Corporate Welfare in Rochester

During the recent primary election there was some talk about corporate welfare in our city.  Lisa Jacques in particular mentioned it in her newspaper interviews for both the City and D&C newspapers. So perhaps it is time to have an in depth examination of corporate welfare in our city.

Nationally, corporate welfare and business subsidies have been heavily criticized.  David K Johnston's book Free Lunch is all about this and demonstrates how these practices do not work.  There has also been articles in  national media as diverse as The Huntington Post and Forbes which agree that corporate welfare is not good for our nation.  Economists almost universally agree that these incentives do not stimulate the economy and seldom cover the costs of the incentives. New York State has even instructed its economic development agencies, including COMIDA, to stop giving out incentives for commercial property except under special conditions as they do not work.

Despite all of the facts and analysis, our city government has given out more than $584 million in corporate welfare in the last four years alone.  This is mostly in the form of tax breaks but the city has lots of smaller ways to give out money as well.  It is interesting that none of these projects are for manufacturing but almost 93 % have a major housing component.  All the remaining projects are commercial but the subsidies are not being given to the retail companies that move in, but instead to landlords who get to enjoy higher profits as a result.

The housing projects seem particularly bothersome. Our city has a vacancy rate for all units of around 9% according to the US census bureau.   This is not surprising as our city not growing but was built for a third more people to live here. As a result these new units only cause people to move to newer housing leaving older stock vacant. These vacant buildings then litter our neighborhoods driving down property values, and discouraging investment.

In the case of low income housing I can not find a case where the new low income housing is less than the cost one could find units in some areas of our city.  Thus the new low income housing draws tenants away from housing that is less expensive.  In most cases, Monroe County has to cover the higher costs of the new, low income housing projects which puts stress on the county budget.  Further putting new units into a glutted market keeps rents low on non-subsidized projects, which keeps profits low, and discourages investment in the areas of the city which most need it, and leading to property neglect.  Finally, housing by its very nature, is not a job creating activity, thus the subsidies do not do what government officials say they do.

Subsidizing commercial development is also a bad deal for Rochester.  A business is dependent upon people buying its goods and services.  In general, the only way a commercial enterprise increases spending is to draw money into the area form outside of it. Other than this new commercial only changes the locations where people spend money not the amount of money they spend.  So allowing some businesses not to pay taxes is an unfair advantage and increases the chances that the tax-paying businesses will fail which can decrease property values and decrease revenues for the city.

Finally, as most of these developers are from out of town, the tax breaks we give them also leave town. Which means that money is leaving our economy, decreasing the total amount which could be spent at stores thus hurting our local businesses.

None of this information is new and most people believe corporate welfare is not good for our community.  What we are really doing is employing trickle-down economics and this practice has been a failure at federal, state and local levels for decades.  As a theory, no serious economist believes it will ever work.  In spite of all this, many leaders in our city feel that local corporate welfare is good.  We get nice new buildings we can feel good about, while they get their picture taken cutting a ribbon. Our political leaders get campaign donations and developers get high profits. The both tell us that without this money these shinny new projects would not happen.

Mayor Tom Richards called corporate welfare, “investment” and argued that without investing in these projects there would be no growth.  The problem is that even with all of this “investing”, in the past 10 years poverty has increased, taxes have gone up, and jobs have become even more scarce. By almost any measure these look like bad investments.

Unfortunately the recent report from the Anti-poverty task force ignored the effect this sort of spending has had on poverty in our city. These benefits to the wealthy have come at the expense of the poor in our community.  While millions are being given to these developers our city leaders have cut library hours, recreation, summer hiring, teen court, anti violence initiatives, and many other services while it raised taxes, fees, and fines.  The result does not favor the poor in our city and yet has totally escaped any discussion of the poverty problem in our city.

By any methodology, corporate welfare in Rochester has only made use poorer.  That is why it is so important that we have a changing of the guard in our local government.  We have been using trickle-down economics for years and what we have gotten is deteriorating neighborhoods, vacant houses, drug dealing, violence, and failing education. Yet every City Council member and our Mayor have supported 48 projects with more than half a billion dollars that we will never get back.  What we need to do is start investing in people.  We should be helping poor people build assets rather than increase wealth for the richest in our society and the first step toward this is to end corporate welfare at the local level. Only then will we be finally able to see true growth in Rochester.


Tax Breaks January 2012 to April 2015 given by the City of Rochester
Project Date Tax Breaks yearly duration tax breaks total Loans grant other
Davis St Turnkey project 01/01/12 $32,000.00 20 $640,000.00


Sahlen Stadium 01/01/12



$31,000.00 $72,000.00
El Camino Estates 02/01/12 $200,000.00 30 $6,000,000.00 $500,000.00

Holy rosary Apartments 02/01/12 $500,000.00 20 $10,000,000.00 $1,125,000.00

Carriage Factory 03/01/12 $800,000.00 20 $16,000,000.00 $2,500,000.00

Flats at Brooks Landing 03/01/12




$385,000.00

05/01/12


$900,000.00

Collegetown 03/01/12 $3,300,000.00 20 $66,000,000.00 $20,000,000.00
$2,700,000.00

04/01/12




$990,000.00

11/01/12




$3,450,000.00
Downtown Residential Tax Breaks 04/01/12 $450,000.00 10 $4,500,000.00


SON Housing Project 04/01/12 $200,000.00 30 $6,000,000.00 $105,000.00

Latta Meech House 04/01/12


$100,000.00 $50,000.00
Windstream building 04/01/12




$3,000,000.00

12/01/12




$5,150,000.00

02/01/13




$5,882,000.00

02/01/13




$2,957,850.00

02/01/13




$1,400,000.00

04/01/13




$575,000.00

09/01/13




$550,000.00
Hardy Park Apartments 05/01/12


$825,000.00


06/01/13


$300,000.00

Corm Hill Townhomes 09/01/12




$48,000.00
Sibley Building 09/01/12



$4,600,000.00

03/01/13




$993,750.00
Erie Harbor apartments 09/01/12




$480,000.00

09/01/13




$172,000.00
350 State St 10/01/12


$300,000.00

Pinnacle Place Apartments 10/01/12 $1,000,000.00 30 $30,000,000.00 $2,000,000.00

Olen & Kennedy tower 11/01/12 $1,200,000.00 30 $36,000,000.00


293 Hamilton St 02/01/13



$50,000.00
St Joseph's Parking 03/01/13




$15,600,000.00
Marina project 03/01/13




$300,000.00

09/01/13




$3,130,000.00
Harris Park Apartments 07/01/13 $424,000.00 32 $13,568,000.00 $8,300,000.00

Midtown Tower 07/01/13 $1,700,000.00 20 $34,000,000.00 $6,700,000.00
$7,661,000.00
Marketview Heights 09/01/13 $532,000.00 30 $15,960,000.00 $300,000.00

Cox Building 09/01/13



$1,000,000.00
Michelsen Mills Project 11/01/13 $572,000.00 30 $17,160,000.00 $1,850,000.00

Bevier building 11/01/13 $100,000.00 20 $2,000,000.00 $750,000.00

Lake Ravine Apartments 02/01/14


$950,000.00

34 Stutson St 05/01/14


$200,000.00

Straub St infill project 06/01/14



$232,360.00
Stadium Estates 06/01/14 $297,000.00 30 $8,910,000.00 $800,000.00

Bausch Lomb 07/01/14 $1,125,394.00 20 $22,507,880.00


Eastman Garden Apt 09/01/14 $600,000.00 30 $18,000,000.00 $600,000.00

Citigate 10/01/14 $5,505,000.00 20 $110,100,000.00


Wedgepoint Apartments 03/01/15 $500,000.00 30 $15,000,000.00 $400,000.00

Totals


$432,345,880.00 $49,505,000.00 $47,363,360.00 $55,527,750.00















$584,741,990.00


















































































































































































































































































































































































































































































Listen to Alex...

...on Transforming Rochester on Rochester Free Radio. You can see when it's on at the Rochester Free Radio show schedule.

Search This Site

Labels