Monday, February 21, 2005

Fantabulous Day Off

Ah! One of the joys of being a Bureaucrat is that every now and then you get a completely random day off. Behold the magnificence that is PRESIDENTS DAY!

I'm going to spend all day getting deals on appliances and buying tires. Fantastic!

Anyway, couple things: First, an article in the Pittsburgh Business Times regarding the proposed cuts in CDBG funds. For all the ED people I've talked to in Pittsburgh and in THE CITY, this is bad. Bad. Bad. Bad. This will probably cut the economic development projects that Urban areas can undertake by a huge amount. Important projects will end up lingering for years, or not being done at all.

The benefits of the CDBG funding is that it helps to leverage private funds by decreasing the risk on private lending institutions. The private market may only be willing to lend 80% of the value of the project, but the government can help fill that 20% gap in order to make the deal work.

"OK," the freemarketeers ask, "Why subsidize something that the private market isn't going to support? Isn't that antithetical to the private market and isn't it indicative of a bad project."

I would argue that the positive externalities to the city/region/state (elimination of blight, reduction of crime, creation of jobs, protection of green space, reduction of polution, use of existing infrastructure, etc.) outweight the costs to the city/region/state. The private market may not be interested in the negative externalities involved in their development, but the government can help guide their decisions and create an upfront incentive for urban development.

Speaking of private markets, read the articles here and here about the upcoming Supreme Court Case Kelo et al. v. City of New London et al. It's all about the use of emminent domain for economic development. In short, the City of New London CT is looking to take property for the development of a new Pfizer research complex. The property owners are arguing that the taking by the City and the proposed development would not rise to the qualification of a "Public Purpose".

As the PG Article points out, New London never established the area as "blighted". As I recall, "elimination of blight" is considered to be a Public Purpose under PA Urban Redevelopment Law.

Definition of "Blight" in PA Law:

[T]here exist in urban communities in this Commonwealth areas which have become blighted because of the unsafe, unsanitary, inadequate or over-crowded condition of the dwellings therein, or because of inadequate planning of the area, or excessive land coverage by the buildings thereon, or the lack of proper light and air and open space, or because of the defective design and arrangement of the buildings thereon, or faulty street or lot layout, or economically or socially undesirable land uses. From 35 P.S. § 1702(a); see also 53 P.S. § 6930.2(a)( 1)
So basically, you have to prove that an area is "blighted" and that the government's plan will remove the blight (public purpose) in order to receive emmient domain powers.

And we can talk about the negative externalities of "blighted" properties... especially those that are hindering real economic development.

So if New London loses, it'll might actually be a good thing for real emminent domain projects: the kind that DO eliminate blight or have some sort of tangible public purpose. [Help me out here, but I believe that all the recent emminent domain projects undertaken for economic development in the City of Pittsburgh have been to eliminate blight. Those that were sketchy (Heinz expansion and 5th & Forbes) never followed through with emmient domain.]

As THE BUREAUCRAT, I can see the reason why the government need circumscribed emminent domain powers; New London, however, seems to have gone about it the wrong way and it does not seem to meet the serious threshold for takings.

'Course, I don't think that the Deer Creek project is in a "Blighted Area" either, so there you go.

This post brought to you by: Ooooh! $300 Fridge! Sweet!

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