Do big tax breaks to lure developers make sense?

From Robert Whitcomb's Digital Diary, in GoLocal24.com

For years, Providence has used the offer of big tax-stabilization plans to try to lure big developers and other enterprises to the city, with occasional success. But at the same time, Providence commercial  real-estate-tax rates remain among the highest in America. GoLocalProv.com has reported that the Lincoln Institute ranks the cities with the highest commercial rates as Detroit, New York, Chicago, Providence and Bridgeport, Conn., with “effective tax rates that are at least two-thirds higher than the average’’ of the 53 cities it surveyed.

Meanwhile, Boston ranks at 28th. Not exactly a competitive situation for Little Rhody!

Basically,  like many jurisdictions around America, Providence (and Rhode Island) do a lot of economic development by deal rather than by broad-based policies that treat all property owners  equitably.

Thus in Providence, as GoLocalProv.com noted, “new projects are the ‘haves’ -- new, modern and heavily subsidized,’’  while businesses that have been in Providence without these “bribes’’ are in older, less energy- or otherwise efficient buildings and have to pay the very high commercial real-estate taxes.

Thus over time they have a big incentive to leave the city. These usually small enterprises don’t get the political PR of a sexy national company moving some employees into Providence but there are a lot of them, and the city suffers when they leave, usually quietly and with no news stories. This emphasis on preferential tax deals for “sexy,’’ high-profile tax deals at the expense of the much larger number of unfavored enterprises continues to destabilize the city’s fiscal condition.

And remember how often   companies that get preferential tax deals decide to leave town with little warning.

It’s past time that the city and state implement major commercial property-tax reform. As my friend Gary Sasse noted in GoLocalProv: “Unfortunately, state policy appears to be directed at providing real estate developers with preferential tax deals while totally ignoring structural property tax reforms needed to make Providence truly competitive.’’