Economic development is vital to the future of Utah County

(This is from the Daily Herald column that was published April 27, 2019.)

Over the next few decades Utah County will grow by a million people and match the population of Salt Lake County.

Lest you think these are inflated projections, consider where these people are coming from. Yes, many will move here from other states, but the biggest chunk are home grown and will consist of the children and grandchildren of current residents.

Much of that growth will be in the north and west section of the county. That means many people will choose to live in the Cedar Valley. So far, the Cedar Valley has no businesses with employment of any significance. For example, most wage earners in Eagle Mountain leave the city every morning to commute to work and return home every evening. What does that traffic and air quality look like when the population of Cedar Valley doubles and then triples? It will happen. Eagle Mountain is one of the fastest growing cities in the state and the third largest in square mileage.

As the state debates a new tax structure, contemplate how we are going to pay for all of the new roads, power lines, water and sewer lines, schools, fire stations, police stations, libraries and everything else it takes to support a safe and healthy modern lifestyle. If we don’t plan for these things now, our children and grandchildren will have to live in high-density housing with a hefty tax rate or live somewhere else.

So what can we do that will allow our families to live close by, enjoy cleaner air, not have to commute through hours of bumper-to-bumper traffic, and without having to be slaves to an out-of-balance tax structure?

The answer is an obvious one — economic development. If we bring more businesses here to Utah County, closer to where people live, then we reduce traffic on our roads and put less pollution in the air. Plus, those businesses create tax revenue and the jobs they create also create tax revenue. Those in-town jobs cause restaurants and stores to pop up, which in turn create more tax revenue. The end result is lower taxes and higher quality of life.

There are plenty of examples to study, considering everything from bedroom communities to cities of industry. Bedroom communities can go two directions over time. They either become very expensive or they struggle to survive. On the other end of the scale, there are some cities that have nearly as many businesses as they do residents. Those cities have no financial difficulties.

I believe that there is an ideal balance that can pay the bills and provide for a high quality of life. However, Eagle Mountain is nowhere near that sweet spot. That is why we are putting as much effort into economic development as we are in planning a balanced city with outdoor recreation, preserved open space, wildlife, agriculture, schools, churches and viable transportation options. Our goal is a city as quaint and inviting as a Norman Rockwell painting with a robust economy behind it. Achieving such an ideal is no simple task, but without economic development it is impossible.

Unfortunately there is a lot of confusion about economic development and because of the confusion and misunderstandings, we often see resistance to our efforts to bring national brand companies to Utah County. In my conversations with individuals and groups throughout the state and locally, there are consistent questions that come up. I would like to address some of those questions.

What are tax incentives? Tax incentives are negotiated with a company based on costs to the city and other taxing entities along with costs to the company to set up shop. A company will often have to spend millions of dollars to build roads, bring in power, water, sewer, etc. before they can even begin to put up their own structures. The tax incentive allows them to recoup their investment. If they could not get the money back that they have invested it would be like being taxed twice. Remember, the purpose of taxes is to pay for services rendered.

Why do we offer tax incentives? It seems like big business just gets whatever it wants at the expense of the little guy. Can’t we offer them less? Courting businesses is a free market all of its own. Businesses will choose to go where it makes the most financial sense. Much like someone shopping for a new home. Eagle Mountain has advantages and disadvantages. We have affordable land but very little infrastructure. Other cities might have infrastructure in place but the land is more expensive. The tax incentives offset the cost of infrastructure.

Why can’t everyone get the same tax incentives? Actually, anyone could but few have the financial resources to invest in infrastructure that would benefit the city.

Won’t these companies come anyway? The short answer is no. A quick glance at all of the cities where fortune 100 companies don’t go makes that clear. Eagle Mountain has fought hard for several fortune 100 companies and lost out in the final rounds.

What if the company goes out of business? If the company goes out of business, we lose nothing. In fact, we get a lot a free infrastructure because the tax incentive only kicks in as they make money.

Don’t these companies cause a burden on our schools and other services? With every business that shows serious interest in Eagle Mountain we commission an impact study. The independent impact study shows us exactly what a business will cost the city and all taxing entities. These costs are factored into the tax incentive. In other words, we make sure the business pays for those costs and more.

How can you justify giving a wealthy company all that money? They don’t need any help. A tax incentive does not give any money to a company. Also, the tax incentive isn’t designed or intended to help the company; the purpose is to help the city and its residents.

Is that corporate welfare? No, corporate welfare would be a government bailing out a struggling company.

Don’t tax incentives for business just move the tax burden to the shoulders of residents? No. In fact, it is just the opposite. Businesses relieve residents from burdensome taxes. That is the point of economic development. There are only two ways to pay taxes. In a strong local business economy businesses pay a large share. In bedroom communities or weak local economies, residents must pay the entire bill themselves. Anyone rejecting economic development is by default choosing higher taxes.

Are tax incentives a form of corporatism? No, because they do not create legislation to favor one company over another or give them an unfair advantage.

What are the long-term impacts? Tax incentives can be structured in numerous ways. Sometimes, it is in the form of a cap, meaning the incentive runs out once a company reaches a point where they would have paid a specified amount in taxes. Others might limit the tax incentive to a number of years. For example, the Facebook incentive is limited to 20 years. In 20 years Eagle Mountain could easily reach a population of 120,000. Where would Eagle Mountain and Utah County be in 20 years if there were no such businesses here? Having strong companies here give a promising outlook for a future that works.

I mentioned taxing entities. The typical taxing entities include the state, county, city, fire department, police department, water district, and school district. All of these must approve a tax incentive for a tax incentive to be put in place and economic development to happen. Also, if you live in an HOA, you probably pay more to your HOA than you do to your city.

Tax revenue is not money that belongs to the taxing entities. It belongs to the people and businesses that earned it, and should only be levied to pay for needed services. Anything more is a form of tyranny.

Taxes are necessary for a society to thrive, but a society cannot thrive unless taxes are structured with economic development in mind. It is the responsibility of government to seek means to reduce that burden as much as possible and whenever possible, following the dictates of the great American charter focused on securing life, liberty and the pursuit of happiness.

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