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Local incentives to selected businesses: A cycle that should be broken

Date published: 3/24/2008

OUTSIDE BUSINESSES usually do not locate in a place because of the bright smiles of the burghers and the rosy cheeks of their children. Nor do local governments avidly court businesses because they're hot to trot after anything that wears an "Inc." or an "LLC" after its name.

Both parties seek financial gain, which is why Fredericksburg has offered or aims to offer incentive packages--sales-tax rebates and such--to Kalahari water park, fancy Wegmans grocery store, Capital Ale House microbrewery/restaurant, and, for expansion purposes, downtown's Kybecca wine shop. The city hopes that these enterprises, at a time of flattening municipal income, will stimulate much of the taxable spending that Fredericksburg needs to operate.

Alas, it isn't only the felicity of the English language that "incenting" violates. It also runs roughshod over sound democratic and free-market principles. For example:

Private businesses should rise or fall on their own merits, neither hindered nor helped by government.

Tax policy should not be twisted to the benefit of some companies and the relative detriment of others--i.e., those passed over for government-bestowed goodies. These "losers" are sometimes, outrageously, compelled to provide tax support to their very competitors.

Entrepreneurial suc-cess is impossible for entrepreneurs themselves to forecast--remember the Edsel?--much less governments.

Such principles are now greasy spots in the road outside City Council chambers, and it's about time that body said "enough." But let's also recognize that the council's foray into incentives, the sort of expedition that has backfired in some communities, is in ours palliated by circumstance, prudence, and strategic coherence.

Mayor Tom Tomzak notes that the city is facing $90 million in mandated capital improvements, not to mention pressure on municipal-labor costs from Northern Virginia, at a time when the retail Mecca of Central Park is challenged by the counties' newer retail Medinas. Ginning up revenue is essential, and if that isn't done through business activity it will be done through property taxes. If Kalahari revenue projections--$64 million over 20 years--are right, rebating 48 cents of every tax dollar collected is practically palatable even if philosophically tref. City incentives also are pegged to performance benchmarks: If a chosen outfit fails to keep the cash registers ringing like Quasimodo's bells, its rebates go away.

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Date published: 3/24/2008

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