Subsidies to individual companies are rarely a recipe for economic success, a new study commissioned by a Phoenix-based think tank concludes.
The study zeroed in on one deal inked by Pima County with a private company that was subsidized with $15 million of debt.
But the issues identified in Pima County "to a great extent also apply to the rest of the state," Victor Riches, president of the Goldwater Institute, told Arizona Business Daily.
The institute won a lawsuit that led to the voiding of the 2016 build and lease deal the county made with World View Enterprises, a space technology company. A judge ruled the county violated state law because the deal was not properly vetted prior to being signed.
The county is appealing the ruling that voided the deal, which led to the county building a facility near Tucson International Airport to be leased by the company.
"People are much better served when the state focuses more on being more attractive as a whole rather than incentivize certain activities," Riches said. "It does not work and is sometimes illegal."
Riches said the Worldview deal made the institute realize it might be beneficial to provide some ideas to the county and other local authorities.
The study by California State University, Northridge Professor Shirley Svorny concluded that it is much better if local authorities limit regulations and make it easier to get permits than singling out individual companies.
"Instead of negotiating subsidies to individual private firms, such as World View, Pima County should focus on efforts that make the community attractive to firms in general and to the workers they might hire,” said Svorny, an economics professor. “The county would be best off directing its resources toward local public services.”
Riches said Pima County is more challenging to do business in than other counties, but the ideas contained in the study can translate to other parts of the state.
In her study, "Economic Development in Pima County," Svorny outlines what she argued were alternatives to individual subsidies, including "limiting unnecessary regulations," revising zoning laws to facilitate location decisions and limiting the county's influence over land-use decisions.
Svorny also recommended lowering business and individual tax rates and urged the county to provide amenities, including road maintenance and open spaces for recreation. She argued for privatization of government services and highway construction.
The county board of supervisors voted 3-2 to appeal February's court ruling. County administrator Chuck Huckelberry criticized the Goldwater Institute following the ruling.
"While Goldwater is preoccupied with killing jobs in Southern Arizona, they routinely ignore other economic development incentives in their own backyard," Huckelberry said in a statement published by the Tuscon Sentinel.
He cited deals in Mesa, Scottsdale, Gilbert and other cities in Maricopa County.
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