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Where's the wolf?
By:
Mr. Jim Waters
For
once, a Kentucky policymaker did not rush to sign a blank check when an
influential developer cried “wolf.”
Kenton County Judge-Executive Ralph Drees not only kept the taxpayers’ checkbook
closed, he called the bluff of Cincinnati real estate mogul Jeffrey R. Anderson.
The developer wanted the city of Crestview Hills to provide public revenue bonds
for a new upscale shopping center he plans to build where a nearly vacant mall
now stands.
Afraid that a developer who did not get his way would take his ball and go home,
the Crestview Hills City Council did what most panicked politicians do and
approved $90 million worth of bonds and a 20-year property tax exemption for
Anderson’s project.
But such decisions do not represent sound public policy, which requires that the
long-term impact and all people be considered, not simply the short-run effects
that benefit just a few.
Not only is such an approach good policy, it’s also good politics.
It didn’t take Drees, a Republican, long to take on his first major challenge
after being selected by Gov. Ernie Fletcher to fill an unexpired term as
judge-executive. He recently traveled to Frankfort to oppose Anderson’s bond
request before the Kentucky Private Bond Allocation Committee. Since then,
Democrats have not announced a candidate to run against Drees in the November
election.
He told the state committee that the proposal approved by Crestview Hills is
“corporate welfare at its worst.” Drees also pointed out that the developer
would have no problem securing private financing to re-develop the mall because
of its attractive location.
With an extensive background in real estate, Drees has never doubted the
viability of the project. He clearly sees the potential for its success. Rather,
his objection is based on the belief that private development should not thrive
at the expense of his “shareholders,” who, in this case, are Kenton County’s
taxpayers.
In essence, Drees called Anderson’s bluff and the developer blinked. After the
state’s bond committee refused to consider the presumptuous proposal, Anderson
quickly secured private financing through a $50 million bank loan.
When a private developer sees the profit potential in a new real estate venture,
its viability is often dependent on acquiring appropriate financing. If the
numbers add up, private lenders are ready to write a check. However, if private
financiers do not show an interest, why should taxpayers?
From Anderson’s perspective, Drees’ questioning of public financing and property
tax exemptions for his project was misguided and precarious. An Anderson
representative complained to one reporter that the judge’s involvement “almost
single-handedly took down the whole project.”
This is saber rattling at its best. Drees pointed out that while the developer
touts the new center as being worth $40 million, Crestview Hills’ ordinance
would have offered Anderson up to $90 million in bond financing. By insisting
that “if the bond issue is $90 million, then normally the value has to be at
least $90 million,” Drees acted in the best interests of his constituents.
Also, the judge rightly questioned the logic of giving the developer a 20-year
property tax exemption. Why should this mall project not pay its fair share of
the tax dollars due schools and other taxing districts? If not being subject to
property taxes “single-handedly” threatens the success of the project, then
maybe Anderson should have looked for a new opportunity.
If the new Crestview Hills open-air mall is successful, developer Anderson
should reap the reward. If it flops, he should bear that consequence, too.
When taxpayer monies get involved, the burden of risk gets shifted away from the
person who stands to benefit the most, to a public entity that gets caught
holding the bag if the project fails. By opposing the public financing of a
project that would have greatly benefited a private developer, Drees helped his
community avoid this unnecessary risk and take a significant step toward
reinvigorating the free-market principles intended by our founders.
From the taxpayers’ perspective, challenging the profit-seeking behavior of
businesspeople who see government as another profit center is as worthy a cause
as removing able workers from welfare roles. Both are drains on the ability of
government to meet bona fide needs and still leave taxpayers with enough money
to pay their bills.
Judge-Executive Ralph Drees exudes the kind of government leadership Kentucky
desperately needs. When the wolf howls, this rare breed easily distinguishes
between yowling for extra profit, and the cry for real assistance.
-- Jim Waters is the Director of Policy and Communications at the Bluegrass
Institute for Public Policy Solutions, Kentucky’s only free-market think tank
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