Oro Valley's recent decision to yield its status as Arizona's subsidy capital didn't come a moment too soon. The first report for two sales-tax rebate subsidies awarded for Oracle Crossings Center and Steam Pump Village are in, and the results are predictable.
The first project forecast sales of $106 million over the last two fiscal years, which would have generated $2.12 million in sales tax revenues; but instead produced $35.5 million in sales and only $441,000 in sales tax revenue. The second projected sales of over $26 million and tax revenue of $525,000, and instead produced sales of $2.1 million and tax revenues of $46,000. In both cases, nearly half of the sales tax revenue will revert to the developers.
Explanations for the revenue paucity include delayed construction and insufficient demand for retail space. Could it be that the market is telling the town something?
The Oro Valley experience is only the latest evidence that politicians are lousy investors. A few years back, Tucson gave Slim-Fast a big subsidy to build a plant; within a few years the plant went bust and the promised jobs disappeared-along with the taxpayers' money.
Arizona's founders had their own epiphany 100 years ago: subsidies lavished upon railroad companies that never managed to lay track. Determined never to repeat that error, they wrote into the Constitution the anti-gift clause, which absolutely prohibits gifts to individuals or corporations in the form of subsidies or otherwise.
Cities have ignored the constitutional constraint, engaging in a frenzied competition over who can bestow the most corporate welfare. The Goldwater Institute's constitutional challenge to the $97.4 million subsidy of the CityNorth mall in Phoenix offers hope in reining in local government excesses.
Politicians have every right to be gamblers-but the Constitution instructs that they do so with their own money.
Clint Bolick is the director for the Goldwater Institute's Scharf-Norton Center for Constitutional Litigation.
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