Is That Really a P3?

April 2018
By Mark Funkhouser  |  Publisher
Former mayor of Kansas City, Mo.

I was surprised to see in John Buntin’s fascinating article in this issue, about the relationship between Disney and its host city of Anaheim, Calif., that for years some city politicians had accepted the company’s arguments that the hundreds of millions of dollars Anaheim had granted in economic development incentives amounted to model public-private partnerships. But what Anaheim has been doing to keep Disney happy is mischaracterized as a P3. As defined in our Governing Guide to Financial Literacy, a P3 is “a long-term agreement between a government and the private sector to share the risks and rewards of delivering an essential public service.”

So what’s going on? Justin Marlowe, a professor at the University of Washington and a Governing columnist, tells me that that’s the way plain-vanilla, old-school economic development -- straightforward tax and other financial incentives to lure companies and the jobs they provide -- is now frequently being marketed. What you’re seeing these days, he says, is very savvy rebranding, turning the rising salience of legitimate P3s into a marketing tool.

I take the compulsion to rebrand these giveaways of taxpayer money as a hopeful sign that, in the wake of the frenzy of cities offering unprecedented incentives to land Amazon’s HQ2, the fever for this questionable approach to economic development might finally be breaking. If so, that’s long overdue. “It is poor management for cities to offer long-term tax incentives to lure companies to their location,” Fran David, a retired city manager, asserted in an email to me. “It is also irresponsible and destructive for behemoth corporations to demand such concessions. Paying taxes to local government is a responsibility of all of us, businesses included.”

Companies like Disney and Amazon clearly offer substantial value to their communities, and David describes lots of responsible ways for governments to bring extra value to the relationship, such as expediting planning approvals and building permits, eliminating utility connection fees, and upgrading infrastructure. “What cities should not do,” she wrote, “is give away long-term revenue from a business that will be operating in their community for years to come.”

Buntin writes that Anaheim Mayor Tom Tait “worries that city taxpayers are being stuck with a hefty bill to benefit companies that don’t really need public help.” Government leaders should remember that the courts have ruled that corporations are people, and good people pay their fair share of taxes.