October 14, 2012

Charles Lawton: Property-tax system a drag on regional recruitment

Several weeks ago in these pages, Portland Mayor Michael Brennan spoke eloquently and forcefully for linking the three legs of what he called "our research triangle" meaning the Greater Portland region's business community, its educational system and its research and development institutions. Citing a Massachusetts Institute of Technology study that said Portland's three "legs" were strong but lacked "a mechanism for collaboration and coordination," the mayor announced a plan to create such a mechanism. Part of that mechanism, he said, would include the Portland Regional Chamber and involve "working collaboratively with the entire region to recruit out-of-state businesses to locate here."

These are all terrific ideas worthy of support. It is unfortunate, therefore, that the first major business relocation decision to arise since the mayor's announcement -- Wright Express's desire to expand -- has generated intra-regional squabbling about competing tax breaks and property poaching. This completely predictable outcome shines a bright spotlight on the enormous elephant hulking in the back of every room where platitudes about regional cooperation are recited -- the local property tax.

Imagine if every municipality in the Greater Portland region said to every business it sought to recruit, "Oh, and by the way, you have to hire all your workers from in town, and buy your electricity and water and telecommunications connections from our local providers." The result would be obvious: No city or town in the area would have a business larger than a Laundromat or a coffee shop.

Businesses larger than purely local consumer service providers expand and relocate not to individual municipalities but to regions. They consider not municipal but regional labor markets; not municipal but regional transportation, power and communications networks; not municipal but regional civic and social amenities. The only truly effective "mechanism for collaboration and coordination," in the Greater Portland region, therefore, is a regional property tax sharing agreement.

Think for a moment about the time and money spent recruiting and then defending regional business location decisions: years for Idexx and Artel versus Pike Industries; more recently Pierce Atwood and Auto Europe versus unnamed suburban locations; and perhaps most revealing, the ongoing battle over who benefits and who pays for the Cumberland County Civic Center. A truly regional economic policy would identify the local impacts of regional businesses -- say those with 100 or more employees -- and allocate property tax revenues accordingly. Sure it would be complicated and involve tough bargaining, but hardly more complicated or tough than what assessors go through each year trying to decide what the property value of major commercial/industrial properties actually is. Or more complicated and tough than what city councils go through trying to decide where to spend property tax revenues to meet city needs.

The best way to begin lasting regional "collaboration and coordination," I suggest, would be to create a regional TIF district. Such a move would have three collaborating and coordinating benefits. First, it would establish promotable regional business locations; second, it would define a regional impact threshold size; and third, it would bring state money to the table by limiting the diminished state education aid and increased county tax bills that ordinarily flow from increases in property values.

If the cities and towns of the Greater Portland region want to add to their "best in the nation" trophy case of awards, then "Best Regional Development Plan" should be their target.

Charles Lawton is Chief Economist for Planning Decisions, Inc. He can be reached at:

clawton@planningdecisions.com

 

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