By Tom Westmoreland
We are currently in a recession. The reasons for the recession are not important for this article but it is a fact that the recession is not a natural, market-driven variety.
There have been and will continue to be efforts to stimulate the economy and provide relief to those that need it. At best, these financial relief programs will only be helpful in the short term and fall short of actual need. This approach is not sustainable and leaves us with a massive debt to pay.
The only long-term solution is to get everyone back to work with permanent, well-paying jobs. We need to get our economy up and roaring again. In order to accomplish this, we need to think differently and act differently than we have in the past. That means ridding ourselves of old biases that hold us back.
One of the things I believe we need to think differently about is taxes. It is no longer good enough to simply be for or against taxes. It is not even enough to evaluate taxes based who benefits from the revenue. Our goal must first and foremost be the economy. It doesn’t matter what you believe that people need for quality of life, without a strong economy, your priority is in jeopardy of being cut or reduced.
In other words, quality of life is directly related to the economy. The very strength of our nation is reliant on our economy.
With the power to tax comes great responsibility but, more than that, it requires trust and confidence. It is up to elected officials to rebuild that trust. However, this can’t be a one-sided effort. We all need to learn more about the relationship between taxes and the economy. If you have business experience you most likely have a better understanding of that relationship than most. You may have even said, “If the government would just let the free market work and reduce tax burden then we would all be better off.”
There is something almost magic that happens when a business can create value and wealth where there was none before. Like planting a garden in what appears to be worthless dirt. With vision, faith and hard work there is soon a bountiful harvest.
There is something else about a free market that I find fascinating. Though competition of opposing interests can sometimes appear savage, if based on value, it will produce a higher quality product and promote honesty. This is the magic of a free market and why capitalism requires honesty and predictability in order to thrive. This can be demonstrated with the purchase of your favorite canned beverage. You buy the beverage, pop open the can and begin to guzzle it down. All this without being able to see what you are drinking, let alone have proof that the content is safe and satisfying. If at any time, you can no longer have that level of blind faith and confidence in the manufacturer, you will no longer buy the product.
This is no different with government. When I say government, I am primarily speaking of taxing entities. As government, we are stewards that must make an accounting and show our value not by our standard but by the standard of God and the people we both tax and serve. Not measured by any one part but measured in total effect on all parties. One measure of this is by demand. A city, county, state or country can measure this by people and businesses that want in or out.
The difficulty here is that taxes and fees are not simple things and not one-size-fits-all. As a clear example we see the struggle our legislature has had to improve on our state tax structure.
I think most people understand the importance of economic development, not only for jobs but to help shoulder the tax burden that residents would be left with otherwise.
Where the confusion sets in is regarding Tax Incentive Financing or TIF. The reason it can be confusing is that there are so many different varieties of TIFs. Unfortunately, those that are against TIFs tend to throw them into a one-size-fits-all thinking.
Let’s first break them down into two major categories: pre-performance and post-performance. In pre-performance, a cash or equivalent value investment is made to the company up front to be paid back in any number of ways. This type often is the first to come to mind but in fact is very rare because of the high risk and usually involves special circumstances. To my knowledge Eagle Mountain City has never done this and is not likely to.
Post-performance TIFs are very different and are the tool the Eagle Mountain uses. In these cases, a business does not receive any benefit until after they fulfill their obligations. This most often is a cash investment into the community for such things as roads, power, water, sewer, assistance to schools, and other investments in the community. If you are familiar with how impact fees work in a residential development, you will notice some similarities.
When a business does receive a tax benefit it is only after they have made an investment and after they start making money.
I often hear that these incentives are taking money away from the city, school district or whomever but nothing could be further from the truth. Through a post-performance TIF, everyone benefits. The community gets an immediate cash investment and a guaranteed growing tax base that was not there before.
Let’s use the Facebook’s Eagle Mountain Data Center for an example. Facebook invested over $100 million into the community that will get paid back to Facebook over a twenty-year period. That is like a 20-year interest-free loan that you don’t have to pay back with your current income. It is only paid back as Facebook and, as a result, the city makes money with a portion of the taxes going toward paying off the loan. On top of that, Facebook has purchased computers for the school district and sponsored class programs. They have also issued substantial grants to small businesses through the chamber of commerce, among other examples of community support.
Compare this to the tax revenue brought in from the land the data center now sits on. The grand total of tax revenue brought in by that land was less than $50 a year. I am not sure that is even enough to cover the costs to collect. Now it brings in millions of dollars per year.
So, the next time someone says that a post-performance TIF is taking money away from residents, children or anyone else, remind them of the facts. The TIF agreement created wealth where there was none before. It created a positive impact to the economy through jobs and support businesses that follow.
Eagle Mountain is geographically the largest city in Utah County and one of the largest in the state. If in 20 years it is nothing but a large bedroom community, it will be a huge burden on the county and neighboring cities in traffic alone.
If we are not preparing now for the future, the future will be plagued with difficulties and disappointment. It is as true in economic development as it is in life and planting trees. The best time for planting a tree is 20 years ago, the second-best time is today because 20 years may seem like a long time, but it comes quicker than we realize. It will come. The question is, will we be prepared?
Delayed gratification is a common theme in any discussion of success in life. This is demonstrated wonderfully in George S. Clayson’s The Richest Man in Babylon.
If we plant our economy trees and invest for the future, we will reap the fruit of our investment and others will call us lucky and fortunate.
During this time of COVID-19, we hear a lot of talk of stimulus, which is nothing more than borrowing money that we must pay back. What if we instead invest for the future, building an economy today so that when others are paying off debt, we are collecting on our investment in economic development?
This is Eagle Mountain’s plan.
Tom Westmoreland was elected mayor of Eagle Mountain in 2017 after serving on the city council for four years. He served a mission for The Church of Jesus Christ of Latter-day Saints in Indiana and attended Utah Technical College (now Utah Valley University). Prior to being elected as full-time mayor of Eagle Mountain, he worked in business development, primarily in the advertising and publishing industries. He and his wife, Rebekah, a nurse, have nine children.