INFORMATION #2 07-29-1996 - Laserfiche WebLink

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J 'om 01 Interstate competition to lure industries is defended, assailed "If one looks at the resources states are spending in this war -- moving businesses from one lo- cation to another- they're not creating new processes, they're not creating new products, they're not creating new ideas," Horn said. "They're'simply mov- ing money from the public treas- ury to the private till," Cities often are the losers, as companies are lured to suburban or rural industrial centers that FarOmise lower taxes, cheaper nd and lower labor costs, Horn said. In the end, he said, taxpay- ers in cities end up paying for the unemployed and contaminated industrial sites that are aban- doned and taxpayers in the sub- urbs get stuck with the bill for schools, roads, bridges, sewer and water lines -- all duplications of infrastructure left behind in the cities. Reich said, "Tennessee, for ex- ample, rightly celebrated when it won the competition for General Motors' huge Saturn plant, but last year, the plant's school dis- trict reported that it was 100 classrooms short of what it need- ed to meet minimum state stan- dards.'' Citing research by Arthur Roi- nick and Melvin Burstein at the Minneapolis Federal Reserve, Reich said the economic compe- tition between states is filled with ironies. Among them, business officials donating time, money or products to schools at the same time their demand for tax abate- ments and other public subsidies undermine education. Hard to succeed "So businesses may be engag- ing, perhaps unwittingly.., in a process in which with one band they are trying to improve local schools, but simultaneously the chief financial officer may be en- gaging in a bidding war which undermines the local tax base, making it more difficult for school to sticceed," Reich said. He called on politicians in competing jurisdii:tions -- cities, states or regions -- to try to en- force compacts against bidding for business relocation, lie also called on the federal govermnent to consider barring tile use of block grants to fuel state or local bidding wars. Rollick and Burstein have urged a congressional ban oil tile econonlic competition on the grounds that tile race impedes interstate commerce and, there- fore, violates the ILS. Consti- tutioo. Reich said the idea is worlh t~ing but may be bard to co- force. In the meantime, he called on business leaders lo slop raids on Ibc l)ublic treasu~ in lhe name of OCOllOnlic developulenl. "Don't enter the political thicket and start instigating these kinds of bidding wars," Reich said. "These tax abatements, these subsidies, can be Ibc mom insidious forms of corporate wel- fare because they are difficult to see at the state and local levels tlorll, the llepublican state senator from Dayton, Ohio, called the Reich speech and the Wash- ington conference the start of a national luovelnenl. "Clearly, federal action is ap- propriate,' ltorn said. "l'm not optimistic that it's that simple to politically turn this thing around. "It's going to be a process of educating politicians, business leaders and the public about what's really going oiL"