Development Subsidies Are Unnecessary, Wasteful—and Popular

Apparently no 2-by-4 of reality to the head or boot of common sense to the behind can penetrate the minds of starry-eyed government officials who believe they hold the keys to the engines of economic growth.

The latest evidence of this: the warm welcome some McHenry County Board members and Lakewood village officials have given a proposed $40 million sports complex at Routes 47 and 176.

The developers want $18 million of the county’s federal economic stimulus bonds, and Lakewood officials are mulling $5 million in additional incentives, including helping secure grants for more financial handouts; waiving annexation, platting, and permit fees; and handing over $1 million of village taxpayers’ cash.

It apparently does not matter that taxpayer-subsidized developments have an astonishing record of failure. Here are just a few grim examples:

* The Motorola plant in Harvard. More than 1 million square feet of factory space has been standing empty since 2003, as many years as it was in use.

* The Woodstock Die Cast property development. Bankrupt and foreclosed.

* The McHenry Riverwalk project at Boone Creek and Green Street. Would be bankrupt if not for millions of dollars of giveaways by the McHenry City Council, including a recent decision to let the developer virtually abandon plans for public parking. Could yet end up bankrupt.

* The $25 million Libertyville Sports Complex. It has drained nearly $10 million from the village’s “rainy day” fund to repay construction bonds. The village board recently raised three taxes to pay bonds because the rainy day fund is nearly empty. The developer was Mark Houser: the same Mark Houser who advocated for building a minor league baseball stadium at McHenry County College and now wants to build one—subsidized by taxpayers, of course—nearer Woodstock.

* The $55 million Sears Centre in Hoffman Estates. Bankrupt and taken over by the village just a few weeks ago. The 11,000-seat arena opened barely three years ago.

These are local examples. Nationally, similar instances abound. I could fill this newspaper with them.

In polite circles, this proposal for a subsidized sports complex is called “economic development.” In less-polite circles it’s called “corporate welfare,” “corporate statism,” or even “fascism.”

Research shows even “successful” subsidized projects cost taxpayers. They divert government resources, skew private spending and investment decisions, shift tax burdens, and put local governments in the position of favoring incentives recipients to keep the government “investments” looking good.

Economic development commissioners and others who go to bat for projects such as this sports complex are enemies of business competition and fairness. They have no qualms about backroom negotiations for political favors that no one else can hope to receive.

Subsidized projects that are underperforming, failing, or failed litter this and neighboring counties. Yet these cautionary examples apparently have no impact on some of the county’s leaders.

So maybe we should try a different tack. If a developer admits a project cannot stand on its own, would you invest your money? Of course not. Yet that is what a developer admits when he says he needs taxpayer subsidies. “Investing” tax dollars in a dubious project is as stupid as investing our personal dollars in one.

And if a developer asks for subsidies because he wants taxpayers to lower his costs to boost his profits, then the project does not need subsidies.

Either way, there is never a good reason to subsidize private projects such as this sports complex.

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute in Chicago and a lifelong McHenry County resident.