Is economic development overrated?

By BOB ACKERMAN

Published on April 06, 2007

Is the promise of an economic development surge for Amherst a matter of pie-in-the-sky, or does it hold real promise for decreasing the rate at which residential property taxes will rise?

It might be interesting to look at a municipality more heavily engaged in economic development to see what effect that effort has had on single-family residential tax bills. Northampton is a useful candidate. It has a full-time economic development office reporting to the mayor, it is roughly the same size as Amherst, and it is nearby. Its commercial tax base is 20 percent of its total base, whereas the commercial tax base of Amherst is 10 percent.

From 2000 to 2006, the average single-family residential tax bill in Northampton rose 138 percent (from $2,314 to $3,189) while the average bill in Amherst rose 140 percent (from $3,552 to $4,979). This difference is what the hype is all about? This difference is a slam-dunk plus for a development surge to be accompanied by hazy associated costs?

Confused, I checked with my personal Swami, who told me that in the short run my current tax bill would not decrease a jot even if economic development had already produced an extra million dollars this year. His argument was that with roughly a $4 million budget shortfall for level services, managers are worried that an override of about $2 million is the limit of what to hope for. With the extra million from commercial taxation, the town would still be a million short, and I would be facing the same override and the same tax bill.

The Swami is persuasive, but I left convinced that I needed to know more. Walking home, I passed the shops of many of the local business owners with whom I have become friends over the more than 35 years I have lived in Amherst. I hold them responsible for my business schizophrenia - hating large corporations, but feeling warm and fuzzy about the local places where I do small commercial acts. I worried about the inevitable rise in rents in the wake of economic development that might put some of these good people out of business. I began to wonder why economic development talk is mostly from well-meaning amateurs who are prepared to jerk around with the local business environment without really being involved in it.

The smart guys in the good suits would argue the virtues of the blowtorch of economic competition, which would do bankrupts the favor of forcing them to move to more profitable lines of work, and make us all better off. But these are the same guys who were telling me sometime back that my utility bills and cable bills would go down under the blowtorch of competition following deregulation.

So I have decided to put friendship ahead of arguments. Until I hear something much more convincing and detailed than I have heard to date, and I know the local business community is on board, and I know that what we have can be saved, I am not willing to support a strong push for new commercial growth.

But let's go back to that difference in dollar amounts of the single-family tax bills in the two towns. Surely, you might think, the lower Northampton bill is the result of their much larger commercial tax income holding down residential tax bills. Bad argument! That is a part of the explanation, of course, but not the most important part.

Despite its level of commercial taxation, Northampton officials have twice since 1990 asked voters for large overrides to protect what seemed to them essential services, but they were turned down by voters. The two tax bills rise in roughly comparable steps since 1990, except for two out-of-step jumps in the Amherst bills following the two overrides that have been approved in Amherst in that interval. (All of the relevant data are to be found at www.mass.gov.)

So the Northampton commercial base, which we could hardly imagine matching in the foreseeable future, does not protect from a perceived need to ask for large overrides to protect services. I continue to believe that overrides and realistic assessments of local economic development, necessary as they may be as desperate, temporary measures, do not offer convincing long-term solutions to our economic problems, which require major transformations of the larger economic structures outside of Amherst, to which we are inextricably linked.

That nearly all the municipalities of the Commonwealth (including Northampton) have related municipal budget problems strongly suggests that their origin does not lie in local good management or local bad management, but elsewhere. I think it is past time to move the fight out of town.

Bob Ackermann is a retired professor.