concerned enough to call back into session his Fiscal Policy Task Force that revised taxes a few years ago, resulting in LOIT, the local income option tax, which is line six or so on your pay stub. Doden wants to increase a number of taxes on you, and he wants to borrow as much money as caps allow, money you will have to pay back with interest.

To say that it is time for a thorough revamp of our economic development program is a simple truth. When incentives are offered to a business to move from one side of the Lutheran Hospital campus to the other something is fundamentally wrong. When another business is “incentivized” to move from New Haven to Fort Wayne, the spirit of the program is being abused. When government administrators cannot account for the promised jobs, reform is overdue. When there is no “claw-back” of tax dollars from businesses that fail to fulfill their job creation promises, it is time for an overhaul.

A few leaders feel that with nearly full local employment, with few vacant buildings in Fort Wayne, with abundant new construction downtown, and with the bonus of the Legacy, it is time to convene a discussion to make sure that economic development benefits us all.

GFW should welcome the public opportunity to remind us all that over the decades a stodgy conservative approach to development led Fort Wayne to the deterioration of the 60s, 70s and 80s. Perhaps Mr. Doden and team comprise the vision of a Graham Richard, the ebullient leadership of Win Moses, and the determination of Tom Henry to lead Fort Wayne above conservative stodginess. If so, he should be happy to explain his grand vision to us all.

Mayor Henry’s Fiscal Policy group, we understand, will be an insider-only closed-door affair that will only seed distrust. The public Fifth Tuesday Forum would be a more appropriate place to debate the future of local economic development. Mr. Jehl is right to demand this process.