Subsidizing Private Enterprise is Poor Policy

Subsidizing Private Enterprise is Poor Policy

By: Steven Stanek

Apparently no shuttered factory, half-built real estate development or bankrupt sports arena can convince starry-eyed local government officials that taxpayer subsidies almost always fail to start the engines of economic growth.

The latest evidence of this: the welcome some McHenry County Board members and Lakewood village officials have given a proposed $40 million sports complex at Routes 47 and 176.

The County Board’s finance committee has endorsed backing for $18 million of federal economic stimulus bonds, and Lakewood officials are mulling $5 million in additional largesse, including helping secure grants for more financial handouts; waiving annexation, platting, and permit fees; and giving $1 million of village taxpayers’ cash.

It apparently does not matter that taxpayer-subsidized developments have an astonishing record of failure.

Here are just a few examples, with which local officials surely must be familiar:

• The Motorola plant in Harvard. More than 1 million square feet of factory space has been standing empty since 2003. That’s as many years closed as the plant was open.

• The Woodstock Die Cast property development. Bankrupt and foreclosed.

• The McHenry Riverwalk Center project at Boone Creek and Green Street. Would be bankrupt if not for millions of dollars in giveaways by the McHenry City Council, including a recent decision to let the developer virtually abandon plans for public parking. Could yet end up bankrupt.

• The $25 million Libertyville Sports Complex. Has nearly drained the village’s $10 million “rainy day” fund to repay construction bonds. Village board recently raised three taxes to keep paying the bonds. Developer was Mark Houser: the same Mark Houser who hoped to build a minor league baseball stadium at McHenry County College and now wants to build one – using subsidized stimulus bonds, of course – nearer to Woodstock.

• The $55 million Sears Centre in Hoffman Estates. Bankrupt and taken over by the village just a few weeks ago. The 11,000-seat arena opened barely three years ago.

Nationally, similar examples abound. I could fill this newspaper with them.

Research shows even “successful” subsidized projects cost taxpayers. They divert government resources, skew private spending and investment decisions, shift tax burdens, and prompt local officials to favor subsidy recipients to keep the government “investments” looking good.

Those who back government handouts for projects such as this sports complex are enemies of business competition and fairness.

They have no qualms about backroom deals for political favors that no one else can hope to receive.

Failing or failed subsidized projects litter this and neighboring counties. Yet these cautionary examples apparently have no impact on some local leaders.

So maybe we should try this approach. If a developer admits a project cannot stand on its own, would you invest your money? Of course not. Yet that is what a developer admits when he says he needs taxpayer subsidies.

“Investing” tax dollars in a dubious project is as stupid as investing our personal dollars in one. And if a developer asks for subsidies just because he wants taxpayers to lower costs to boost profits, then the project does not need subsidies.

Either way, there is never a good reason to subsidize private projects such as this sports complex.