It matters who guards the henhouse

No one would argue that Oklahoma’s business community does not have a major influence on public policy. They benefit from a significant lobbying infrastructure through Chambers of Commerce, extensive personal connections between business leaders and elected officials, and a state political culture that holds business in high esteem.

The business community is a positive influence in many ways. They create jobs, wealth, and opportunities that benefit millions of Oklahomans. However, precisely because this sector has so many natural advantages, we should be wary of going too far in giving one segment of the community control over decisions that affect all of us.

Recent debates in two Oklahoma municipalities offer prime examples.

Fears of a ‘shadow government’

In recent weeks, Norman has seen a major backlash to the city council’s proposal for a Norman Economic Development Authority (NEDA), a trust that would oversee publicly funded economic development measures. Development trusts similar to the proposed NEDA already exist in many Oklahoma municipalities, but opposition arose from a perception that the NEDA would allow business interests to take control of the public agenda. An alliance including both progressives and Tea Party conservatives opposed the entity, calling it a “shadow government.” They distributed petitions and packed city council meetings to protest.

The city council responded with some concessions, including moving back the vote for several weeks and making all of the trustees elected council members rather than appointed professionals. Even so, residents were upset that public discussion of the NEDA was cut off before a city council vote. In the Norman Transcript Mayor Rosenthal said the NEDA was off to a “a disappointing and shameful start”, and she contrasted its limited public debate with the much broader participation in the development of Norman’s stormwater and high density zoning plans.

City Councilmember Tom Kovach argued the other side, saying that the closing off of discussion was the “unfortunate consequence of those who made a reasoned debate into a political one.” Kovach also wrote that the original reason for appointing business professionals as NEDA trustees was so “discussion about projects be on a non-political basis.”

It’s easy to understand Kovach and others’ desire for a less political process. Reaching political consensus is messy, difficult, and frequently annoying. But it’s important, since the only alternative is to privilege certain approaches and exclude others. Without this process, outcomes are less likely to reflect preferences of the whole community and, as we have seen with the NEDA, leaders risk losing legitimacy in the eyes of the public.

What Chamber-driven policy leaves out

Events in Norman should serve as a warning to Tulsa, where the Tulsa Metro Chamber of Commerce is pushing a an economic development proposal to upgrade the city’s airport industrial park with tax dollars. They estimated a cost of $254.4 million for specific improvements based on requests from corporate tenants of the facility.

One reason to be wary of this proposal is that it is extensively tied up with the interests of Chamber decision-makers. Out of four tenants in the facility targeted for investments, two – American Airlines and Spirit AeroSystems – have executives serving on the Tulsa Metro Chamber Board. Meanwhile, the Chamber refuses to identify how much these tenants would benefit from the proposal, citing nondisclosure agreements. The upgrades were reviewed and approved by outside consulting and engineering firms, but the evaluators were still chosen and paid for by the Chamber.

Even if we assume these firms provided a reliable, independent judgement, they were tasked only with evaluating the need for upgrades to this particular facility. That leaves out some big questions. First, even if upgrades are needed, why should taxpayers cover the cost? Why not instead charge higher rent to the companies that will directly benefit? Or assuming a taxpayer investment is necessary, what guarantees do we have that the companies will stay? If they benefit from improvements without being asked to pay more rent, then they should at least have an obligation to keep jobs here, enforced by a clawback mechanism to recover the cost of upgrades if they leave.

A second concern is whether this particular project should be the first priority for public investment. The Metro Chamber is controlled by existing businesses, so whatever ideas they bring to the table are going to reflect that perspective. However, research has shown that almost all net job growth comes from startups. Would we be better off investing that $254.4 million, or some portion thereof, in a startup incubator? Even if many or most of these startups fail, it only takes one becoming the next Google to reward the investment several times over.

That’s not to say a startup incubator is absolutely the best use of these funds. It is just one example of ideas that may be left out when economic development policy is driven by incumbent businesses. Even with the best intentions, Chamber leaders won’t see the issue from every possible perspective.

Democratic process matters

A second component of the Tulsa Chamber’s proposal is a “closing fund” of $75 million. As the name implies, these funds are meant to be used for closing the deal in final negotiations with companies considering relocation to a city or state. In the interest of speed, an executive (governor or mayor) or a small committee is given broad discretion to make closing fund awards. Thus by their very nature, closing funds trade public oversight for a quicker turnaround.

We’ve seen the results in the troubling history of similar funds in Oklahoma and Texas. That’s why the process matters. Economic development is an important function of our state and local government, but it is also one of the most easily abused. Business executives, accustomed to more control of decisions within their own companies, may be frustrated by the politics. But they need to realize that the use of public funds requires a more open and careful deliberation. It’s not quick or easy, but it’s an important part of democratic governance.

ABOUT THE AUTHOR

Gene Perry joined OK Policy in January 2011. He is a native Oklahoman and a citizen of the Cherokee Nation. He graduated from the University of Oklahoma with a B.A. in history and an M.A. in journalism. Gene also serves on the board of the Oklahoma Sustainability Network, is a trustee of the Oklahoma Foundation for Excellence, is a member of Investigative Reporters and Editors, and has chaired the communications advisory committee for the State Priorities Partnership, a nationwide network of state fiscal policy think tanks. He lives in Tulsa with his wife Kara Joy McKee, who is a Tulsa City Councilor.

3 thoughts on “It matters who guards the henhouse

  1. The Norman City Council did respond to the most troubling aspect of the NEDA and made City Council the Trustees rather than a non-elected board of individuals with expertise in making deals.

    As an economics professor with expertise in state and local tax policy and local economic development, I raised two fundamental questions: “Why does Norman need another trust/this trust?” and “How do we know it will work when research suggests otherwise?” These were never addressed by city council or proponents of the NEDA.

    Tom Kovach was right that the reasoned debate turned political. In fact, he and Hal Ezzell employed a political tactic to cut off reasoned public debate.

    Norman city council members (excluding Mayor Rosenthal, Spaulding and Gallagher) proved political strategies can be used to circumvent the democratic process and to avoid responding to legitimate economic concerns about proposed policy.

  2. I’ve come to the conclusion that most, if not all, Chambers of Commerce are eventually taken over by the major businesses of any town…Developers, Builders, Bankers. It seems that this is their history. The small business owner has little say. The National CofC as well as State and Locals are a conduit of outside political money for use in local and national elections. With Citizens United rulings, that money can be anonymous and unlimited. I suspect that much comes from foreign sources who seek direct influence.

  3. The arguments against the NEDA failed to convince me that it wasn’t needed. One suggestion was to use the University North Park TIF as a vehicle. How is that even related? Plus that TIF has a whole host of problems of its own. Norman city government can move glacially slow as most governments are prone to do, and as I understand the NEDA, it is an attempt to speed up the process of bringing new businesses into the city.
    The biggest complaint was about the parlimentary process used to cut off debate. I know this pissed a lot of people off, but the council needs to develop a process of managing public input. Whenever anything controversial is on the Council’s agenda, it seems half the community shows up and everyone expects to speak. These Council meetings last into the wee hours, and then every last one of the Council members feels the need to deliver a 5 or 10 minute speech spelling out their view. This isn’t democracy, it’s insanity. They need to limit public input to no more than 15 or 20 minutes, and the council needs to vote and save the sermons for church.

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