Wednesday, January 19, 2011

Economic Development: Short-Term Greed vs. Long Term Prosperity

Every day, I drive from my Port Richmond home to my Independence Square office and see scores of abandoned buildings that were once factories, warehouses, and a thriving part of Philadelphia's industrial complex. Many of my neighbors are skilled members of various labor unions; to include steamfitters, plumbers, carpenters, electricians, iron workers, longshoremen, and teamsters. Being a reasonable intelligent person, I've been having a hard time understanding why Philadelphia has rising unemployment when it has the following going for it:

  • One of the lowest urban costs of living on the Eastern Seaboard
  • Cheap and ready-to renovate or build commercial real estate
  • Fully-operational port complex with great highway access
  • A city with good cultural destinations, social services, healthcare, transportation, and an international airport
  • A myriad of skilled, organized employees who are more than ready to work.
So why aren't potential employers, import/exporters, manufacturers, and business developers flocking to Philadelphia to build their businesses? Because it's obvious we aren't going after them.

The truth is that we aren't the only city in America - or even in a one hundred-mile radius that's hungry for economic development. Philadelphia is competing with politicians who are willing to put the long-term survival of their cities against the short term income gained from over-taxation.

Many can remember a Philadelphia that worked. Shipbuilders, Westinghouse, and other manufacturers employed thousands; giving Philadelphia the distinction of having the highest number of home ownership in the eastern United States. However, when our manufacturing base changed, our city didn’t adapt to become more business friendly. One can remember debates about the infamous Philadelphia wage tax as far back as in the administration of Mayor Frank L. Rizzo, as plants would leave Philadelphia just to give their employees the 4% raise that would be left out of the wage tax. The wage tax, as sad as it is to see the bite it takes out of my paycheck, is somewhat understandable because Philadelphia has some of the lowest property taxes on the east coast.

What hurts our economic development, however, is a daunting combination of business taxes and a state and city government that is extremely un-user friendly. Bureaucracies and fees between taxation, L&I, and the state make Philadelphia an unappealing place to set up a new, state of the art business.

So what are some success stories?
  • In the 1990s, during the technology boom; the sleepy D.C. suburbs of Montgomery County, MD and Fairfax County, VA competed heavily for the creation of a technology corridor to house new internet businesses and government contractors. In the end, Virginia succeeded in developing the I-66 and VA-267 corridors resulting in a huge business and population boom of the areas of Tyson’s Corner, Reston, and Herndon which has since continued into neighboring Loudoun County. They succeeded because they had reasonable taxation and a streamlined, user-friendly county government system that made Virginia a user-friendly choice to the over-regulated, highly taxed governments of Maryland and Washington, DC.
  • Recently, amid the worst economic crisis since the great depression, Mayor Cory Booker has been aggressively marketing his city of Newark, NJ (a former crime-ridden wasteland) to manufacturers, distributers, and shippers as far away as China. How? Incentives. He has access to a huge seaport, great highways, an international airport, and is fifteen miles from New York City at a third of the price of being in New York City.
What can we learn in Philadelphia?

First, Mayor Nutter needs to hire or contract an economic development team at the Philadelphia Department of Commerce that is educated and well spoken, with strong business acumen. One this team is selected, get out there and start marketing! Philadelphia is an extremely good sell to startup or relocating businesses…but what’s in it for them?

Second, create strong incentives for businesses relocating to or opening in Philadelphia. If a company commits to employing and/or doing capital improvements in the City of Philadelphia, why not give them tax breaks or abatements? Furthermore, how can we restructure L&I, Streets, PWD, and PGW to make them more user-friendly for corporate accounts?

If businesses crate jobs, which brings employed taxpayers to Philadelphia neighborhoods to spend money in our small businesses, restaurants, etc; isn’t it worth short-term tax abatement? Furthermore, is our city government business-savvy enough to create a strong economic development campaign?

No comments:

Post a Comment