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Tax incentives unlikely to enrich poor communities
It is well intentioned and, in theory, sounds marvelous. I’m talking about Charleston’s renewal community tax incentive program to lure businesses into blighted neighborhoods to help revitalize those communities.
The program is in its third year. Each year, through December 2009, Charleston will receive $12 million in tax incentives from the U.S. Department of Housing and Urban Development, which authored this national program.
The funding would be used to help businesses set up shop in economically distressed neighborhoods. The more renewal community residents a business hires, the more tax deductions it gets, allowing businesses to save thousands of dollars each year.
In turn, businesses would create jobs that would propel residents of these poor communities toward genuine participation in a 21st century, knowledge-based economy.
Renewal community residents would constitute about 35% of the business’ payroll. Instead of pushing brooms, toting barges and lifting bales, they would be typing at computers or displaying their technical know-how. They would be paid livable wages.
The bottom line is that the standard of living for renewal community residents would be raised to the point where many of them would become homeowners. Welfare would be a thing of the past. Today’s rundown neighborhood would be tomorrow’s residential pride and joy.
That’s the dream—a dream I want to see come true. So far, the reality is less appealing.
Of the 258 jobs created by the 16 businesses participating in the tax incentive program, renewal community residents hold only 86 of them. Keep in mind: There are 19 renewal communities in the area, comprising a population of about 60,000.
Perhaps more important, many of those jobs are low-paying jobs for unskilled labor. These jobs would have existed without the tax incentive program.
Some renewal community residents figure they’re better off economically by staying on welfare than by working a renewal community job. Not only is this sad, but it defeats the purpose of the program.
The problem lies in the concept of the program: It is unrealistic.
The goal is to have businesses move to or start up in neighborhoods where the labor pool is largely illiterate and unskilled. But as a business owner, whom from that labor pool are you going to hire? And hire to do what? And how can you afford to pay them a livable wage, particularly if your business is small?
Whether they were sincere in their job-creation estimates—estimates they must provide the city to participate in the program—businesses, especially knowledge-based ones, have a valid excuse for not hiring from a renewal community.
The desire for a skilled and educated workforce is a huge one throughout the entire Lowcountry. At a workforce forum the Business Journal held earlier this year, nearly every panelist complained of how difficult it is for their companies to find workers who can read, write and count.
“Workforce training” is a popular phrase in our region’s economic lexicon. It should be. After all, about 45% of our ninth-graders don’t finish high school.
OK, so let’s train them—the “them,” in this case, are the renewal community residents.
Job training happens to be part of the tax incentive deal. But again, that seems a Herculean task for a business, especially a small one.
It is one thing to teach literate people a new job skill. It’s quite another for a business to teach illiterate people, period.
How many businesses, large or small, have the time or resources to do what schools and families are supposed to do?
Well then, let’s take a holistic approach. Literacy centers, libraries, county schools, the colleges, job-training centers—let’s get the entire educational community involved in training and teaching the illiterate and unskilled.
These institutions already are involved. Today, here and across the nation, there are more different kinds of educational outlets and initiatives available to the poor and illiterate than ever before.
Where educational involvement needs to increase is in the renewal communities themselves, among the community residents.
That’s why the city and HUD need to reassess the renewal community tax incentive program. It would be encouraging if HUD could point to success stories from any one of its 40 renewal communities throughout the nation.
Granted, poor communities don’t get revitalized overnight, but the picture would be sunnier if (a) HUD cited businesses that are creating the kinds of jobs leading to a community’s rebirth, and (b) HUD explained how the community’s residents prepared themselves for those jobs.
Also, the rules need teeth. Businesses applying for the tax incentives must detail the kinds of jobs they plan to create and be held accountable. If you don’t create the jobs you said you would within a certain time span, the city kicks you out of the program, and you reimburse the city for the tax incentives you received.
It’s only fair.
Dennis Quick is the senior staff writer for the Business Journal. E-mail him at dquick@charlestonbusiness.com.
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