Hamilton Crossings TIF is the Worst Kind of Public Subsidy

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From a public finance perspective, exurban sprawl development is basically a big Ponzi scheme. The property tax revenue from Big Box development is pathetically meager, and the public return-on-investment in the infrastructure needed to serve this kind of development is massively negative in the long run.

That’s why sprawl developers always come hat-in-hand to local governments when they want to build a new interchange – they can’t build this stuff profitably without public subsidies.

That’s what we’re seeing with this Hamilton Crossings proposal in Lower Macungie Township. The developer is straight up saying that if the public doesn’t subsidize this project, then it’s not getting built. What more do the free market-loving Lehigh County tea party folks need to hear to vote this down? The government subsidies to Costco and Whole Foods are going to lower their rents relative to the Giant across the street and hurt Giant’s business.

I think a lot of the time we hear incumbent businesses complaining about the lack of a level playing field they’re actually defending protections that tilt the playing field to them, but in this case Giant is not rent-seeking. They actually have a point about unfairness. If the Hamilton Crossings developer had to put up his own money, rents would be higher for Costco and Whole Foods, and they wouldn’t be gaining a competitive advantage on Giant. But because they’ll be paying sub-market rents thanks to the TIF, they’ll be better able to compete with Giant on prices.

So there is a solid free-market Republican argument against this thing. Bruce Schanzer is thinking he can do this project without the TIF. I don’t really believe it, but that should make the free market argument against the TIF even more compelling. If this can in fact be done in a profitable way with no public subsidy, then why lose tax revenue?

The main reason I don’t like this project is because the Lehigh Valley Planning Commission doesn’t like it. I think the LVPC’s Comprehensive Plan for the region is a decent smart growth plan, and I believe that LVPC rulings should be legally binding. Since they’re not legally binding, the next best thing is for elected officials to treat their recommendations as binding, especially when it comes to rejecting new sprawl. A new Big Box shopping center is the last thing this area needs. Future retail businesses and grocery stores should get built in infill locations in the existing built up areas – the city downtowns or the existing shopping centers. Much as I’d like to see the Lehigh Valley get a Whole Foods, it really should go in downtown Allentown or Bethlehem.

This entry was posted in Miscellany.

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