Is Government Sponsored Economic Development = Corporate Welfare?

The city of Georgetown has established an economic development corporation (GEDCO) with its own board or directors and budgets that grant economic development funds to selected organizations. In FY17, they plan on spending $6,235,967 on debt service and economic development projects.

Many call this corporate welfare. Government is not particularly good at picking economic winners and losers or knowing when to invest and when to stop investing. Don't expect our city officials to recognize when it is time to turn off the tap of taxpayer money.

The Texas Public Policy Foundation TPPF has recently completed a study of government sponsored economic development and relevant quotes follow:

"It is important to understand that corporate welfare has the same corrosive effects as welfare for individuals and fails to live up to the core American ideal of protecting “life, liberty, and the pursuit of happiness.” 

For instance, if a large corporation used its expertise to break into the bank accounts of Texans and transfer millions of dollars into its own account, everyone would condemn this action as theft. Those who ordered and conducted the raids would be prosecuted and locked in jail. However, let the government take the money from Texans’ bank accounts and then give it to the same company and it is called economic development. 

Additionally, proponents of corporate welfare suffer from a false belief in central planning. They believe that either they or government planners can best determine what technology has the best chance of success, which jobs and products best supply society’s needs, and where best to expend scarce supplies of capital. They believe that they just can’t sit back and let the economy take care of itself; they have to take money and property from citizens in order to solve the citizens’ problems for them. 

Recommendations 

Texas is the national leader in increasing prosperity for its citizens. It has arrived at this point because it has relied on the free market model of economic development and protected the rights of its citizens while largely rejecting the government approach. Building upon this approach, Texas should reduce or eliminate current economic development programs, restrain growth in overall government spending and regulation, and reduce taxes. Relying on markets is the best way to promote liberty and boost the economy."

Where Did the Sales Tax Windfall Go?

The City budgeted $21.52M in sales tax revenue for FY16 according to their FY16 budget. It was recently reported that the sales tax refunds from the state set a new annual record of $22.6M. That is adjusted to $22.478 for FY16.

Inquiring minds would like to know where the excess sales tax revenue of $958,000 was spent. Were debt payments accelerated, the funds depositied into the Council slush fund, or were other under budgeted functions covered, like the EMS overtime?

The City needs to be transparent on how and where these funds were applied.

ICYMI(In Case You Missed It), Property Taxes are Up!

The Texas Comptroller of Public Accounts published his Biennial report on property taxes. Property Taxes

Property tax is the largest tax imposed in Texas. In 2015, property tax generated more than $52 billion for all taxing units that can levy a property tax, and it represented al most 48 percent of all taxes imposed by state government and local taxing units.

Here are two of the relevant charts.

School districts are the major extractor of property taxes from the citizens of Texas at $28B. The cities extract "only" $8B.

The percentage change in estimated population for Texas from April 1, 2010 to July 1, 2016, is available from the United States Census Bureau. Texas population grew from 25,145,561 to 27,862,596 over this time period. That is a 1.72% annual growth rate. 

Recall that inflation has been less than 2% annually over the same period. Thus, while annual population growth plus inflation for the entire state has been less than 4%, property taxes grew 6.31% between 2014 and 2015.

One should be asking their elected repsentatives why the taxes collected are growing at a 50% higher rate than population plus inflation.

Electric Fund Exceeds Budget by $6 Million

During the City Council workshop this week, it was disclosed that the expenses in the electric fund exceeded budget. The following is the city statement:

The Electric Fund experienced higher purchased power costs than projected. Capital improvement projects are also over budget due to a substation project and increased development. The fund is projected to be $6 million over expenditures. Staff are developing a plan to bring the fund into balance and to cover the 75 day contingency reserve. 

During May through August of this year, power consumption was far below normal because the temperature averaged 5 degrees below normal.  The city contracted for "near peak" power during that time and found themselves with excess power capacity which could not be sold at a profit on the market.  This resulted in a loss.

Since we have been told repeatedly that the city has a 25 year contract for wind generated electricity, presumably at a fixed price with inflation escalators, and it currently supplies 100% of Georgetown's demands, why is the city contracting with ercot for electricity at near peak rates? We have been told by city officials that these long-term contracts for wind and solar generated electricity would provide predictability and stability in electric rates.

This is why we, the citizens of Georgetown, need transparency in all the city departments, including the electric company.

Increased Appraisals Push Tax Bills Higher

Local politicians like to boast that they have held the tax rate constant or even lowered it, while your tax bill goes up because the appraised value has increased. Some of your Georgetown city council like to make this argument that they are fiscally conservative and that you, the property taxpayer is better off because your property is worth more this year than last year. This in spite of the fact that you have not received a pay increase that covers the increase in property taxes.

Kenric Ward at Watchdog details the latest issues with the county appraisal districts(CADs).

"By state law, county appraisal districts (CADs) are tasked to do one thing: set the property values that raise revenue for local taxing agencies.

Headed by boards of directors, CADs are bureaucratically opaque, institutionally autonomous and fundamentally incestuous bodies with no effective public oversight.

By state law, county appraisal districts (CADs) are tasked to do one thing: set the property values that raise revenue for local taxing agencies."

Seeking to democratize the captive CADs, Bettencourt, R-Houston, proposes mandating that all directors be elected officials within their respective counties.

“This makes them directly answerable to the citizens,” Bettencourt said of provisions in SB 2. 

Just another reason to have your state senator and state representatives back Senator Bettencourt's bill SB 2.

"Local Control" is a Perverted Big Government Argument

Local politicians and big government advocates continually use the argument that local governments should not be constrained by state law on how much they can tax citizens or whom they can annex to increase their control over more people and increase revenue without raising taxes.

Georgetown and the Texas Municipal League are both opposing any state imposed restrictions on a cities ability to increase property tax revenue.

"Conservative lawmakers, including State Sens. Paul Bettencourt (R-Houston) and Van Taylor (R-Plano), are pushing reforms aimed at slowing the growth of property taxes levied by cities and counties.

Reformers hope to limit excessive tax increases by empowering voters, not via legislative mandate. The most prominent measure would require that cities and counties obtain voter approval for a year-over-year tax increase above 4 percent." Property Tax Reform

"Why Does the Texas Municipal League Oppose Tax Reform?

Their own governing documents answer this question. TML and other tax-funded government associations exist for the sole purpose of advancing the interests of governments – including their ability to tax, spend, and borrow – not taxpayers. TML’s Constitution. Section 2.1 clearly states:"

“The purpose of this organization is to advance and sustain the interests of the cities of Texas.”

"As a governing philosophy, the “local control” doctrine is antithetical to that of our Constitutional Republic, which exists to empower citizens and protect their rights.

What TML actually supports is local government control – the unlimited power of local politicians – not limited governmen

Georgetown citizens need to get involved with the city government and hold them accountable for the budget. Question boldly all the expenditures and make the city justify the expenditures, especially the issuance of bond debt!

UT Study Shows Gas & Wind Generators Provide Cheapest Electricity

The University of Texas Energy Institute has just released a definitive study showing that natural gas and wind generators provide the cheapest electricity when the total direct and indirect costs of generating and delivering electricity is considered.  Researchers used data from existing studies to enhance a formula known as the Levelized Cost of Electricity (LCOE). They included public health impacts and environmental effects and they used available data to calculate county-specific costs for each technology.

"Natural gas and wind are the lowest-cost technology options for new electricity generation across much of the U.S. when cost, public health impacts and environmental effects are considered, according to new research released today by The University of Texas at Austin". UT Energy Institute

The full report is available at the link as well as online tools the team developed to facilitate a discussion among policymakers and others about the cost implications of policy actions associated with new electricity generation.

Taxpayers Paying $16M+ to Lobby Texas Legislators

Senator Konni Burton has determined that cities, counties and school districts spent over $16,000,000 in 2015 to lobby the state legislators. That does not include the money that the Texas Municipal League (TML) spent lobbying for the benefit of member cities, often against the best interests of taxpayers. Georgetown pays an annual membership fee to TML for them to lobby the legislature on their behalf.

Kenric Ward at Watchdog provides additional information.

"Burton says local governments do not necessarily share their constituents’ fiscal concerns when lobbying state lawmakers.

The upcoming session promises a bruising battle over property taxes. Cities, counties and school districts vow to fight legislation — including Senate Bill 2 — that seeks to lower Texas’ local levies, currently sixth highest in the nation."

You can be sure that Georgetown and TML will be lobbying our state legislators to not restrict their ability to impose whatever property tax they feel is necessary, without regard to the burden placed on the property owners.

Contact Senator Schwertner and Representative Terry Wilson and ask they support Senator Burton's bill that eliminates the use of taxpayer money for lobbying. The bill is SB 241 and the text can be found at Texas Legislature Online

Judge Finds Commissioners Violated Law Questioning Constable Applicant

"A federal judge ruled this week that three Williamson County commissioners violated a man’s constitutional rights when he was asked illegal questions during interviews for a constable’s position.

Commissioners Lisa Birkman, Cynthia Long and Valerie Covey violated Robert Lloyd’s 14th Amendment right to equal protection when he was asked questions about his opinions on abortion and gay marriage during interviews in March 2013, according to the ruling." Austin Statesman

Williamson County spent approximately $500,000 of taxpayer money defending the commissioners over the last three years. What a waste of money!