22 replies to this topic

[tSlater]

But, at least for the short-term, that 1% income tax would need to be replaced by another source of revenue.

[Jippy]

x99, on 04 October 2011 - 09:02 PM, said:

... because you don't just get to say, "We're the super important City so we can impose a tax the surrounding areas do not impose, and expect that it will have no impact." This is not Chicago. Companies do not relocate downtown because of the "prestige" of downtown. Business flees downtown because downtown is generally not an economically prudent choice save all but a very few select industries. Riddle me this: What happens if you move the Kent County Courthouse to the Beltline? Desolation, that's what. Attracting industries that don't otherwise have a good reason to be there is a challenge the City is not facing all that well. Wishing for all of these improvements does no good unless you've got a sustainable model to attract and retain people and business to the downtown environment. The current tax structure does not provide for this--not even remotely. Amway would have to be run by a gang of fools for them to move themselves downtown. It just isn't going to happen unless the powers that be stop looking at people with money as people with pockets for the picking, which is precisely what a city income tax does. We used to have a scenario where downtown space was so cheap you couldn't give it away--that made it a bargain for many. Now, that isn't so much the dynamic. When the cost-structure hits parity or close to parity with the 'burbs, you have--like it not--got to come up with the next great thing to finance all of these projects. In the past, it was possible to put the cart before the horse because someone was basically giving away free carts. That is no longer the case. Hence, my odd desire to see droves of City workers hitting the streets coupled with a municipal bankruptcy filing in 2012. I want to see all of these infrastructure dreams come to fruition, thus my rather curious "behind the scenes" vision designed to save the City oodles of dollars destined to finance the future.

This view is not an accurate representation of how locational decisions are made. For a regional CEO to determine a new HQ location, existence of local income taxes will only be one of many factors. Other equally or more important factors would include efficiency of transportation/infrastructure, land prices, visibility, adjacent amenities, and the ability to attract/retain top talent. To say that Grand Rapids will never attract major employers downtown because of a 1% income tax is an overly simplistic analysis on the implications of taxing policy. If I were a CEO, I would happily consent to the tax if I viewed sufficient return on that investment based on the other factors. To make a decision based entirely on the existence of an income tax would be more of a political statement than a decision grounded in sound business methodology.

The other underlying factor in HQ geographic determination is that of inertia. Once a certain level of momentum is achieved in moving out to the suburbs (the past 50 years), or back into the city (perhaps over the next 10 years?), other companies will be more apt to follow suit. This can be witnessed in NYC and Pittsburgh primarily, but the beginnings of this trend may be occurring in Detroit and Chicago as well.  In my opinion, companies remain conflicted to both follow the norm and distinguish themselves from the pack. Downtown versus suburbs is one of those areas where cities could do a better job of "peer pressuring" other companies to move downtown. The first company move can be used as leverage for further relocates.  What is happening right now in Detroit with Compuware and Quicken Loans (Dan Gilbert) is an excellent template to follow.

[GRDadof3]

x99, on 04 October 2011 - 09:02 PM, said:

... because you don't just get to say, "We're the super important City so we can impose a tax the surrounding areas do not impose, and expect that it will have no impact." This is not Chicago. Companies do not relocate downtown because of the "prestige" of downtown. Business flees downtown because downtown is generally not an economically prudent choice save all but a very few select industries. Riddle me this: What happens if you move the Kent County Courthouse to the Beltline? Desolation, that's what. Attracting industries that don't otherwise have a good reason to be there is a challenge the City is not facing all that well. Wishing for all of these improvements does no good unless you've got a sustainable model to attract and retain people and business to the downtown environment. The current tax structure does not provide for this--not even remotely. Amway would have to be run by a gang of fools for them to move themselves downtown. It just isn't going to happen unless the powers that be stop looking at people with money as people with pockets for the picking, which is precisely what a city income tax does. We used to have a scenario where downtown space was so cheap you couldn't give it away--that made it a bargain for many. Now, that isn't so much the dynamic. When the cost-structure hits parity or close to parity with the 'burbs, you have--like it not--got to come up with the next great thing to finance all of these projects. In the past, it was possible to put the cart before the horse because someone was basically giving away free carts. That is no longer the case. Hence, my odd desire to see droves of City workers hitting the streets coupled with a municipal bankruptcy filing in 2012. I want to see all of these infrastructure dreams come to fruition, thus my rather curious "behind the scenes" vision designed to save the City oodles of dollars destined to finance the future.

You do realize that corporations do not pay the 1% city income tax, right?  And that companies are moving downtown and expanding downtown for the prestige? A lot of them.  There are financial challenges to having a business downtown. The cost of land is one, meeting parking demands is another.  Neither of those would change with dropping taxes or the city filing bankruptcy (absurd).