In 2002, the Michigan Privatization Report dedicated an entire issue to
dismantling the state's economic development complex — the myriad programs
designed to create jobs where central planners think too few exist. One of the
articles, "If You Build It, They Won't Come," critiqued a government effort to
create a shopping plaza anchored by a grocery store in the Northside
neighborhood of Kalamazoo. Northside's experience shows that a business won't
stay just because government builds it.
The grocery store
project was well-funded: The Michigan Economic Development Corp. — the state's
official "jobs" department — promised $1 million; the federal government
contributed $300,000; and the city of Kalamazoo dedicated $200,000 to the
After more than three
years of planning and delays, the grocery store finally opened and was met with
great fanfare. Indeed, public interviews and comments suggested that the deal
had panned out nicely and was bringing much-needed direct and indirect jobs to
the neighborhood. The new grocery store and plaza even got positive coverage in
the Congressional Quarterly, a popular periodical read by members of the U.S.
Congress and other "movers and shakers."
But a funny thing
happened on the way to economic nirvana. Despite generous subsidies, the
grocery store closed in May of this year, less than six years after opening.
The tale of this
economic "winner" is really one of government economic development work in the
Great Lakes State. It involves the redistribution of tax money in the name of
jobs; government officials' false belief that they can increase total jobs in
specific geographic areas; and a disregard for past experience and evidence.
In the first MPR article
on the Kalamazoo grocery store project, we argued that:
- Three previous attempts by
private vendors risking their own money had already failed at this precise
location. Why would the fourth time — with taxpayer dollars — be the charm?
- The neighborhood in
question had high crime rates, and thus it was difficult to attract shoppers,
let alone service-providing vendors.
Michigan Privatization Report and other Mackinac Center work, analysts have
pointed out that taxing some to give to others does not create new jobs, but at
best just shifts them around.
The grocery store's
operations may have ceased, but government efforts have not. The Kalamazoo
Gazette reports that the Northside Association of Community Development would
like another grocer to take over the building. In June 2009, the Kalamazoo City
Commission allocated $250,000 of federal stimulus funds to help "resurrect a
grocery store in the city's Northside neighborhood," according to The Gazette.
The first $50,000 is slated for maintenance on the empty grocery store.
One has to wonder how
many of these development initiatives need to fail before officials at all
levels of government get the picture. Even if AutoWorld's inglorious implosion
— both figurative and literal — wasn't enough to dissuade policymakers from
such gambits, examples of failure abound. A quick summary shows this folly:
- Some $35 million in local,
state and federal funds was invested in AutoWorld, a seven-acre theme park in
downtown Flint. The park, which opened in 1984, was supposed to draw 900,000
visitors annually and revive the beleaguered city. It closed after only two
- Construction of Cereal
City USA in downtown Battle Creek, was made possible by a $900,000 loan the
city secured from the state. The attraction, which opened in 1998, was billed
as "a land of wonderful, interactive experiences and entertainment for the
entire family, as they explore the birth, development and global impact of the
cereal industry." Officials estimated that the park would draw 400,000 visitors
annually, but it was shuttered in January 2007 after years of dismal
- The Kalamazoo Aviation
History Museum secured a $3 million state grant to launch construction of an
aviation theme park. The attraction was touted as "a centerpiece for economic
development and tourism in southwestern Michigan," and local officials hoped
that the state would finance half of the $80 million construction cost. A 25
percent hike in the local hotel tax also was considered. Ultimately, the grant
money was returned to the state after the project was scaled back for lack of
- The city of Pontiac
invested $55.7 million to build the Silverdome in 1975. The Detroit Lions
relocated to Detroit's Ford Field in 2002. Although the team paid the city $26
million for breaking its contract, Pontiac continues to incur a hefty deficit
in maintaining the 127-acre site.
A better economic
development approach would be for local units of government to make sure their
public services are effective and efficient and then roll back the costs of
living, working and investing in the community. The likely result would be a
far stronger economic base, and one that can easily induce grocers to open
stores without targeted subsidies or other incentives.
Michael D. LaFaive is
fiscal policy director at the Mackinac Center for Public Policy.