Blindsided & Bummed About It

Here's a simple definition of business-friendly: Tell me what the rules are up front and then apply them fairly.
August 2005
William Fulton
By William Fulton  |  Columnist
Director of the Kinder Institute for Urban Research at Rice University and former mayor of Ventura, Calif.

One of the best things about speechmaking is that the sponsor usually gives you the check as you head back to the airport. In business terms, it's perfect: The accounts-receivable time lag is zero.

Not long ago, however, I was giving a speech to the annual luncheon for employees of a major Western city. When the lunch was over, my sponsor showed me my check and then said, "I'm really sorry, but the finance director says I can't give this to you until you get a city business license." Half an hour after finishing my speech in the large ballroom of a major hotel, I was standing in line at the business license office filling out a form and writing out a check.

I made it to the airport just in time that day--with the check in my pocket but, thanks to my trip to the business license office, $80 poorer than I thought I'd be. During the flight home, I began to ponder why, as an entrepreneur trying to do business with the government, the licensing thing had really bothered me.

First, of course, was the sheer ridiculousness of it. The only reason I was even in town (or in the state, for that matter) was because the city had asked me to come and give a speech. My work took half an hour. And yet the very organization that asked me to town nicked me for a business license tax.

Second was the humiliation. One minute I had been the masterful luncheon speaker, humorous and inspiring to hundreds of public employees. The next minute I was forking over eighty bucks to a nice lady in the tax office who peered at me curiously, unwilling to believe I was the same person she had just heard speak.

But third--and maybe most important--I was blindsided. As happens so often, the government had changed the rules on a business owner in the middle of the game. Maybe more accurately, the government had a rule that nobody had told me about, probably because my sponsor and the finance director hadn't talked before I got there.

And this is where I began to think about my side trip to the business license office as an economic development question. As a business owner, it didn't seem to me that the city was being very, as they say, "business-friendly".

When economic development types say their goal is to be "business- friendly," it always makes me nervous. Most business owners will think "business-friendly" means that there shouldn't be any rules that apply to them--or, if there are, the government should do the business a favor and waive them. And that's the perennial economic development dilemma: If an important business wants rules waived, and you waive them, then what happens when the next important business comes through the door?

There's a difference, however, between being easy and being fair. I didn't expect my host city to be easy. But I did expect it to be fair.

I expect the ridiculous from government. Crazy rules abound, and buried somewhere deep in history there is usually a good reason for them. (In this particular case, the finance director had cracked down on business licenses because of street-vendor scofflaws based in another state.) I have even learned not to be too concerned about humiliation. I didn't mind standing in line if that's what every other business owner has to do to. That's fair enough.

What struck me as not being "business-friendly" was being blindsided. And business people dealing with government will tell you this all the time: I don't care what the rules are, just tell me what they are and stick to them. It's amazing, however, how often this doesn't happen. Government agencies change the rules. Or the rules are contained in some book that only one guy on the third floor of city hall has and no one else has ever seen. Or they decide halfway through the process that some rule applies to you after all.

Amazingly, government agencies often do this even to favored businesses--businesses that cities or states want to attract and are even subsidizing. Sometimes all the financial incentive does for the business is cover the cost of the unpredictable government-hassle factor.

So, despite the rhetoric from some business groups about low taxes and financial incentives, I've come to the conclusion that the best economic development strategy is simply to be fair and up front about what you expect. I wouldn't have felt $80 poorer on the way home if I'd written that money off in my head during the flight there.