Making Believe in Big
by Bruce Fisher
A future based on the rich entertaining the poor?
When the Indianapolis Colts play the Denver Broncos on October 20, 2013 in Lucas Oil Stadium in Indianapolis, the average ticket price, according to a ticket website called Vivid Seats, will be $467. That is the before-tax weekly household income of more than 54 percent of the 410,000 people who filed tax returns in Erie County, New York, in the last year the IRS counted. But everybody in Erie County pays local sales taxes, which is the revenue source that local governments use to subsidize professional sports venues like the Ralph Wilson Stadium.
Measured as a share of income, the more than 200,000 Erie County taxpayers who reported less than $30,000 in annual earnings pay much higher shares of their incomes in sales taxes compared to the fewer than 8,000 income-tax filers in Erie County who reported incomes over $200,000. A report by the Institute on Taxation and Economic Policy shows that in New York State, people reporting between $17,000 and $34,000 paid six times more of their incomes in sales taxes than people in the top one percent. Same thing in Indiana: People in the $30,000 range paid 6.1 percent of their incomes in sales taxes, six times as great a share of income as the highest-income reporters there. It’s like this: If you’re only pulling down $30,000, you notice $1,800 a year in sales taxes. If you’re bringing in $800,000, then $8,000 in sales taxes is a rounding error.
Yet the American political economy today is better set up to deliver to the Buffalo area its own new version of the Indianapolis Colts-Denver Broncos game than it is to deliver new jobs to the Rust Belt. As Assemblymember Sean Ryan noted in a recent statement, the latest review of local industrial development agency operations shows what we have long known: that in the rare event that net new jobs are actually created by the tax breaks, interest-rate subsidies, and outright corporate handouts that IDAs pass around, the net new jobs tend to be in retail, services, and distribution—not in wealth-creating industries. Mostly, though, IDAs hand out subsidies and create few jobs. The New York State Budget Office report is stark: Since 2008, the Erie County IDA has incentivized 12 active projects with tax incentives totaling $2,959,172; the projects were supposed to create 262 jobs, but 14 jobs have actually been lost.
Job loss, low-wage work, and big projects—are these phenomena universal in the Rust Belt? Not necessarily. Sixty miles from Buffalo is a massive brownfield where the world headquarters of Kodak Corporation used to employ tens of thousands of high-wage workers. Rochester benefited for more than a century from a phenomenally profitable technology that abruptly became obsolete when digital imaging replaced film. But an export-based economy built on technology has had enduring benefits for that town. The old dollar-wealth of that era yet endows institutions like its university, its medical center, science museum, children’s museum, music academy, public policy institute, and more, but the real wealth there is intellectual capital. Rochester is still a well-recognized center of engineering innovation: The number of patents issued to Rochester-based companies and researchers dwarfs output here. Rochester generally ranks among the top dozen American metro areas in this measure of innovation, even after the demise of Kodak; in Buffalo, the average number of patents issued annually between 1990 and 2010 actually fell from an already-low plateau.
A 2013 Brookings Institution study found a pretty tight correlation between innovation and employment, which is why it’s not surprising that though big old companies may have faded in Rochester, many dozens of small new companies have formed and employment there has actually increased. The “ecosystem” matters: The number and amount of Department of Defense-related research grants won by the University of Rochester is bigger than all the national research grants won at SUNY Buffalo.
Yet Rochester, too, has its failures. The subsidized mega-projects—like the massively expensive downtown Renaissance Square mall that became a massively expensive downtown transportation center—has failed. Subsidies of around $100 million to a developer for a corporate tower, plus a new “civic center,” a soccer stadium, and other such stuff haven’t delivered. Monroe County suburban sprawl rolls on; downtown is sliced up by expressways that divide with ugly concrete gulches. And in the middle of the first decade of the 21st century, another Brookings Institution analysis showed that Rochester had won the dubious distinction of having had the greatest increase in concentrated poverty of any city in the United States.
We don’t need no learnin’ here
Employment has grown in Rochester. Employment has shrunk here. Rochester is hardly paradise; its PR literature touts the same adjacency to fresh water, the same educated workforce, the same cheap housing, even the same safe weather we have here. But the deliverable—increased employment—is a reality there, and in other Rust Belt communities that have focused on the human capital inputs that our political class has a hard time getting its collective mind wrapped around.
It’s increasingly clear that the American future will belong to plutocrats alone unless many dozens of small startups and innovators, supported by civil servants and educators who are paid decently and allowed to do their jobs, are protected and promoted. Small startups and innovators require a different infrastructure than what our political class wants to deliver.
The latest evidence from our political class is that 1980s-style mega-project, Dennis Gorski’s nouveau Stalinism of cement as the path to freedom, is back in full force in Buffalo. Gorski’s former aide Byron Brown, about to win his third term as mayor of Buffalo, routinely cites the “quarter-billion dollars of downtown development” underway. Echoing this scene from an Eisenstein film or a Gladkov novel, at least two amateur city planners here post photos of the massively subsidized construction on their blogs and amplify the mayor’s message that “progress” is underway.
And then there is Erie County gvernment. The data-driven analysis published by Brookings, the Atlantic Cities website, and many academic journals would find but little to salute in the new, 92-page “Initiatives for a Smart Economy” plan just issued by Erie County government. Positives in this plan: a call, once again, for reforming the Erie County Industrial Development Agency, which, sadly, carries the name of the county but is not controlled by elected county leaders, and remains dominated by subsidy-seeking real-estate development interests. There’s a call for better housekeeping on energy efficiency within local government, though no plan to create a resource for the 25 towns, 16 villages, three cities, and 28 school districts that all administer hundreds of buildings and vehicles separately even as their collective client base shrinks. There’s a recommendation to invest some effort in regional agricultural policy, which, as is normal across the country, remains and will remain largely a state government affair.
But Erie County’s lead initiatives are either irrelevant to the region’s economic future, or negative.
• Despite a 2002 environmental impact study conducted by Ecology and Environment, Inc., that found zero economic upside to building a new convention center—and massive evidence in the last decade that small- and medium-size cities get stuck with expensive boxes that nobody from out of town ever wants to use—Erie County government is proposing to hire another consultant to find a rationale to build another big box.
• Despite acknowledging that over 40 percent of both the African-American and Hispanic populations are in poverty (both communities live overwhelmingly within the 40.5 square miles of the City of Buffalo), and that unemployment and under-employment are chronically centered in this urban geography, Erie County government—against the advice of the Regional Economic Development Council—plans to site its new $30 million science and technology-training center 12.4 miles from the core of Buffalo;
• Despite an “economic development” bureaucracy that includes the industrial development agencies, the State of New York’s various agencies, the United States government, and various quasi-public entities, Erie County’s new plan proposes creating a Toronto office to fish for firms that might want to move here from the Province of Ontario.
• And, despite the near certainty that the dynamic of out-of-market ownership of the Buffalo Bills won’t change (i.e., that local payers of sales tax will continue their $13 million annual subsidy of the out-of-town ownership of this National Football League franchise), Erie County proposes to invest even more taxpayer money on what is essentially a guaranteed export of local disposable discretionary income.
There might be a regional economic upside if Erie County’s plan to spend another $500,000 on another convention center feasibility study purchases the services of a local firm, but that’s the equivalent of looking for oats in what the oat-eating horse leaves behind.
There might be a regional economic upside, for the construction period, of building the new science and technology training center in the suburbs, but that money will be lost to New York State’s efforts at creating an “ecosystem” of adjacency where the Hauptman-Woodward Institute, the Roswell Park Cancer Institute, SUNY’s medical school, and the other workforce-training programs are all clustered.
Child-friendly, brain-development friendly
The impulse to build big, and to import both the consultants to advise us and the talent to entertain us, is systemic here in Buffalo. Recently, a group called Greater Buffalo Sports & Entertainment Complex, LLC, hosted a presentation by the architects of the huge stadium complex where the Indianapolis Colts play football and the national association of fire chiefs gathers for several weeks a year. The Greater Buffalo group thinks that $400 million or so of public funds, plus more than $1 billion of private funds, could combine to create a huge waterfront stadium/convention center/entertainment zone on Buffalo’s outer harbor that would be linked to Buffalo via a network of streets that currently end at the Buffalo River.
It’s a pretty plan. Its proponents overlay a schematic of Chicago’s Grant Park, where the Field Museum, the Buckingham Fountain, the Shedd Aquarium, Millenium Park, and of course Soldier Field all cluster, and the lead designer actually said, “Look what these developments have done for Chicago,” as if one of the world’s great urban economies was created as a result of, rather than precedent to, all the fun. He neglected to mention the existence of the University of Chicago, which has the largest concentration of Nobel Prize winners of any campus in the world; nor was there any thought expressed that Chicago’s global status as one of the top innovation hubs (as calculated by Brookings, Atlantic Cities, Forbes, the Financial Times, the Economist, and your three-year-old just learning to count) has anything to do with its ability to survive more than 500 gun murders per year.
This community is stuck in Gorski-thought. On July 4, Erie Canal Harbor Development Corporation, which has already committed $153 million of public funds to its plan for replicas of canals and to a subsidized hotel-office complex, hosted an Independence Day celebration that featured a no-waiting beer tent with a dozen spigots, a one-item child-entertainment tent, and a single ice-cream vendor where the lines were more than 20 minutes long. The line of porta-potties was long and extensive, but none were set up to accommodate young children.
Once again, the Buffalo-area public policy paradigm is to build big-box projects of the kind that have failed everywhere else to create economic development; to subsidize monopolies; to provide mass-entertainment venues for adults; and to contemplate not whether to provide public funds for these items but only what kind of handouts to provide, and to which favored interests.
That paradigm may well work as it has for the past 30 years, so long as the 54 percent of the tax-filers here who make $30,000 or less don’t become 60 percent or 67 percent of the tax-filers here, but note: Since the 2009 income tax data was compiled, there has been not only a shrinkage in the overall size of the Buffal0-Niagara Falls metro-area workforce but also a shrinkage in the number of jobs actually occupied. Around 410,000 people filed income tax returns in 2009; we won’t know until next year, when the IRS releases its new data, if that number has shrunk below 400,000.
If there are fewer taxpayers around, as Census data and workforce data both tend to indicate, then it’s probable—given the relatively small size of the so-called “creative class” here compared to, say, Rochester—that the share of the population that brings home $30,000 a year will have grown.
That would seem to indicate that policy-makers who stick with the paradigm of pumping the public money for entertainment into the Buffalo Bills and into beer-sellers downtown, and into suburban workforce-training sites, will be spending a poorer population’s money on things that may make it drunker, but not more employable, or likely ever to file a patent.
Bruce Fisher is director of the the Center for Economic and Policy Studies at Buffalo State College. His recent book, Borderland: Essays from the US-Canada Divide, is available at bookstores or at www.sunypress.edu.blog comments powered by Disqus
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