Billings, Montana, wants to be better. It wants to be like Sioux Falls. Billings economic development boss Steve Arveschoug and other interested Billingsians visited our eastern Queen City last month to divine our "secret sauce". What do they think makes Sioux Falls grow?
“You take a bucket of the energy and vision of their mayor (Mike Huether); a bushel of private service leadership; three shovelsful of expertise from city planning, the chamber and economic development — and sprinkle it with a sales tax,” Arveschoug said [Mike Ferguson, "Business Leaders Look to Cook up Billings Version of Sioux Falls' Success," Billings Gazette, 2014.06.15].
What?! Taxes are a useful ingredient for economic growth?
Over and over during their presentations, Sioux Falls leaders emphasized the importance of the city’s share of state sales tax revenue — 2 cents on every dollar spent — in building and updating infrastructure. In many examples, private investment has followed public spending. The two-cent local share of sales tax revenue adds about $100 million to city coffers each year, half of which is typically spent on infrastructure to help support growth [Ferguson, 2014.06.15].
Montana does not have a general sales tax, but it does tax certain items. It does have resort and local option sales taxes, but only for towns with population under 5,500. The largest sources of state revenue are income and severance taxes. Large local governments like Billings thus don't have the same revenue-generating power as Sioux Falls.
But notice that Billings's economic development chief thinks Sioux Falls invests its money most wisely not in handouts to specific businesses, but in infrastructure that directly benefits everyone:
“It is very clear to me that communities have to provide infrastructure if they want to attract new businesses and help existing businesses grow,” [Arveschoug] said. It’s important that the investments are made strategically, he said — such areas as convention centers, recreational facilities, trails, civic plazas and downtown redevelopment. “Sioux Falls has 1,350 acres of commercial space infrastructure ready to go. If you want to consider coming to Sioux Falls, they had somewhere to take you,” he said. “That’s a strong platform for them, and I’d like to see us develop that concept, that ability to develop.” In Wyoming, he said, the legislature can appropriate $25 million or more to communities to help build infrastructure to attract and retain businesses [Ferguson, 2014.06.15].
Give one company a big grant or tax kickback, and when they go belly up, that money's gone, and you have to come up with a new incentive package for the next big fish. Build a good park or downtown plaza that makes Company X say, "Oooo! We want to move to your town!" and if Company X doesn't make it, that same park or plaza will be there to incentivize Companies Y, Z, A, and B.
I'm not sure I'm all that thrilled about a regressive tax to make Billings more like Sioux Falls. And the first infrastructure Billings needs is not a park but a big scrubber to get rid of the refinery smell we get every time we zoom by on I-90. But we should note with pride that our neighbors will come to Sioux Falls to figure out how to do economic development right.