State Shared Revenue and Tax incentives

As a general rule, I am against tax incentives given to businesses by cities. I think it is generally a scam where the business already has made a decision and plays cities off of each other. This article from EVT has the latest.

Like most things in the world it is not as simple as people think. Cities in Arizona have very specific needs for funding especially after they hit build out for State Shared Revenue. By build out, I mean the point where a city is no longer growing and can no longer rely on annual increases in shared revenue (Revenue is based on a city's population relative to the rest of the state). Cites must look for commercial projects to provide revenue. Bedroom communities have specific problems at build out because homes don't provide a lot of revenue, but require a lot of services. This is why a car dealership is such a great boon to cities. The dealership will not only pay property taxes (at a higher rate than a home), but will provide a ton of sales tax.

The way incentives should work is that they give a break on X dollars of the property or sales tax, they assume or project Y amount will be produced by the business (Y should be higher than X). Sometimes these deals take longer to payoff than others. This means that sometimes the city will see little revenue for say 5 years. The other positive for cities is that commercial interests are relatively stable sources of revenue because their facilities are big investments. Most cities are trying to create a stable and long-term funding base, so they can provide services to you (and not become insolvent) without raising your taxes.

Just in case you ever wonder why our cities dole out incentives...