Competition is the centerpiece of a market economy, leading to the success of the best product or service while leaving less-efficient or less-satisfying alternatives to suffer the pangs of failure.

But what happens when competition among private entities includes public bodies such as local governments?

The results appear to be the same — winners succeed, losers fail — but the process can appear to be less fair when government’s thumb weighs on the scale. However, a closer examination of a given situation may show that what matters most isn’t what government does but what a private firm with clout can be persuaded to do, which is something different.

That appears to be what happened in Portland, where the city’s largest law firm, Pierce Atwood, accepted an offer from the local government for a substantial tax break if it moved from a developed property downtown to an undeveloped one on the waterfront.

That would add value to an older building in an area — the waterfront — where a declining industry — fishing — has left vacancies and run-down structures for which the city would love to find new uses. So Portland gave a $2.8 million tax break to convert the former Cumberland Cold Storage building next to the Fish Pier for Pierce Atwood’s use. The firm had said it was considering moving to a location in South Portland if it couldn’t find space in Portland.

The tax break has led the owner of the law firm’s current building, One Monument Square, to cry foul, saying it deserved an abatement on its own $300,000 tax bill because the city gave its major tenant an incentive to leave.

But that’s not the point. Pierce Atwood apparently was determined to find a new home, and the opportunity to keep a company with 175 employees in Portland while improving a dilapidated structure led the city to make its offer. To say that One Monument Square requires compensation for losing a tenant it would likely have lost if the city had done nothing is not a compelling argument.

Should South Portland be compensated because the law firm decided not to move there? The answer is clearly “no,” and the same holds true for One Monument Square.

 


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