HALLSTROM: A Cause for Appreciation, If Not Celebration


I still haven't fully reconciled my fiscal conservative bent with the mechanics of tax breaks for property developers.  In a true free market, projects and ideas succeed on their own merits.  If they can't, they should be naturally selected out of existence.  But today, Kilbourne Group held a grand opening for the Black Building, and along with the fanfare will come cries of foul play from those that think that Kilbourne Group is getting special treatment. 

To be fair, you could say that it is.  But so could any other developer that would like to play the game.  That's what happens when municipalities decide to offer tax breaks for a specific purpose.

Full disclosure, Kilbourne Group is a client of ours.  Fuller disclosure, I was 100% for the incentives way before they ever were.

Now, there's no arguing that these tax abatements are substantial, and they do last for a number of years.  And while the city isn't actually paying any to Kilbourne (direct cost), money that could be coming into the city is not being collected (opportunity cost).

But here's the key point -- There is only money being forfeited because Kilbourne is creating money that could potentially be collected.  We would not even be having the conversation if the buildings or parking lots sat empty because there would be no tax revenue to be fought over.  So while I understand the reluctance for anyone to cheerlead these incentives, we do have to look at the end game.  These abatements are investments. 25 years from now there will be hundreds of thousands of tax dollars coming in that would not otherwise.  We like the idea of big revenue later, we just don't want to give up anything in the short-term.  We want it all, it seems, and we end up looking fairly greedy.

And, I might add, part of the currently fashionable class warfare game because Kilbourne Group projects are inevitably linked to the man of means who happens to reside in the Governor's residence.

I applaud City Commissioner Tony Gehrig for his efforts to hold city leaders to fiscal responsibility.  We need voices like his to make sure people know they are being watched.  But Tony's assertion is that if we did not offer such incentives that all these projects would still be built in their entirety and we just don't know that (except for one company leader that answered the question directly).  Big picture, it's beneficial to the city to have a reputation as being "development friendly" and you cannot accurately measure what that means over an extended period of time.  But again, why are we fighting here?  Who is harmed?  It's not as if the Kilbourne projects are costing the city a big check every month, we're just foregoing money for a while. And the payday will someday be sizable.  

I am a taxpayer too.  And I have the same concerns all Fargo residents do about increasing taxes and government.  But I also know that a city's reputation as being friendly to growth and development play a big part in what businesses stay here and move here.  And what young people do, as well.

Now, let me say this.  If by some chance, an elected official starts floating the idea of further extensions of the abatement, say 10 years from now, then we will have a case of dirty pool.  Right now, nobody is scratching on the 8-ball.