I’m going to do something a little out of my comfort zone and go back to that Politico piece on Bernie Sanders that I cited in my last piece. According to that reporting, one of the things that Sanders campaigned on in his first run for mayor of Burlington was opposition to raising residential property taxes. Instead, he wanted to get money out of commercial properties and well-to-do non-profits. In Burlington, the latter would be the University of Vermont and the hospital.
Sanders had campaigned against the incumbent mayor’s plans to raise residential property taxes, and proposed raising taxes on commercial property instead…
…Later in his tenure, Sanders went after the University of Vermont and a local hospital, non-profit institutions that owned large swathes of valuable land in the city but were exempt from paying taxes and cut deals for them for them to contribute “Payments in Lieu of Taxes.”
Sanders didn’t invent PILOTs in Burlington. That other people’s republic, Cambridge, Mass, had been receiving them from Harvard since the 1920s, as had other cities since. But he did anticipate an approach that’s become increasingly popular in the Northeast in recent decades as tax-exempt hospitals and universities have swallowed up more and more land and local governments have put the screws on them to pony up more money for city services.
I’ve never been thrilled with the PILOT way of doing business. Certainly, some kind of revenue is better than nothing, but there are principles that are compromised along the way. Take what’s happened in Chester, Pennsylvania. In order to lure a Major League Soccer team to their dilapidated waterfront, the city and Delaware County struck a deal with the ownership of the Philadelphia Union. The Union would make “payments in lieu of taxes.”
When Nick Sakiewicz envisioned a home for the team, he looked at locations across the country. He settled on Chester, bypassing cities including Philadelphia and Portland, Ore., because he “saw this was a great place to be.”
“Revitalizing the city isn’t what we ever promised,” said Sakiewicz, the team’s chief executive and operating partner. “One business doesn’t fix decades of economic mismanagement in a city.”
To sweeten the deal, the state kicked in $47 million, the Delaware River Port Authority gave $10 million, and Delaware County committed $30 million in the form of a bond.
For Chester’s benefit, a 30-year lease was arranged, which stipulated that in lieu of property taxes, PPL Park would pay the city $500,000 a year through 2014. After that, payments would drop to $150,000 through 2040.
[Mayor] Linder said those payments – in a financially distressed city with $5 million in debt – are not sufficient. He said Chester owes the county more than $400,000 annually to pay off the $30 million bond. Chester is responsible for paying one-fourth of the bond, said John McBlain of the Delaware County Council.
Apparently, there was some issue with the Union making their annual $500,000 payment in a timely manner, but the real trauma is that the salad days are over. This year, the payment is down to $150,000, which doesn’t even come close to covering the cost of the city’s bond payment. And this arrangement is supposed to persist for the next quarter century.
Yes, having a MLS franchise is great for Chester’s blighted image, and the organization does employ a lot of Chester residents. They create significant economic activity, both legitimate and black market. They are doing commendable things in the community on a number of fronts, from simple charity to organizing youth soccer leagues to setting up mentoring programs for troubled youth. There’s no doubt that there are tangible benefits to having the Union in Chester, but it probably doesn’t make up for having a significant structural deficit for the foreseeable future.
Given the choice of having a franchise or not having a franchise, Chester would probably prefer to have the franchise, but it’s not an ideal situation by any means, and it’s a not a clear-cut win for the city or the county. That’s why both the outgoing and the incoming mayor are complaining about the arrangement and begging the Union to give more.
And this is what I don’t like about PILOT programs. The Union aren’t bad citizens, and they’re not responsible for single-handedly fixing one of the most awful cities in the region. But they got a sweetheart deal, and now it causes problems and resentments. Wouldn’t it be better if they just paid commercial property taxes that the city could set at a reasonable level and rely upon when they do their budget?
Again, getting something is better than getting nothing, and Sanders was able to get something in Burlington that improved the city for all its residents. That’s commendable, and a mayor has to get results within the system that exists. I just think it’s a bad system.
To my eyes, comparing this to the Burlington PILOT is apples to oranges. In Burlington Sanders needed to get revenue from landowners who were profitable but tax exempt. The Chester case is giving a special tax exempt status to a normal business that should just pay taxes. It’s just another example of how cities building sports stadiums is usually a loss for the city.
Bernie was against deals that gave any tax breaks and other financial incentives to lure any business. He rejected that as smokestack chasing. Instead he supported helping local business who would pay taxes. He used the PILOT to pry money from existing non-profits that already owned large tracks of tax free land. I think it was a clever move.
With all due respect, the stadium has done little for Chester’s image, because no one ever hangs around to visit Chester itself, as the article makes clear. They get right back in their cars and head home. Same way that the entertainment center in Camden has done nothing to change Camden’s image. Or how the Flint MI aquarium didn’t do anything for Flint. And anyway, the problem isn’t “image” (which, IMO, invokes Potemkin) but rather a lack of jobs and industry.
Is it really lack of jobs and industry (relative to the public stadium’s visitor’s perception) or the fact that they coming into labeled “bad” and “black” cities? I guess I’m thinking more about how Camden is portrayed without knowing much about Chester and present-day Flint. And do the labels affect the prospects for industry and jobs!
The forced gentrification and ethnic cleansing that Rick Snyder is carrying out on Detroit and Rahm Emmanuel is carrying out on Chicago is as much about relabeling and relocating as about real urban problems.
The City of Chicago could have the resources to deal with its financial issues but has chosen not to bother the people with money.
The other issue is the state power (outside of Massachusetts, Virginia, and Kentucky) of the state over counties and municipalities. Michigan is a textbook case.
When Sanders was mayor, states were more restrained in exerting their power.
OT:
elections have consequences.
so do vanity third-party candidates.
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LePage: I’ll veto every Democratic bill until Legislature agrees to kill income tax
By Mario Moretto, BDN Staff
Posted May 29, 2015, at 2:27 p.m.
AUGUSTA, Maine — During a fiery news conference that lasted nearly an hour, Gov. Paul LePage pledged Friday to veto every bill sponsored by a Democrat until his opposition relents and accepts his constitutional amendment to eliminate Maine’s income tax.
LePage this year has proposed a constitutional amendment that would eliminate the state’s income tax by the year 2020. Republicans, who have shied away from the governor’s more comprehensive tax reform efforts, have rallied around the amendment.
Democrats have opposed it, sparking LePage’s trademark fury during a news conference at the Blaine House.
Efforts to amend the state’s Constitution require not only the support of two-thirds of the Legislature but the approval of Maine voters. LePage has said voters should be given the option of eliminating the income tax, which accounts for about half of all state revenue.
“If the Democrats are going to disenfranchise the Maine people, then the governor of Maine is going to make sure that every bill that comes down from the House and the Senate with a Democrat sponsor will be required to have a two-thirds vote, because I’m going to veto every one, and I did a bunch this morning,” LePage said.
Two-thirds support in both the House and Senate is needed to override a governor’s veto. So far, 205 bills have been sent by the Legislature for LePage, according to official legislative figures. Of those, LePage has vetoed 26.
The governor’s bill, LD 1637, was rejected by majority Democrats on the Taxation Committee on May 13. It has yet to come up for additional votes in the full Legislature. It could likely pass in the GOP-controlled Senate, but given Democrats’ questions about how to pay for such a monumental reduction in state revenue, it’s unlikely to garner enough support to pass in the House, which they control.
“The Republicans are on board, and the Democrats want to disenfranchise the Maine people. They don’t want them to have that vote,” LePage said. “Shame on them, and I see a [Democratic] leader here. Shame on you, for not letting the Maine people, the 1.3 million people in the state of Maine to have a say in the income tax.”
House Majority Leader Jeff McCabe, D-Skowhegan, was the “leader in the room” who earned LePage’s ire.
After the news conference, McCabe said the governor had come “unglued.”
https:/bangordailynews.com/2015/05/29/politics/lepage-ill-veto-every-democratic-bill-until-legislat
ure-agrees-to-kill-income-tax
This is an abuse of the veto. The legislature should impeach this asshole.
twitter about Lindsey Graham entering the 2016 GOP Race…
go twitter
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Allan Brauer @allanbrauer 7m7 minutes ago
Lindsey Graham 2016: A Chicken in Every Pot and a Strapping Buck to Bust Up Every Chiffarobe
These sort of public-private deals work as long as the public has a strong negotiator and it is the private interest that very much wants the deal to go through. Structurally, BooMan is right. They turn out to be the worst of both worlds.
The most insidious idea informing taxation these days is the notion that business and corporate taxes amount to double taxation. If the business is a separate legal person, it’s a separate taxable entity; otherwise self-dealing can shelter taxes. Of course that’s the system that business owners want–externalizing legitimate societal costs.
As for opposing increases in residential taxes, that makes sense to me when incomes of residents in a city are being hammered economically and commercial interests already have a favorable tax or assessment structure.
Property taxation is a holdover from a time in which land was a major factor in productivity and income for households and household income was proportional to the acreage and quality of land it owned. It is now an anachronism. To my mind a more equitable system of taxation is a real estate transfer tax. That policy has the benefit of discouraging asset inflation by penalizing unsubstantial increases in value.
My sense of the opening moves in Bernie Sanders’s stint as mayor of Burlington VT was that they were political gestures to give form to and remove fear of a socialist administration.
What we have seen since public-private deals became common is that sweetheart deals with kickbacks to the public negotiator tend to be the rule. That makes them just another form of corruption in which the politician benefits more than the municipality or state. Sanders’s pioneer status goes more to the fact the he structured the agreement to give the municipality a recognized benefit. And btw, bragging rights are not really a financial benefit unless the cash actually flows in significant quantities from the private entity to the public general fund. Nor are second-order financial benefits. If the primary financial agreement does not make sense, chances are the private entity is raiding the public treasury.
The problem with the private behavior is that they are public citizens when they are initially negotiating but when the renegotiation comes around they become business owners who can’t be asked to sacrifice any profit.
what’s the outlook in Philadelphia? I understood some years back it was like Cambridge MA with hospitals and universities owning a large % of the land?