Sandy favors retailer with a tax break – for a quarter-century

 

Scheels construction site in Sandy off I-15 exit at 11400 S. Photo credit: Alexis Young

Last Friday, we highlighted a special tax deal offered to Costco by Spanish Fork. Today, we highlight another deal offered in Sandy to Scheels, a sporting goods superstore, and analyze the rationale used to justify these kinds of deals.[pullquote]Government should not be in the business of providing advantages to favored companies[/pullquote]

Earlier this year, Sandy city, Salt Lake County, Canyons School District, and four smaller taxing entities agreed to rebate 100 percent of Scheels’ property taxes for 25 years for a new store in Sandy, a deal worth more than $16.8 million (see here, here, here and here).

To illustrate the magnitude of this deal, the same privilege offered to residents of Salt Lake County, including Sandy, would save each household an average of $1,817 per year in property taxes,1 or $45,425 over a 25-year period. And the same deal would save other businesses an average of $8,928 2 per year for each commercial property they own, equal to $223,205 per property over 25 years.

These numbers raise an important question: Why does Scheels, a company based in Fargo, N.D., get a tax break of mammoth proportions while Utah families and other businesses that have been paying full tax rates for years or decades get nothing?  Read more

Costco deal unfair to other Spanish Fork businesses

 

How would you like to pay no sales taxes for 18 months and no utility bills for four years? Sounds like a sweetheart deal, doesn’t it? Well, it is for Costco in Spanish Fork. The city has offered Costco, a multibillion-dollar corporation, these special privileges and more for building a store within city limits (see here and here).[pullquote]Favoring one company over another…is bad public policy.[/pullquote]

I wonder what Costco’s competitors in Spanish Fork think about this deal, especially the smaller, home-grown companies that have operated there for years or decades without receiving any special treatment.  Read more

To grow Utah’s economy, start at home

 

We have been critical of many of the state’s economic development programs designed to lure large corporations to Utah. For example, see here.

But any legitimate critique of policy should be accompanied by a reasonable alternative.

Today, Sutherland released a new paper that outlines a strategy called “economic gardening” – an approach to economic development that could lead to thousands of homegrown jobs for Utahns.

You can read the paper here:

Economic Gardening: A Proposal for Growing Utah’s Economy from the Inside Out

Let us know what thoughts you have on our proposal.  Read more

Government-created jobs? Pure fiction

 

Jobs are a hot topic in politics these days. President Barack Obama is pushing his jobs plan; his Republican challengers are wrangling over who can create the most jobs; and Governor Gary Herbert has announced a goal to see 100,000 Utah jobs created in 1,000 days. All this talk about jobs raises a question: Can government create jobs?

[pullquote]Government should create only what it can: a legal and policy framework in which entrepreneurs – the real job creators – can do what they do best without government getting in the way.[/pullquote]The way many presidential candidates talk, you’d think they can simply pull a lever or wave a magic wand, and poof – a new job appears out of thin air. In reality, government can do very little, if anything, to create jobs.

Governor Herbert acknowledges this. While announcing his jobs goal he declared, “In Utah, we recognize it is the private sector – operating in free markets – which produces jobs, opportunity, and prosperity for our citizens.” He understands that government cannot create jobs but can promote policies that allow businesses to expand. Read more

KCPW brinksmanship shows how businesses dupe policymakers

 
A very instructive interaction recently concluded in Salt Lake City between the city council and KCPW, a local nonprofit radio station. It helps illustrate how private-sector businesses can (and often do) dupe policymakers into giving them special, privileged deals that their competitors do not enjoy, and which are not even necessary to accomplish the stated goal of the deal.

It all began in the second week of October when KCPW officials approached the city because they had an outstanding loan that was about to expire and, according to KCPW’s general manager, their “backs [were] against the wall.” Without the loan from the city, KCPW would be going off the air. The city’s citizen loan committee had recommended that the city council turn down the loan because “KCPW had not proven it could repay” it. Ignoring this warning, the city council chose to override the loan committee recommendation and award the loan to KCPW anyway. Read more

The price of a blender and the market economy

 

The other day, I stopped at a yard sale with a friend. He had spotted a blender as we drove by and wanted to take a look at it. He picked it up, pulled out the glass jar and examined all the blender’s parts. After determining it would serve as a suitable replacement for his worn-out blender at home, he asked the homeowner how much she wanted for it.

She pondered for a moment and then threw out an offer, “How about $3?” Her manner indicated that she was likely new to the yard sale business and had little knowledge of what her blender might be worth. I thought for sure my friend would accept the offer. He replied, “OK, I’ll think about it.” Read more

Will the economics of nuclear energy work for Utah?

 

This morning, during part three of Sutherland’s series of policy forums called “Is Utah Ready for Nuclear Energy?” a panel of experts discussed the economics of nuclear power generation.

A Utah company is currently working to build a nuclear plant near Green River, Utah – an endeavor called Blue Castle Project. The panel at today’s forum made many interesting observations in regard to the economics of nuclear power which relate to this project. You can watch the entire forum here:

httpv://www.youtube.com/watch?v=eGGDFd2_4PM

For those who can’t watch the forum, I’ll review some of the most interesting points here. Read more

Economic gardening: helping entrepreneurs grow Utah’s economy

 

Last night, Ernst & Young presented Entrepreneur of the Year awards to nine Utah entrepreneurs who were recognized as being innovative and influential. This recognition is important because entrepreneurs are the engine of Utah’s economic prosperity.

Entrepreneurs are creative, determined, risk-taking people. They don’t just dream, they turn dreams into reality. Through their efforts, entrepreneurs drive Utah companies and government to be more innovative, efficient and cost-conscious, and they often help improve the quality of our daily lives.

Because of all this, it makes sense that government would do all it could to encourage entrepreneurial activity. Many cities and states around the nation have begun to do just that. Read more

West Valley City to own $30 million hotel

West Valley City is providing a loan of $30 million to a private developer to build a hotel as part of the city’s Fairbourne Station project. If the hotel fails, then the city will be responsible for covering any losses. Watch this new report to learn more about the project:

httpv://www.youtube.com/watch?v=VWzm7BRnUJc

Should government be in the business of providing loans to private companies when private lenders are unwilling to do so? Should West Valley City own a hotel?

Here’s the script for the video:

VOICE-OVER: A half-billion-dollar project, called the Fairbourne Station in West Valley City, was recently announced as a way to give Utah’s second-largest city an economic boost. West Valley City Mayor Mike Winder explains the centerpiece of this project.

MAYOR MIKE WINDER: “The anchor of this Fairbourne Station, as we’re calling it, is this four-star Embassy Suites Hotel, beautiful second story hotel, but it needs the private sector investment to spur and kick off this development.”

VOICE-OVER: According to a document provided by West Valley City, the potential risks of financing such a project in this tough financial environment make it difficult for developers to get a loan for a hotel. The most generous lending terms to developers from banks are, quote, “an unrealistic 60 percent cash down and require the project to be entirely paid for within five years.”

MAYOR WINDER: “We had people in the private sector that came to us and said, ‘Hey, we have an Embassy Suites that we’d love to be part of your project.’ The problems were they couldn’t get the financing and their pockets weren’t deep enough to self-finance it.”

VOICE-OVER: Because the private developers could not get favorable terms on the loan, West Valley City Redevelopment Agency stepped in to borrow $30 MILLION from Bonneville Mortgage and will loan that money to a private developer to build and operate the hotel. The developer will then make monthly lease payments to West Valley’s Redevelopment Agency until the loan is repaid. This means that taxpayers are responsible for the loan. If the development goes under, the city has a backup plan.

MAYOR WINDER: “We have in the agreement in an escrow, two years of payments they have already made that will automatically go to the city if they default at all.”

VOICE-OVER: Despite this backup plan, if the city can’t find a new business to lease the land, the city will still have to repay the loan and may have to use taxpayer dollars to do so.

STAND UP: So if banks are unwilling to loan to private hotel developers on good terms, why will they lend to the West Valley City Redevelopment Agency for a hotel development project? Royce Van Tassell, vice president for the Utah Taxpayers Association, explains why.

ROYCE VAN TASSELL: “The bank doesn’t really care whether or not they think West Valley City can succeed in the hotel business. They know they have got the full faith and credit of the taxpayers to back them up. If West Valley City can’t make its payments, West Valley City just raises taxes on the taxpayers and the bank is totally protected. That’s why they don’t need the same terms from West Valley City that they do from the private sector: The private sector can’t raise taxes.”

VOICE-OVER: There are at least seven existing hotels in West Valley City; none of them have the ability to raise taxes if their company doesn’t make enough money. In other words, the city government is competing against taxpaying businesses in West Valley. So should West Valley City’s government get involved in the hotel business? Private hotel owners don’t think so, and neither does the Utah Taxpayers Association.

ROYCE VAN TASSELL: “The city, state, government should not be competing with the private sector. If the market demanded a four-star hotel in West Valley City, the market would build a four-star hotel.”

VOICE-OVER: By getting involved in a hotel business that the market isn’t demanding, West Valley is taking a significant risk. Ed Robinson, director of Sutherland Institute’s Center for Limited Government, explains the risks of government getting involved in the hotel business.

ED ROBINSON: “The risk being taken by people who aren’t experts in assessing that risk, and related to that, if it doesn’t work out they have to figure out how to take it over and make something of it or how to get rid of it at a profit or not too big of a loss. None of those are things I think governments are experts in or set up to do.”

VOICE-OVER: Only time will tell if taxpayers will have to pay for the city’s $30 million gamble. For Sutherland Institute, I’m Alexis Young.

Does Utah have enough water to support a nuclear power plant?

Yesterday, Sutherland hosted the second of three forums on nuclear energy in Utah. In this session, we discussed water requirements and water resources needed in the proposed nuclear power plant near Green River, Utah.

Sutherland President Paul Mero interviewed three water experts, Dr. Thom Hardy, Jerry D. Olds, P.E. and Nicholas G. Zervos. If you missed the live webcast, you can view the video below: httpv://www.youtube.com/watch?v=N7v6APQ68gU

To see more Sutherland videos go here.