Working in Iowa

 

 

There are two fundamental phenomena at work in our metropolitan centers.   First, over a very long period of time, rural residents have persistently migrated towards more densely populated urban areas in search of jobs.  Second, within those densely populated urban areas, most especially following World War II, there has been equally persistent population growth in the suburban fringe areas coupled with stagnation and decline in the central cities.  

 

Competition for people was round one.  Round two is the intense and intensifying competition for jobs that has beset all communities and states.  Across the U.S., as central cities struggled, suburban office parks, shopping centers, and other transportation-friendly commercial activities sprung up.  Jobs decentralized, and the suburban areas mostly ignored the gripes and laments of central city officials. Commerce was locating precisely where it needed to be, after all. It is so easy to be smug when you are on the plus side of the ledger.

 

With the competition for jobs now reaching a frenetic level in this recessionary environment, the stakes have risen sharply.  It rarely happens, but we occasionally do hear of a developmentally advantaged suburban area griping they’d been undone by the core city. Usually, though, it is the other way around.

 

This all makes the recent goings-on in the Cedar Rapids area somewhat fun to watch.  The web-domain site, Go Daddy, founded by Hiawatha native Bob Parsons, had tentatively committed to buy, remodel, and occupy a facility in Hiawatha.  Good news for Hiawatha.

 

But wait!  The city of Cedar Rapids in a desperate, if not somewhat underhanded, effort to repopulate its flood-devastated downtown area upped the stakes. It matched Hiawatha’s offer, threw in an office building to boot that the city would remodel to suit Go Daddy, plus added free parking for its employees.

 

Your bid, Hiawatha.

 

Hiawatha folds. 

 

Let’s sort out the winners and losers.  First, if Cedar Rapids gets the firm over Hiawatha it is important to note that the area economy is not better off one way or another.  The economy does not care where Go Daddy locates in the metro.  From a political and public relations point of view, in the initial round, the mayor and former economic development director, Ron Corbett, along with the city’s Chamber of Commerce will come off looking great, nonetheless, as it is the appearance of economic development that matters.  After all 500 jobs are nothing to sneeze at, even if they would have been in the area nonetheless.

 Re-elections, backslaps, and bonuses all around.

 

There is another huge winner that no one ever pays attention to.  This wheeling and dealing process is brokered by a company called CRBE out of Phoenix, which is an industrial site-selection firm that assists businesses to find the right communities for their needs, which are usually infrastructure, workforce, and other critical business and social requirements. In recent years, as the job competition stakes increased, site selection firms profited massively because they take a healthy cut of the state and local incentives that they negotiate above some expected base level.  Think about it: they get to play both sides against the middle, and no matter what, they always get a good piece of the public incentive pie.

 

The City of Hiawatha is obviously a loser in that anticipated growth has evaporated, but they are not the biggest loser.  In the short run, say the next 10 years, the Cedar Rapids taxpayer stands to lose the most.  There is no way that company will generate sufficient business activity to yield new local taxes net of public service costs to pay the taxpayer back the full amount of subsidy committed.  Accordingly, their “return on investment” better be something darned important to society because it sure as heck won’t be financial.  Helping to restore the central city might be that thing, but the restoration process is a long slog, and if each restoration piece is this pricey, it is going to start hurting in a hurry.  After all, the city has explicitly set the going rate for job growth there.

 

I was asked in an interview what guarantees the city had that Go Daddy would add the promised jobs and stay.  Contracts can be written so that public support would be repaid in full if specific objectives and timelines were not met.  But as to whether a firm like Go Daddy could be trusted to keep its word, just go ask Hiawatha.

 

Oh, the biggest winner? That would be Go Daddy. Go Daddy hired the site selection firm, stands to profit handsomely nonetheless from the entire bidding process, and looks to have played the two cities like a violin.

 

And city and development officials played area taxpayers for chumps, as usual.