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When Should Taxpayers Help a Private Project Get Off the Ground?

Private projects can bring in jobs and extra development, but when do they deserve government money?

A Dallas-based company asked Shakopee for $2.1 million in assistance to build a $67 million server farm that would create 40 jobs. The Mayo Clinic in Rochester wants the state to fund $500 million worth of infrastructure projects that would support the clinic’s planned $3.5 billion expansion. And then, of course, there are sports teams like the Twins, Vikings and Saints that have all convinced legislators to fund public stadiums.

As these plans attest, major projects aren’t just about finding a business plan that works. They’re also about finding a governmental partner willing to share a portion of the costs in the hopes of creating jobs and economic benefits.

Governments can waive taxes and fees, pay for associated infrastructure costs and earmark increased tax revenue for the project area.

Officials have historically used a “but for” test to determine if the government subsidies are worth it—as in a project couldn’t happen “but for” the extra help. Yet that covers a swathe of gray area.

Is assistance justified simply because a business can find another community willing to pay more? Is the type of assistance requested the kind that a community can easily provide? What kind of jobs should the community expect in return?

Shakopee officials wrestled with questions like these to such an extent that they’re now eyeing a much-reduced $406,000 assistance—a package that, with county tax abatement, would still work out to $12,000 of local government money per job.

Patch wants to know when you think taxpayers should help private projects. Share your thoughts in the comments below.

Marianne Stebbins April 02, 2013 at 05:26 PM
Further, government money harms small businesses who have to then compete with their limited resources against in-bed-with-government, aka "crony capitalists." The government only picks winners and losers to the detriment of those who are trying to provide an honest product by the sweat of their brow.
Mike B. April 03, 2013 at 02:18 AM
Solyndra says it all! If anyone forgot, that's Obama's project to sink federal monies into solar power. Millions of your tax dollars were lost. Locally, we have frauds such as Ziggy Wolf. Unfortunately, local politicians have no backbone to say no.
AlPatch April 03, 2013 at 03:42 AM
Government doesn't have the business expertise to make investing decisions. Many public officials lack the business experience to understand competitive advantages and disadvantages. The Vikings stadium is potentially a case study of that point. What government does have is the ability to create numerous regulations plus tax and borrow large amounts of money. So, to move jobs to a community these days it requires the government to buy the jobs at $12,000 or $60,000 or much more per job instead of competing on the benefits of being located in a specific community. This might work in an economic environment of cheap money, but is not possible in a normal environment of allocating capital efficiently. So, government buying jobs is the peak of capital misallocation. In the old days when we had capitalism, money was allocated on supply and demand. Today, an inexpensive method of job creation may be for good ideas and jobs to be developed in small business, regulation reduced zones. May not need to buy the jobs. The subsidy may be the large amount of money saved by reduced regulation compliance costs. However, as long as there is so much societal mistrust, hard for people to let go of the regulations. Sad. As we economically decline, more regulations, raised taxes, fewer risk takers, all keeps contributing to the economic decline. Trust erodes. Nasty negative loop. Can't buy our way out by buying jobs.
David April 17, 2013 at 09:02 PM
It's Brad who is not only missing links, but making up strawmen in the process. The question and Dianne's comment focused on public monies to PRIVATE projects. The fire department and police are NOT private projects and paramedics from private companies do not receive public funding so Brad's strawman doesn't even pass the smell test. Beyond that, who decides which private projects meet a threshold of 'public benefit' and what level must be met? Public funds by their nature do not have the scrutiny or the risk avoidance that private money does. So we end up with Solyndra's and all the other black holes of public money 'invested' in private projects. Since bureaucrats aren't spending their own money, they will NEVER have the same compelling need for prudence that private investors have as Brad calls for. So that control he would see on public 'investment' will never happen. Public funds need to stay out of picking winners and losers in the private market through awarding money to certain private groups but not others. It's nothing but crony capitalism. Brad really should read the comments better first before responding.
fb.com/WCwatchdog April 18, 2013 at 06:23 AM
Completely Agree, Never!

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