The post Nashville boomed. But for whom should cities grow? appeared first on Better Cities Project.
]]>Nashville feels successful. But that success raises a question every growing city eventually has to answer.
And like every other American city, I am sure there are plenty of advocates for taxpayer subsidized investments who want to claim that success as their own. The two of us were exactly the kind of economic impact these subsidies are designed to produce: We visited from well outside the metro region to attend an event at Bridgestone Arena. We spent money on the event, and on local hotels, meals and souvenirs.
Nashville’s success is not an illusion. Public investment and aggressive promotion helped turn the city’s musical identity into an exceptionally lucrative tourism economy. But success after an intervention is not proof of success because of it. Nashville already possessed a music industry, a major healthcare cluster, Vanderbilt University, state-capital status and the demographic tailwinds lifting much of the South.
Subsidies may have shifted investment from one part of downtown to another, but shifting growth around a city is not the same as creating it. Those economic impact studies cited by city boosters rarely establish how much of that growth would otherwise have occurred—or whether the benefits exceeded the public costs and the disruption imposed on residents.
No one can deny the boom. The city had such a reputation for growth that several MLB franchises—including my own hometown’s Kansas City Royals— let speculation swirl that they might relocate to Nashville, using the threat to squeeze local governments for even more taxpayer largesse.
Who gets credit for the boom is one question. Who bears the burden is another.
Plenty of cities might still envy Nashville’s growth, but that growth has come at a real cost to the people who already lived there.
One of the places we set out to visit was Noshville, a New York City-style deli that has been catering to Nashvillians for 30 years. Its last location will close in 2027, the result in part of increasing costs, including a jump in both the citywide property tax rate and appraisals. It showcases that while Nashville has become a place more people want to visit, work and live, Music City has become a more expensive place to remain. A 2024 Vanderbilt University survey of longtime locals found that over half (55%) believed the city’s recent growth made their lives worse.
Freddie O’Connell channeled this feeling in his campaign for mayor the year before. In highlighting his opposition to economic development subsidies for the Titans, one of his ads pitted residents against the billionaires and bachelorettes who, “are getting all the wins.” After his victory, O’Connell promised an administration that would make the city, “more ‘ville and less Vegas.”
Mind you, O’Connell was never purist on incentives. As a councilmember he voted to subsidize the city’s soccer stadium. Since becoming mayor, he’s signaled that the city may offer Starbucks incentives over and above what the state offered them for expanding their Nashville offices.
A more recent Vanderbilt survey found a majority of residents now believe the city is on the wrong track and that O’Connell’s approval rating has fallen, with 82% saying they could not afford to buy a home in Davidson County and just 36% planning to.
Residents are not anti-development. In fact, sometimes voters demand their elected leaders be “job creators” rather than just grass cutters and pothole fillers. But there is a tension between supporting growth and focusing on meeting the imagined needs of visitors, investors and possible future residents.
Certainly, Nashville should not remain what it was in 1995. Cities change because people change them. New residents arrive, businesses open and close, neighborhoods evolve and land becomes more or less valuable.
City leadership should not erect unnecessary barriers to change. Yet they shouldn’t imagine themselves building a city different from what residents have made it, or doing so faster than residents are ready for. There is a difference between allowing changes to emerge from millions of individual decisions and having city leaders decide what kind of economy—and, inevitably, what kind of city—they want to create.
Cities often have master plans to manage development. Perhaps instead cities should make allowances to develop without a master.
Local government can create the conditions for growth without trying to determine its destination. It can provide public safety and infrastructure, protect property rights, make it easier to build housing and operate a regulatory system that allows residents and businesses to respond to changing circumstances. City officials have plenty to do without trying to predict which industries, attractions or residents their communities should pursue.
That approach requires some humility. No mayor or economic-development agency knows which neighborhoods future residents will value or which local institutions will eventually become part of a city’s character. Governments can respond to those changes; they are less equipped to anticipate them.
The Nashville I visited was energetic, crowded and prosperous—the kind of place people move to, invest in and vacation in. It just isn’t the kind of place a 30-year-old deli can still afford to call home. The question city leaders should ask before setting out to transform their communities: Is their job to create the city they imagine, or to make it possible for the people who live there to create the city they want, themselves?
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]]>The post When Government Reports Become the Problem appeared first on Better Cities Project.
]]>That’s not an isolated incident. Justice Neil Gorsuch made a similar point in a 2024 Atlantic essay, drawn from his book Over Ruled: The Human Toll of Too Much Law: a Social Security Administration report on its own printing operations took 95 employees four months to complete.
Both are examples of what happens when legislatures create reporting mandates but don’t get around to killing them.
Daniel Ho and his coauthors at Stanford’s Regulation, Evaluation, and Governance Lab set out to measure the scale of the problem in a new paper, “The Abundance of Reports and Incapacity of States.” They built an AI tool to search all 500 million words of legal code across all 50 states, then checked their findings against internal data from three state governments: California’s Government Operations Agency, Maryland’s Governor’s Office, and New York’s Governor’s Office.
The numbers are worse than the $1 Coin Program suggests. California’s reporting requirements grew from fewer than ten in 1940 to roughly 3,800 by November 2025 — more than 400% growth since 2000 alone, with no comparable growth in the civil service required to process it. Across all 50 states, the researchers identified 41,925 statutory provisions containing 47,305 distinct reporting requirements.
A comprehensive review of Maryland’s mandated reports found it would take state legislators 140 to 558 hours to read them all — 3.5 to 14 weeks of full-time reading, for a legislative session that lasts 13 weeks. When asked, Maryland staff suggested nearly 20% of the requirement could be eliminated or consolidated without losing anything. California’s own tracking database suggests roughly 30% of ongoing, recurring reports may simply never get filed at all. No one enforces it. No one, apparently, is checking.
That last point matters more than it sounds. In April 2023, San Francisco’s Planning Department overstated citywide evictions by about 1,600 — a 40% error — in its Housing Balance Report. Nobody caught it before publication, almost certainly because almost nobody was reading it. “If all reports are treated as high priority, none are,” the Stanford authors write. One Maryland agency official put it more bluntly: “We are not quite sure if anyone utilizes the report for policy purposes.”
Similarly, Kansas City’s 2021 audit of its Community Improvement Districts revealed that one-third had not published budgets and a quarter had not filed annual reports—both required by state law. The Council subsequently tightened reporting requirements and put the auditor’s recommendations into city code. This is the problem in miniature: the city increased its reporting requirements, but it did not wrestle with the bigger issue of whether more reporting equals more transparency or better policymaking.
Ho’s researchers found more colorful examples going back to the Red Scare — reporting requirements written for a threat that no longer exists, still technically in force. Congressional staffers, per the paper, have taken to using unread reports as doorstops.
Every reporting mandate was issued for a plausible reason: a scandal, a promise, a genuine desire for oversight. The problem is aggregation. A legislature that adds a reporting requirement every session and repeals almost none ends up, decades later, with a code nobody can fully read and a government that can’t tell which of its own rules are being followed.
The Stanford researchers offer model legislation — the “Streamlining Administrative Reporting Act” — built around a genuinely useful idea: stop assuming a report is permanent or worth the effort. Lawmakers should consider the time and resources such a report would require, default to a five-year sunset unless the legislature actively renews it, and an automatic ending when the program it’s reporting on ends. The report also recommends a public digital repository so it’s possible to tell which reports actually exist, and, perhaps most promising, the option to replace a static written report with a public dashboard when it performs the same job.
More reporting was supposed to mean more transparency. Instead, it’s produced a pile large enough that nobody — not legislators, not agencies, not the public — can see through it. The fix isn’t more oversight. It’s fewer things to oversee.
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]]>The post Initial thoughts on Kansas City’s deal with the Royals appeared first on Better Cities Project.
]]>First, the documents themselves.
Second: the bigger picture on these deals. Stadium deals like this one follow a well-studied script, and the research consistently reaches the same conclusion regardless of the city.
What’s unclear about this deal specifically. Beyond the general research, a direct reading of the filed agreements raises questions that haven’t been publicly answered.
How the city got here. The process itself—not just the deal’s terms—has drawn scrutiny.
What taxpayers are actually exposed to. Some of this exposure is stated plainly in the contracts; some of it isn’t quantified anywhere public.
Bottom line: a $1.9 billion stadium deal generates plenty of coverage but not much documentation council members can point to when a constituent asks a hard question. The material above already exists, in public records, published research and independent reporting. What’s missing is making officials answer it before the vote, not after.
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]]>The post Savannah’s zoning rewrite is a blueprint for other cities appeared first on Better Cities Project.
]]>Savannah Mayor Van Johnson has introduced a “Housing Toolkit” that rewrites the city’s zoning map to allow multiplexes, townhouses and small apartment buildings on land currently zoned for single-family homes, offices or business use. The plan would also permit accessory dwelling units broadly and reduce off-street parking requirements. No vote has been scheduled yet, and the proposal will still have to survive a planning commission and council process where opponents typically show up loudest. But the substance of the plan is something other cities should study.
Savannah is not the first city to try to undo its tangle of regulations. Raleigh, North Carolina loosened its zoning in a similar way to allow more “missing middle” housing, and the results are measurable. Raleigh Planning and Development Director Patrick Young has said the city has approved or permitted more than 2,800 new housing units under the reformed code since 2021, calling it “one of the most productive” zoning-reform programs in the country. Buffalo eliminated parking minimums citywide in 2017. Minneapolis and St. Paul followed in 2021, and Austin did the same in 2023. The changes did not require a bond issue, a tax abatement or a new subsidy program. It required a council willing to allow property owners to develop their own land.
Housing affordability is usually considered a spending problem, solved with subsidies, tax credits or public-private deals. Savannah’s proposal is a reminder that it is often a permission problem first. A city does not need to spend to allow a triplex where only a single-family home is currently legal. It needs a council prepared to withstand the objections of the neighbors most invested in a frozen status quo.
Those objections are predictable and not unreasonable, but the evidence from cities that have already loosened these rules does not show the disruption critics predict. Parking demand, as researchers including Donald Shoup have documented for years, is routinely overestimated by planners guessing at need rather than builders responding to it. Character change from more duplexes and townhouses is also a smaller shift than the one already underway in many cities. There, zoning has ruled out everything between a single-family house and a luxury high-rise, so the high-rise is often the only new construction anyone can afford to build.
Mayor Johnson reframed who benefits. “Affordable housing is not just low-income housing,” he said. “It’s housing for mayors, police officers, reporters.” That disarms one of the more common objections to zoning reform: that it is really a fight over subsidized housing for someone else’s neighborhood. Missing middle housing is not a poverty program. It is housing for the teacher, the nurse and the young family who currently cannot afford anything the zoning code allows to be built.
Savannah has not passed anything yet, and a proposal is not a policy. But the toolkit approach is worth copying regardless of how the Savannah vote turns out, because the underlying tool is cheap, replicable and already proven elsewhere. Cities do not have to wait for federal housing dollars or a new tax to expand their housing supply. They can start by asking why a duplex is illegal on a block that used to have one.
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]]>The post Data Centers Can Fund a City’s Future — But Only If Cities Don’t Pay for Them Twice appeared first on Better Cities Project.
]]>Across the country, Loudoun County, Virginia, tells a similar story with different numbers. Data centers now generate almost half of the county’s property tax revenue, and the county has cut its real property tax rate every year for a decade—from $1.145 per $100 of assessed value in 2016 to $0.805 in 2026. A 2026 report by Mangum Economics for the Northern Virginia Technology Council found that without data center revenue, the typical Loudoun homeowner’s property tax bill would need to rise by roughly $5,800 a year just to maintain current service levels.
These are useful data points at a moment when data centers have become a favorite municipal villain. Cities and counties around the country are enacting construction bans and moratoriums, citing power costs, water use and neighborhood disruption. Some of those concerns are legitimate. But Quincy and Loudoun suggest that, handled correctly, a data center boom can be one of the more durable fiscal assets a local government can land. It’s dense commercial tax value that funds services without loading costs onto homeowners—and without the traffic, school growth or public-safety strain that housing or retail development typically brings.
The word doing the work in that sentence is “correctly.” Neither Quincy nor Loudoun bought its data centers with public money. Microsoft came to Quincy for cheap hydropower, not tax abatements. Loudoun’s advantage is proximity to fiber infrastructure and a deep regional market, not a bidding war. In both places, the county collected taxes on commercial property that would otherwise not exist, and residents got the benefit without the county borrowing against a projection.
That is not how every city is playing it. Kansas City offers the counterexample. PortKC, the city’s port authority, authorized $10 billion in bonds to help lure Meta and Google data centers to the region. Incentives for the Meta project alone could reach $8.2 billion over 37 years—more than triple the city’s entire annual budget. The promised windfall hasn’t shown up. Smithville School District, which serves the area around Meta’s Project Velvet campus, has reported tax payments in the low thousands, not the millions once projected. A national study by the nonprofit Good Jobs First found this pattern is common: data center subsidy deals frequently produce a poor return on investment, because the facilities are capital-intensive but generate few permanent jobs, often at a cost approaching $2 million per position.
The contrast is instructive for policymakers weighing their own data center proposals. A facility that pays ordinary commercial property taxes, on infrastructure a company builds with its own capital, is a genuine fiscal asset—one that broadens the tax base and can lower the burden on everyone else. A facility built on public bonds, discounted utility rates and abated taxes is a different animal entirely, and the fiscal case for it depends entirely on assumptions about future revenue that, as Smithville has learned, do not always hold up.
Local officials facing a data center proposal do not need to choose between welcoming the industry and protecting taxpayers. They need to ask which version of the deal they are actually getting. Does the developer need public financing to make the project work, or is it paying its own way in exchange for land use approval and grid access? Are the tax projections independently verified, or supplied by the developer’s own consultants? Is there a clawback provision if promised revenue does not materialize? Quincy and Loudoun did not need a special deal to benefit from data centers—they needed the industry to show up and pay ordinary taxes on extraordinarily valuable property. Cities chasing the next data center campus should ask why they’d need to offer any more than that.
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]]>The post Texas won the data center boom. Now comes the bill appeared first on Better Cities Project.
]]>For years, Texas offered many of the things technology companies wanted: relatively inexpensive energy, abundant land, low taxes and a government eager to attract investment. Data centers followed.
Now state officials are trying to figure out what all that success is going to cost.
On Monday, Gov. Greg Abbott ordered the Public Utility Commission of Texas and the Electric Reliability Council of Texas, or ERCOT, to audit data centers seeking to connect to the state’s electric grid. New approvals are effectively on hold while the review proceeds.
The numbers help explain the concern.
Paul Cobler of The Texas Tribune reports that ERCOT is tracking more than 1,800 proposed projects representing 474 gigawatts of potential electricity demand. About 90% of those requests come from data centers, according to Abbott. ERCOT’s record peak electricity demand is about 91 gigawatts.
No one expects all 474 gigawatts to materialize. Many projects will never be built, and others may be speculative requests from developers trying to reserve a place in the queue.
But that presents its own problem. Texas has to plan its electric grid years in advance. Regulators cannot intelligently decide where new transmission lines, substations and generation will be needed if they cannot distinguish serious projects from placeholders.
Abbott wants considerably more information. The audits will examine expected electricity demand, on-site generation, water consumption, cooling systems, ownership, neighborhood impacts and tax incentives. ERCOT has paused its existing process for evaluating large new electricity users while the review proceeds.
Texas’ experience also raises a familiar economic-development question: What happens when government succeeds in attracting the investment it has been subsidizing?
Texas has been generous.
In April, Cobler and Apurva Mahajan of The Texas Tribune reported that the state’s sales-tax exemption for data centers is costing more than $1 billion annually. The state comptroller estimated Texas would forgo $3.2 billion in sales-tax revenue over the following two years.
Supporters can reasonably argue that Texas receives something in return. Data centers represent billions of dollars in private investment and are increasingly important infrastructure for cloud computing, artificial intelligence and other digital services. Texas may genuinely be one of the best places in the country to locate them.
But the tax breaks are only part of the public cost.
As viable projects move forward, someone also has to pay for the transmission lines, substations and other infrastructure needed to serve them.
Abbott has directed state regulators to make the data centers themselves bear those costs.
In June, he directed state regulators to require data centers to fully fund the electric infrastructure needed to serve them rather than shifting those costs to residential customers. He also called for phasing out what he described as outdated tax incentives and requiring better reporting of electricity and water use.
Texas regulators had already been considering the same issue. Shelby Webb of E&E News by POLITICO reported in May that regulators were considering changes to transmission charges for large electricity users, primarily data centers, to keep residential customers and small businesses from bearing a disproportionate share of billions of dollars in grid improvements.
That is an important distinction in economic-development policy. A project can bring substantial private investment to a community and still impose substantial public costs. Counting the former while ignoring the latter makes almost any development look like a bargain.
Texas is also discovering how difficult those costs can be to calculate.
According to the Tribune, regulators surveyed data center operators about water consumption, cooling systems, electricity demand and power sources. Only 28 companies, representing 92 facilities at various stages of development, responded. The PUC could not say how many surveys it had sent.
That is not much of a basis for planning billions of dollars of infrastructure.
Still, Texas should be careful not to overcorrect. A lengthy or unpredictable approval process could discourage viable projects along with speculative ones.
Webb reported Tuesday that Abbott’s order has disrupted ERCOT’s plans for evaluating new large-load projects. ERCOT had expected as much as 200 gigawatts of proposed projects to qualify for its first review group, although officials believe roughly 65 gigawatts are more likely to be built through 2032.
That gap illustrates both the problem and a possible solution.
Texas does not need to choose between subsidizing data centers and stopping them. It can require developers to provide credible information, establish predictable rules and make projects pay for the infrastructure necessary to serve them. Companies can then decide whether the economics still work.
For years, states and cities have competed to attract large developments by offering tax breaks and other incentives. The announcement usually focuses on how much money a company promises to invest.
Texas’ data center boom is a reminder that investment is only one side of the ledger.
One must count the costs, too.
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]]>The post London’s housing crisis is a warning about the power to say no appeared first on Better Cities Project.
]]>London suggests that zoning is only part of the story.
The British capital does not rely primarily on the sort of zoning familiar to American cities. England instead uses a discretionary planning system. Projects are considered individually against local plans and a range of other “material considerations.” The development plan matters, but compliance with it does not necessarily settle the question.
That distinction may sound technical. Its consequences are not.
The Wall Street Journal recently reported that London needs an estimated 1.1 million additional homes just to reach the Western European average for homes per capita. The city has an official annual target of roughly 88,000 homes, yet construction began on only 4,170 units in 2024–25.
One proposed development in Shoreditch has spent four years seeking approval and produced more than 9,000 pages of documentation. Planning officials rejected it in part because demolishing two existing office buildings would erase what they considered an interesting period of industrial history.
That is not zoning in the traditional American sense. But for someone trying to build housing, the distinction may offer little comfort.
Political scientist Francis Fukuyama has used the term “vetocracy” to describe systems with so many opportunities to block action that accomplishing almost anything becomes difficult. Housing policy offers plenty of examples. Zoning can serve as one veto point. Planning commissions, neighborhood advisory boards, historic preservation bodies, environmental reviews, administrative appeals and discretionary staff decisions can serve as others.
Better Cities Project has examined how public participation can gradually become an unofficial neighborhood veto. New York City is working to reduce the influence of advisory bodies that can slow or obstruct development. The problem is not that residents have opinions about development. They should. The difficulty comes when an advisory process gives existing residents repeated opportunities to stop projects that otherwise meet a city’s rules and stated housing goals.
London provides a useful comparison because it separates two problems that are often treated as one.
Zoning usually sets the limits in advance. Before anyone proposes a project, the law already determines what can and cannot be built.
Discretionary review creates a different problem: uncertainty after the fact. A project may appear acceptable under existing plans, but developers still cannot know whether officials will approve it, what additional studies will be required or what objections may emerge before a final decision.
That uncertainty is not free.
The Journal describes one London developer who spent £40,000 on an application to convert a derelict building in Hackney into two apartments. The council said a decision should take eight weeks. Two years later, the developer was still waiting.
Along the way came requests for additional reports on trees, sustainability and sunlight. Each new request sent the project back through public consultation. Financing, insurance, security and other carrying costs continued to accumulate. The developer estimated that the process could eventually cost more than £200,000.
Nothing in that story requires a zoning prohibition. Delay can do the work instead.
The same dynamic appears in American cities even when the institutions have different names. Kansas City-area projects have been slowed or stopped by public processes and neighborhood opposition to additional housing. A project need not be formally prohibited to become economically impractical. Delay, litigation and repeated opportunities for objection can produce much the same result.
That complicates the usual discussion of zoning reform.
Allowing duplexes, apartments or greater density on paper matters. But the reform means less if local government then subjects those projects to several additional rounds of discretionary approval. Remove one veto point and political pressure may simply move to another: design review, historic preservation, neighborhood commissions or some other stage of the process.
None of this requires eliminating public input. Residents often know things about a site that planners and developers do not. Public participation can identify drainage problems, traffic conflicts and other legitimate concerns.
The question is what happens after that information is provided.
A system designed to gather useful information is one thing. A system that allows substantially the same development question to be reconsidered again and again is something else.
Cities can reduce that uncertainty by moving more compliant projects toward by-right approval, in which developments that meet established standards can proceed without another political vote. They can also make greater use of pre-approved housing plans to reduce design and permitting delays while still allowing cities to establish health, safety and design standards in advance.
Austin offers another example. Its recent housing reforms did not depend on a single change. The city allowed more housing types, loosened parking and lot-size rules and also worked on the development process itself. Housing supply responds not only to what cities allow on paper, but also to how difficult they make it to turn permission into an actual building.
London is a reminder that cities have more than one way to prevent housing from being built.
Restrictive zoning is one. A process with enough discretion, delay and opportunities to say no can be another.
Rewriting the zoning map may be necessary in many American cities. But it may not be sufficient.
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]]>The post Tax subsidies should have a test they can fail appeared first on Better Cities Project.
]]>The usual debate is over whether those incentives are too generous, too costly or unfair to taxpayers who do not receive them.
Justin Marlowe of the University of Chicago asks a more basic question in his paper, “Evaluating State Tax Incentives: Challenges and Adaptations:” how do we know whether these programs do what lawmakers say they are supposed to do?
Washington State has spent nearly two decades trying to answer that question. Since 2006, its Joint Legislative Audit and Review Commission has reviewed hundreds of tax preferences using a performance-audit framework. Rather than beginning with an estimate of how much revenue a tax break costs, evaluators begin with the stated policy objective and ask whether the incentive accomplished it.
That sounds like a low bar. Marlowe’s paper shows that it is not.
In 68% of Washington’s full reviews, lawmakers had not clearly stated the objective of the tax preference when they created it. Evaluators had to infer the purpose from statutory language, legislative history and other evidence. Only two incentives in the review record included measurable performance metrics.
That finding may be the most important in the paper.
A tax incentive cannot be evaluated very well if no one says in advance what success looks like. “Create jobs,” “promote development” and “support an industry” sound like goals, but they leave enormous room for interpretation. How many jobs? Compared with what? Would the investment have happened anyway? How long should the benefit last? What result would justify ending the program?
Without answers to those questions, almost any outcome can later be presented as evidence of success.
Washington eventually began requiring new tax preferences to include performance statements identifying their purpose and public-policy objective, along with measurable metrics where applicable. That does not settle every argument over subsidies, but it changes the starting point.
The state’s experience also offers a useful warning. Evaluation is not the same thing as reform.
Washington auditors often recommend continuing a tax preference or asking the legislature to clarify its purpose. Recommendations to terminate or allow incentives to expire are less common. And even when auditors conclude that a preference should end, lawmakers do not always follow their advice.
That should not be surprising. Once a subsidy exists, it develops beneficiaries. Those beneficiaries have an obvious reason to defend it, while the cost is spread among taxpayers who may have little idea the program exists.
This may help explain another of Marlowe’s findings. Washington’s review system appears to have had its greatest influence before new incentives are enacted. More recent tax preferences are far more likely than older ones to include expiration dates.
That matters because it is easier to require accountability when a program is created than to dismantle it later. A sunset clause does not guarantee that an ineffective subsidy will disappear. Legislatures can extend programs, and politically powerful beneficiaries can still win favorable treatment. But an expiration date at least forces lawmakers to revisit the question.
Much of economic-development policy still works in the opposite direction. A project is announced. Consultants produce estimates of jobs, investment and tax revenue. Public officials approve an incentive package. Years later, when someone asks whether the subsidy actually produced the promised results, the answer is often difficult to determine.
The problem is not always that officials are hiding something. Sometimes the information was never collected. Sometimes no one agreed on the relevant measure. Sometimes the original goals were so broad that there is no meaningful way to judge the outcome.
Washington’s experience suggests a better approach: Before approving a subsidy, lawmakers should identify the public purpose, establish measurable criteria, require the necessary data, provide for independent evaluation and set a date when the program will expire unless it is affirmatively renewed.
I asked Marlowe whether the same approach could be applied to individual economic development deals, such as TIF or negotiated tax abatements. He said the answer is yes, but with an important caveat: evaluating individual local incentives is much harder.
Statewide programs can sometimes be evaluated by comparing states, regions or industries, or by measuring results before and after an incentive takes effect. A single project offers fewer opportunities to determine what the subsidy actually caused and may require more detailed data than evaluators can obtain.
That does not make evaluation pointless. For a project-specific incentive, officials can still determine why public assistance is necessary, establish what level of new investment and how many net new jobs are expected, identify what data will be collected and decide how the results will be judged. Those questions should be answered before the deal is approved, not invented after the fact.
The independence of the evaluator matters, too. Economic development agencies are usually charged with attracting investment and administering incentive programs. Many are funded through fees that are collected from approved projects. That does not make them dishonest, but it does create an institutional tension when they are also expected to judge whether their own programs succeeded. Washington places much of this work with a legislative audit body that operates under professional auditing standards.
Marlowe does not present Washington as a perfect model. Evaluators still encounter poor data, vague legislative intent and political resistance. Some large tax preferences receive less scrutiny than their fiscal size would seem to warrant. And a good audit cannot force a legislature to act.
But the paper points toward a useful standard for states that continue to use tax incentives.
They do not have to resolve the larger ideological argument over whether subsidies are good or bad. They can begin with something more practical: define the purpose, decide how success will be measured, review the results independently and require lawmakers to reconsider the program after a fixed period.
A subsidy that cannot fail a meaningful test is not really being evaluated. Governments should be careful about spending money on programs they have no way to judge.
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]]>The post The World Cup may have boosted spending. That isn’t the same as economic growth. appeared first on Better Cities Project.
]]>According to a July 20 article in The Wall Street Journal, the Scots drank Boston dry, Dutch fans filled Kansas City hotels and French visitors ate their share of Philadelphia cheesesteaks. The Journal reports that soccer fans “opened their wallets and boosted spending” across host cities, with places such as Kansas City and Philadelphia apparently enjoying particularly strong increases in tourism.
That sounds like a successful event. It does not necessarily amount to economic growth.
The distinction matters because cities routinely justify public spending on stadiums, convention centers and major sporting events by promising an economic return. Increased hotel occupancy and restaurant sales are certainly good news for the businesses receiving that money. But measuring the economic effect of a major event requires considerably more information than anecdotes about busy hotels and crowded bars.
The Journal article itself acknowledges that the complete tally is still being calculated. Yet its headline describes a “surprise economic boost,” while the story says some business owners are already “claiming economic victory.” Based on the evidence presented in the article, however, what host cities experienced was an increase in tourism and visitor spending. Those are measurable and worthwhile outcomes. They are not, by themselves, evidence of net economic growth.
To establish that, analysts would need to answer several additional questions.
How much of the spending was genuinely new to the local economy? How much spending by residents was simply shifted from one business to another? Did regular tourists avoid host cities because of higher prices or crowds? How much did local governments spend preparing for and hosting matches? And how much of the revenue generated by the tournament ultimately remained in the local economy?
Economists studying major sporting events have long warned about these effects. The most important is substitution: A local resident who spends $100 at a World Cup event may have spent that same $100 at another local restaurant, theater or entertainment venue. From the perspective of one business, the tournament generated additional revenue. From the perspective of the metropolitan economy, much of that spending may simply have moved around.
Then there is displacement. Major events can attract visitors while simultaneously discouraging people who would otherwise have traveled to the city. Hotels may be full and room rates may rise, but that does not tell us how much additional economic activity occurred compared with what would have happened without the event.
None of this means the World Cup was a bad deal for host cities. Quite the opposite may eventually prove true. Kansas City, Philadelphia and other hosts could benefit from international exposure, repeat tourism and the experience of successfully managing an enormous global event. Residents may also value the experience itself. A city does not need to pretend every public celebration is an economic-development program to conclude that it was worthwhile.
But those benefits should be evaluated on their own terms.
The early evidence described by The Wall Street Journal supports a narrower and still positive conclusion: The World Cup brought visitors to American cities and those visitors spent money. Some hotels, restaurants and other tourism businesses apparently did very well. That is worth reporting and cities should examine the final numbers when they become available.
What policymakers should resist is converting a month of visible activity into an unsupported claim of economic growth. Busy sidewalks are not a gross domestic product calculation. Full hotels do not account for public costs. A restaurant owner having a record week cannot tell us whether the metropolitan economy as a whole grew because of the tournament.
Cities competing for the next major event will inevitably hear forecasts about visitors, spending and economic impact. The World Cup offers a useful reminder to separate those concepts. Visitor counts can be measured. Hotel occupancy can be measured. Tax collections can be measured. Net economic growth is harder to establish.
The World Cup may ultimately prove to have produced meaningful economic gains for its host cities. If so, the evidence should demonstrate it. Until then, cities can celebrate a successful tournament without turning crowded bars and full hotels into an economic-growth statistic they do not yet have.
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]]>Although the Supreme Judicial Court removed the proposed statewide rent-control initiative from the November ballot because of a defect regarding religious exemption, the political campaign for rent regulation has not ended. Governor Maura Healey’s openness to allowing localities to adopt rent control still raises an important question: has Massachusetts forgotten the lesson behind its own housing reforms?
Healey and the legislature should be congratulated for continuing to make housing a priority, including by implementing statewide reforms and enforcing the MBTA Communities Act enacted under Governor Charlie Baker. Those reforms deserve recognition. More importantly, they deserve to be continued.
Consider what Massachusetts has actually done.
The MBTA Communities Act recognized that housing shortages are not merely local problems. When one community refuses to allow new housing, the consequences do not stop at the town line. They are borne by workers who commute farther, employers who struggle to attract employees and families priced out of their communities. Housing supply rightly became a state concern.
The legislature reached the same conclusion when it legalized accessory dwelling units statewide. Rather than creating another subsidy or housing program, lawmakers simply made it legal for homeowners to build an ADU that many communities previously prohibited
These reforms are promising because they don’t attempt to make housing more affordable by addressing downstream effects such as cost. They go directly to the problem of affordability by making it easier to build. The Commonwealth has increasingly recognized that local land-use decisions increase costs.
The renewed interest in rent control, however, weakens that focus on addressing the problem by trying to manage the effects.
Supporters of rent control are responding to a genuine problem. Housing costs have risen faster than incomes across much of Massachusetts, and many tenants face real hardship.
But rent-control policies address a symptom of inadequate housing supply — high prices — rather than the underlying shortage. Even if it succeeds in limiting rent increases for some existing tenants, it does not create more housing. Over time, Massachusetts would risk the same negative effects rent control has produced elsewhere: less investment, a smaller rental supply and reduced mobility. To the degree it fails to address housing costs, it can leave current and future tenants competing for an even smaller supply of rental housing.
Rent control is not just a different policy prescription, it is a different diagnosis. In one important respect, it reverses the direction of recent reforms. Where the MBTA Communities Act recognized that municipalities cannot always be relied upon to produce zoning outcomes consistent with statewide housing needs, the rent-control compromise would return more consequential authority to those same municipalities.
The policy distinction matters because it determines what leaders do next. If Massachusetts believes in its own reforms — and I think it should —the logical next step is to continue reducing unnecessary barriers to housing construction, expanding opportunities to build by right and limiting the ability of local processes to discourage housing construction.
Massachusetts should be congratulated for thinking bigger on housing and by focusing on root causes. Housing affordability starts with housing availability. It should not now undermine those successes by weakening its resolve, or reversing course altogether.
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