MILKING THE PUBLIC CASH COW

The Sacramento County Taxpayers League has always been opposed to city and county elected officials acting like bankers, using Sacramento taxpayers as guarantors of loans made to private investors, and as providers of selective direct and tax subsidies to commercial enterprises.

The city, for example, has been banker for ventures such as the office building across from the convention center, Packard Bell NEC in the closed Army Depot, and now is providing a $2.9 million subsidy for a hotel on the waterfront. It is also preparing to buy the Woolworth building downtown to give a news service company time to come up with the money to buy the building from the city. In addition they have given tax rebates and loans to help and keep companies in town. They provided a 5-year $152,000 tax rebate to Ebara Technologies Inc., a $73 million loan to the Kings, and similar deals to others to stay in town. And such deals are not peculiar to the city.

Deals are made by Sacramento County. Paul Hahn, Director of Sacramento County's Department of Economic Development once said that he rather not offer economic incentives, but added, "They are a necessary evil." The county offers new companies rebates on the county's share of a company's property taxes on equipment, and a rebate of the county's 2.5% utilities tax, both for a period of 5 years. To receive these benefits companies must demonstrate that they will bring in at least 50 new jobs worth over $25,000 a year each. To convince companies that plan to leave the county to stay, they offer the similar incentives, but the companies must agree to stay at least 10 years.

Rationale behind such deals are termed by some as "Corporate Welfare". Conversely, those generating the deals term them necessities aimed at attracting or expanding new businesses and regional developments, and retaining existing companies. They cite as benefits the jobs generated, and the related tax revenues that flow from the enterprises and those that they employ.

Among the most egregious of methods being used to divert taxpayer money into questionable areas are formation of Redevelopment Agencies, originally designed to assist cities in cleaning up inner-city neighborhoods. These have been termed "The Unknown Government". Redevelopment Agencies can be created without a vote of the citizens affected, and can incur bonded indebtedness without voter's approval, notwithstanding the existence of Proposition 218.

Redevelopment Agencies consume more than 8% of all property taxes statewide, and have developed a massive public debt with little public awareness or oversight. Unlike other levels of government, they can use the power of eminent domain to benefit private interests. The Agencies, created by counties and cities, are governed by appointees of the city councils or board of supervisors, whom often appoint themselves as the Agency governing members. Such Agencies are an entirely separate government authority, with their own agenda, revenue, staff, and expanded powers enabling them to issue bonds and condemn public property. In recent years such Agencies have been loosely used to expand a city's tax base rather than to correct in-city blighted areas.

Dan Walters, in his Sacramento Bee October 7th article "Cities playing a blight game", pointed out one that has all these ear-marks. To quote Walters, "the City of Sacramento proposed a new redevelopment zone linking a marginally blighted residential and commercial area along Northgate Boulevard to some vacant fields alongside Interstate 80 - land the city wants to develop into a tax producing auto mall. The proposed mall would attract dealers ensconced along Fulton Avenue, an unincorporated area whose taxes now flow into county coffers."

What is not emphasized in all these activities is, as former Labor Secretary Robert Reich once called, "a vast zero-sum game. They rob the public of funds that otherwise could be used for better schools and roads." The practice of providing loans, exemptions, and rebates, even though they involve using public money, are usually conducted in secrecy, with the public in the dark as to how their money is being handled, or the manner in which they are being indebted. The public is often advised after the deals are made, and as a result, are committed to financial risk without input. And that's why we object.

By Joe Sullivan

October16, 2000