Thursday, April 2, 2009

Freedom is the True Economic Stimulus

The City of Houston has announced its own stimulus plan--grant special political favors to certain developers. Yesterday's Chronicle announced the plan:

The plan aims to entice developers not to put their multimillion-dollar projects on hold in exchange for millions in incentives if the companies begin building soon and agree to make improvements to public roadways, sidewalks and streetscapes.

City Council is scheduled to vote today on what would be the first such incentive package for Regent Square, a planned 4-million-square-foot, $850-million mixed-use development that city officials said was about to be put on hold indefinitely by Boston-based GID Urban Development Group. The development will abut Allen Parkway near Dunlavy and Dallas.

If council approves, the company will receive $10 million in reimbursements to be paid out of tax revenues generated by the development.

In one sense this is an act of justice, but in another it is grossly unjust, which illustrates how government meddling can create this seemingly contradictory evaluation. First the justice.

If the city government were confined to its proper functions, GID wouldn't be paying any property taxes. That they will get back some of the money forcibly taken from them is certainly fair and just.

But what about the other developers who don't get this sweetheart deal? They are forced to pay their taxes, and essentially subsidize GID. For them, this is a rotten deal. As Barry Klein, of the Houston Property Rights Association said:

It’s a zero-sum game. There’s no net gain to the economy. It doesn’t change the demand for commercial space, it simply changes the supply. The favored developer who owns the land is the beneficiary and the victims are taxpayers on the one hand and unfavored, unsubsidized developers on the other.

This is always the result when politicians have power beyond the proper scope of government. They dispense favors to some at the expense of others. Politicians, rather than the decisions of individuals as manifested in the free market, determine who will succeed and who will fail.

The proposed tax refunds will be generated by expanding the Memorial Heights Tax Increment Reinvestment Zone:

Under a TIRZ, property tax revenues generated within the boundaries are frozen at a specified level. As development occurs and property values rise, tax revenue above that level, known as the increment, is funneled back into the zone to pay for infrastructure and capital improvements to help attract further development.

Under the plan before council today, part of the increment will be given back to the specific developer rather than the redevelopment authority that operates the TIRZ.

GID's development will most likely increase the value of neighboring properties, which will also increase their property taxes. Which means, neighboring property owners will have money taken from them and given to GID. This is nothing more than legalized theft, in which GID will benefit at the expense of its neighbors. This is inexcusable and immoral.

Andy Icken, deputy director of the Department of Public Works and Engineering, who helped negotiate the deal, said:

The alternative to what we’re talking about would have been to have a great deal of investment going on in this community and to have a big, giant piece of property sitting vacant for a long period of time.

If the city is truly concerned about encouraging development, why does it continue to deny Buckhead Development permission to build the Ashby High Rise? We will never know exactly what was discussed in Icken's negotiations, but it is very clear the GID's development meets with the city's approval while Buckhead's does not. If I were inclined to making wild, speculative guesses, I might think that GID greased some wheels while many of Mayor White's political supporters oppose Ashby. But I'm not, so I won't. But whether anything nefarious occured is beside the point. The fact is, GID is getting preferential treatment. The city's proper function is the protection of our rights, not deciding which projects are politically palatable and which are not.

I have, on many occasions, laid out a true economic stimulus plan-- cut taxes, repeal land-use regulations, privatize city services, and create greater freedom for individual Houstonians. Greater freedom always leads to greater economic prosperity. Individuals have a moral right to use their property in the pursuit of their own values in accordance with their own judgment. Government's function is to protect this right. Freedom is not only moral, it is practical.

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