During the vice presidential debate the subject of poverty in Cleveland, Ohio came up. Cleveland was recently declared the most poverty-stricken large city in the nation by the U.S. Census Bureau. It was followed by Newark, N.J. and Detroit, Mi. Apparently, poverty was one of the few subjects that both Vice President Dick Cheney and Democratic vice presidential candidate John Edwards agreed upon. As my mind raced, I started thinking back to earlier research I had done on tax increment financing and then it hit me, “If tax increment financing (Amendment One) as proposed is such a good idea, then how could Cleveland possibly be this bad off?”
You see, the following quote came from a press release in April from Cleveland, “This streetscape project will help to revitalize our downtown,” said Mayor Campbell. “It’s also unique because we’re using tax increment financing to make these necessary streetscape improvements.” Cleveland is no stranger to this form of financing, and it would do us well to look back at what has happened there to understand why Amendment One is bad for North Carolina.
There are many similarities between the Cleveland of the early 1980s and North Carolina today. Cleveland was devastated economically when the steel industry dried up and manufacturing losses hit the area hard, not unlike what has happened here with our manufacturing losses of recent years.
Cleveland’s response to the losses was to begin a host of tax increment financing districts to “spur economic development.” The same strategy employed to push TIF financing districts in Cleveland is being used here to pass Amendment One. Some examples used in Cleveland are the Third Federal S&L project, the Colonial Market Place, The Old Arcade, the Lee Harvard Shopping Center, and the Shaker Square Shopping District.
All required millions of dollars in tax increment financing. The results, however, were not good. As stated earlier, Cleveland now tops the list of most poverty-stricken cities in the nation. The city recently laid off hundreds of police officers and firefighters and reduced trash pickup to save money. Cleveland officials are even pushing a $68 million bond for education.
This is a city that relied on the belief that tax increment financing would “provide jobs and usher in new economic development.” Cleveland officials did so at their own peril, and they are still using this tool even more aggressively now as they seek another $2.9 million for the new Superior Avenue Streetscape project. Incidentally, Cleveland’s unemployment rate now tops 12.2 percent, more than double the national average.
Amendment One allows local politicians to sell bonds and borrow money without taxpayer approval. Study after study has concluded that this creates a situation where taxpayers will ultimately subsidize the services provided in the new Tax Increment District. But this is a dangerous political season where the No. 1 issue in North Carolina is jobs, and Amendment One proponents are taking advantage of this to falsely argue that this new form of government debt, unlike all others, will create additional employment opportunities. The fact is that every one of the top 10 most-impoverished cities in the United States use tax increment financing. Newark and Detroit, Nos. 2 and 3, respectively, on the poverty list, have extensive TIFs for economic development and have both borrowed their way into poverty.
New economic development is necessary in North Carolina. The way to bring about this development is to foster entrepreneurship with lower taxes and reduced regulations. What we don’t need are more ways for the government to borrow money, especially when it occurs without voter approval. Amendment One is being slipped past chambers of commerce across the state without much debate, and the lack of a good debate means you’re probably giving something up by simply going along for the ride. I, for one, will be pushing for freedom and voting against Amendment One.