Economic incentives are a tricky thing. They’re also a euphemism. While no one wants to call them such, the “incentives” are handouts, also known as corporate welfare.
When developers and corporations are looking at where they’d like to land or where they’d like to expand already existing operations, they approach municipalities or counties or states and ask for “incentives.”
What they’re looking for is some sort of taxpayer-funded subsidy to bring their business to town. It’s using public money for private enterprise.
It’s important to understand exactly what’s being asked when considering economic incentives, because they do have an impact on the public, which foots the bill for the privilege of that business coming to town.
In North Riverside, the privilege for landing Costco was $6.8 million. It wasn’t paid to Costco. It was paid to a development company that otherwise would have taken a bath on a bad investment. It was a bail out. That money is debt that the taxpayers of North Riverside will be paying back for years to come.
Coming back to the village in return are the hundreds of thousands of dollars in sales tax revenues from Costco.
In Brookfield, the village essentially gave land to a developer in order to bring Sherwin Williams to a long vacant slice of land. In that case, the village didn’t exactly lose money, though it spent thousands on site remediation, since it got the land in a no-cash bid process from the county.
Still, it was a valuable asset it gave away as an incentive. The return for Brookfield? A large commercial property back on the tax rolls, a new development and retail sales tax.
The key to these deals is making sure the municipality is getting something valuable — and predictably valuable at that — in return.
Riverside is starting to dip its toes into the economic incentives pool for the first time, and the impulse may be to go for broke. “Riverside’s downtown has some gaping holes in its commercial property inventory; let’s get those filled with businesses. And if it takes rebate sales restaurant taxes or non-home rule sales taxes or waiving building permit fees, let’s do it!”
But those taxes are valuable to Riverside. The restaurant tax helps pay for day-to-day operations of the village. The non-home rule sales tax helps pay for street improvements. The village should not give those sources of revenue away cheaply.
It’s exciting when you’re being courted, but there should be some restraint during the courtship. What the village is looking for is a longtime partner that can help provide the kind of economic stability Riverside surely needs.
But it’s a two-way street, and the village needs to keep that firmly in mind as it moves forward with any plan to give “incentives” to anybody.