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Competing Against The Government

During a recent Fiscal court meeting, I heard various people on the court, and a developer, reiterate that the County was spending millions on Oldham Reserve in order to bring jobs to Oldham County.

Various governments, large and small across the United States are endeavoring to “bring jobs” to their jurisdictions.  They do so by charging current tax payers higher rates.  They don’t announce that they are charging current citizens more; but generally there are lavish tax deferments used to lure these
“new” jobs.

The fact is, that almost none of what they are doing is creating jobs; they are simply stealing jobs from another jurisdiction. 

In addition to costing current taxpayers more, they are also creating government subsidized corporations that have a financial advantage over their competitors.  Which is fine when the employer is in Oldham County, but what if another jurisdiction is subsidizing a company that is in direct competition with a local employer?  Our local employer is at a disadvantage.

In my recent job, we saw first-hand how we were forced to compete against the government. 

It this case, it was the government of Clarksville, Texas.  Clarksville is a small town in Texas that put together an incentive package to lure one of our competitors from another small town in Texas.  This town of about 3,800 people built a building for my competitor that they are leasing to them for $1.00 per year.  They also put together a loan at zero percent interest for my competitor to buy new equipment, and for use in running their business.  In addition, the employees are getting a break on occupational taxes in the county.  Throw in tax abatement of property taxes, funds for training and a few other sweeteners and this package gives our competitor the ability to reduce their prices to about 20% below our selling price, which is about 5% below our cost.   An ability they are pursuing vigorously.  Oh, and by the way, they pay their employees $8.00 an hour.

I have no real quarrel with the company, they are doing what they are supposed to; they are working to be the most competitive they can be, and make the most money.

The issue here is that while Clarksville gained about 25 jobs, the other city lost 25 jobs.  No new jobs were created with this tax payer money.  This poaching of jobs goes on every day on a much larger scale.  Look at how much money Louisville has spent over the years to keep Ford and UPS.  While this investment helps employees and businesses that work at or with Ford and UPS, the cost of the tax breaks are funded by everyone else who has to make up the difference in tax revenue.

As I listened to the discussion at Fiscal Court; I ran through the numbers in my mind.

Oldham over the course of some years will probably gain a couple of hundred new taxpayers – except I imagine that new employers will extract occupational tax abatement for several years:  so no gain.  They will also demand a reduction in property taxes; so these companies will move in tax free, or at substantially reduced taxes.  They will of course still expect all of the services that the county provides.  So expanded services will be provided that will have to be paid for by the existing tax payers.

The county touts all this as bringing “well paying” jobs, which will benefit Oldham County citizens.  However, I’d imagine that all the Oldham County citizens that are qualified to preform “well-paying jobs”, are already employed in said well-paying jobs.  New jobs do not mean that current citizens employed in low wage jobs are qualified to fill the new jobs. In the long run, some of the new “well paid” employees may move into Oldham County.  There is, after all, a lot to like about Oldham County.  Although if most of them live in Louisville area, I don’t see a significant exodus to Oldham County..

Those that do, will generate a need for more services.  And I’m pretty sure the cost of the additional services will be more than can be paid for by the expanded tax base.  That discrepancy will of course mean pressure to raise rates on everyone else in the county.

I recently found out that Oldham County is going to add another magistrate district.  That means another magistrate.  That means more cost.  That means more competition for funds among magistrates.  That means ultimately that we will end up paying more.

I have a better idea.  Let’s cut the number of magistrates in half, and reduce the cost of Fiscal Court by half.