The audit reinforces what we have been saying all along.  The promises made by the advocates of corporate welfare in the form of the Jacksonville Economic Development Commission are often not delivered.  With over a decade long track record of corporate giveaways, handouts and bailouts, taxpayers have little to nothing to show for millions of dollars that have been “invested” .

We applaud the new mayoral administration’s proposed elimination of the JEDC but are skeptical of the dubious effort to re-brand corporate welfare as “public private partnerships” or P3s or PPPs.  Unfortunately the P3s being touted bear no resemblance to the Navy aircraft flying over the city.  Instead, P3s are just another euphemism for corporate welfare schemes where taxpayers bear all the risk of capital financing for a project and private individuals benefit when there (rarely) is a profit.

Now Mayor Brown has promised to reform the concept and focus on Downtown.   Haven’t we heard the broken promises before? Lavilla Redevelopment?  ? Lavilla BistroRiver City Renaissance?  Courthouse?  Genovar Hall?  Shipyards?  Skyway People Mover? Our own John Winkler has performed his own investigation to summarize the just a few of the failed promises of the sages at city hall.  The investigation is featured on our November show.

We do not doubt the sincerity of those who would like to see the urban core thrive.  In fact, we would like to see downtown turn into a prosperous area where people actually enjoy going.   Unfortunately, taxpayers can not afford to lose any more money on risky giveaways disguised as “investments” for some unquantifiable and intangible public good.

We urge Mayor Brown to reconsider the public dollar giveaway to the aspiring robber barons camouflaged as philanthropists.

Not so fast! A recent study appearing in the Harvard Business Review suggests that the secret to job growth is not in doling out tax breaks to big employers in an attempt to entice them to move to your city. If anything, cities with a lot of smaller firms tend to have higher job growth than cities with only a few large firms. Having a business environment that promotes entrepreneurship by reducing business startup and other small business costs imposed by the government is a far better way to improve the job situation in a city than tax incentives to larger established firms.

The benefits are not only in job creation, but also in product innovation. In the book From Poverty to Prosperity written by Arnold Kling and Nick Shulz, the authors argue that innovation does not tend to originate from established firms, but from entrepreneurs risking everything on a novel idea.  Established firms tend to be more conservative in their risk taking than entrepreneurs, but risk taking is essential for innovation.  So lots of entrepreneurs with big dreams lead to a lot more great ideas for goods and services that improve our lives.

I am sure that some government official is reading this and saying to himself “Maybe, we should increase the corporate welfare that is going to small businesses and entrepreneurs!”.  And he would be missing the point!  The best thing that the government can do is to provide the essential government services that cannot be provided by the free market and then get out of the way!

Here is one way for government to get out of the way of entrepreneurs.  When monks tried to sell simple coffins in Louisiana, the State Board of Embalmers and Funeral Directors threatened them with fines and jail time.  Their crime?  Not being part of the funeral parlor cartel that uses the government to protect itself from competition.  The free market does not need government help to weed out the entrepreneurs who do not provide anything of value to their customers that they cannot already find cheaper and better elsewhere.

A RESOLUTION OF THE CONCERNED TAXPAYERS OF DUVAL COUNTY IN OPPOSITION TO CITY COUNCIL BILL 2009-0940

Whereas City Council Bill 2009-0940 exempts the Gerdau Ameristeel steel plant located near Baldwin from paying the public service tax on electricity for five years; and

Whereas the Concerned Taxpayers of Duval County supports low taxes but only when they are applied equally to all businesses and individuals subject to the tax; and

Whereas the Concerned Taxpayers of Duval County opposes City Council legislation that is clearly tailored to providing a benefit to an individual business thereby ensuring city government a role in determining the winners and losers in the local economy;

Now therefore be it resolved that the Concerned Taxpayers of Duval County opposes City Council Bill 2009-0940.

The resolution was read to City Council members at their January 12th meeting.

The title of this post is from the song Downtown sung by Petula Clark in the mid 1960s.  The song was inspired by composer-arranger Tony Hatch’s visit to New York City in which he extols the vibrant atmosphere of Broadway and Times Square.  Having been to New York City, I would agree with this characterization of Manhattan.  With its museums, nightspots and Central Park, New York City truly is the city that does not sleep!

If you read the recent Florida Times Union series on downtown Jacksonville, you get a sense that Jacksonville’s political leaders really want to transfer some of that vibrancy to Jacksonville’s city core.  According to the Florida Times Union, downtown Jacksonville is essentially dead in the weeknights and weekends and is short on residents and workers. What city leaders envision is a walkable downtown full of shops, restaurants, condominiums and lots of people frequenting and living in them. As usual, this vision requires tax money and city government planning.

Before we go flying off the cliff in our enthusiasm to keep moving forward with this vision, let us pause for a second and ask why we need a vibrant downtown.  Even if we agree that the downtown area should be different from what it currently is, is it possible for realize this new vision for downtown? How should we realize this vision? How much taxpayer money are we willing to sink into downtown to realize this vision?

First, we need to ponder is if there is a market for downtown living.  Despite what the movie Field of Dreams suggests, “if you build it, he will come” doesn’t necessarily work.   The United States’ economic graveyard is full of companies that have failed to understand their markets and found themselves in bankruptcy court despite all their efforts to get out of the holes in which they dug for themselves.  So our city leaders believe that 10,000 people living downtown are needed to attract retail development. But if even if we build the condominiums and apartments needed to house that many people and all the shops and restaurants needed to support them, will 10,000 people want to live downtown?  Maybe, the many attempts to jump start downtown development in Jacksonville have failed because there is not a large enough market for downtown living in Jacksonville.

For the sake of argument, let’s assume that 10,000 people want to live downtown.  What is stopping them from doing so?  According to the Florida Times Union, approximately 2,600 people already live downtown.  That surely should be a good start towards growing the downtown area.  There may not be many retail establishments in downtown Jacksonville at the beginning, but this should change as more people pour into the area and create a need for a larger retail sector unless there are government policies that hinder growth in that sector and therefore hinder any further increase in the downtown population.  We should at least ask this question before we pick the pockets of Duval County taxpayers in another failed attempt to subsidize downtown development that may be too expensive to build due to regulations and taxes.  Also, according to the Florida Times Union, government agencies (federal, state and local) own nearly a third of downtown Jacksonville.  Could it be that they grabbed the choicest real estate in the downtown area for themselves and this is hindering downtown development?

Now let’s assume again that 10,000 people want to live downtown and there are no government barriers to doing so, should city government subsidize downtown development?  The problem with government subsidizing any activity is that it inevitably leads to inefficient usage of resources.  In the real world of unsubsidized commerce, businesses have to keep their expenses down and their revenues up.  Otherwise, they go out of business.  Subsidizing business activities reduces the incentives to do either or both of those.  Also, if business owners have to put up less of their own money when starting development projects, they are more willing to take bigger risks since they do not stand to lose as much money as they would if they are on the hook for the entire investment.  Finally, will the downtown development project pay for itself or will it continue to come back periodically to the public trough when it encounters rough times?

One suspects that the motivation for downtown development could come from the smart growth mantra that is so popular within the urban planning community.  Smart growth emphasizes compact development, mass transit, walkability and bike friendliness, mixed use areas (shops and office buildings in close proximity to residential neighborhoods), etc.  Much  of this is echoed in the Florida Times Union series on downtown development. Whatever the merits of smart growth, one would hope that downtown development would not be used as a stealth strategy for pushing smart growth on a city that is not as concerned about urban sprawl as the planners are.

The reason that free markets work is that they adapt to the changing needs of consumers.  If people want to live downtown in significant numbers, the market will respond to that need and downtown Jacksonville will grow.  The involvement of government in downtown development will only distort the market response and will lead to an outcome that satisfies the politicians and planners but not the consumers.