The recent closure of Arlie’s Paint, Body, and Glass — and the City of Marion being left to pay for the building’s lease-purchase without revenue from a tenant — raises questions about the role local government should play in economic development. And now the city is drafting another lease-purchase agreement to bring a business into the industrial park, this time for Mark Evans’ Airstream trailer restoration business.
Should a city, county, or other government body put taxpayer money at risk on economic development projects that have the possibility of saddling the government with debt? It’s always a gamble. Good economic times don’t last forever, and even if they did, businesses close even in a good economy.
The question isn’t about whether Evans will be able to pay the lease. And it isn’t whether Arlie’s was a smart gamble; by many measures, it was a good risk. Arlie’s had been in business a few years and was looking to expand. But a good gamble is still a gamble. According to Arlie Overton, who owned the business, what doomed it was a change in banking that couldn’t be predicted or prevented. That’s the nature of business; outside factors can tip the odds in favor of success or failure.
When an economic development bet pays off, the winnings can be substantial. Otherwise, cities wouldn’t make those bets. Businesses pay property and sales taxes and provide jobs. A new business that employs just five people would be a boon to any city in Marion County.
Businesses also can be beneficial because of the services they offer. The presence of Arlie’s meant drivers wouldn’t have to go elsewhere for bodywork after, for example, hitting a deer. Many people can benefit from having such a service available.
But there are ways to encourage businesses to open and expand without putting so much taxpayer money at risk. Conditional tax abatements are a common example. If you build or expand a business, you can apply for a rebate of X percent of your property taxes for the next Y years. If the business fails, the government body doesn’t lose anything it would have gotten without giving the incentive. Instead, in the case of Arlie’s, the City of Marion is left owing almost $240,000.
Marion City Council member Todd Heitschmidt made a good point Friday about Marion’s economic development plans. He reiterated what he said while campaigning, that he thought the city shouldn’t be as involved in economic development as it has been at the industrial and business parks, but because the city already is committed, it needs to finish the job.
He couldn’t be more right. Marion should continue to recruit businesses to the business and industrial parks until all the city’s lots and buildings are sold and paid for. But after that happens, Marion City Council should think long and hard before betting more taxpayer money on another business.
Every so often, people get unrealistically optimistic about the economy’s chances to grow dramatically and indefinitely, and people, businesses, and governments start taking risks that they shouldn’t. They start thinking they have a “can’t-lose” bet. When reality rears its head, many of those bets lose, and the lost bets end up hindering rather than helping economic improvement.
Sensible gamblers know to never make a bet they can’t afford to lose. Can the city afford its latest bet?
— ADAM STEWART