The on-again, off-again, on-again plan to open a new steakhouse at the old Fiddle Creek location is now off-again—at least for the foreseeable future, and perhaps permanently, according to the Empire-Tribune, as reported here: http://www.yourstephenvilletx.com/news/20160819/never-mind-investors-in-new-steakhouse-back-out-of-deal. And that’s a pity. But at least this fiasco helps offer a lesson in Eco-Devo 101.
Readers of this column know that the steakhouse was being promoted by the city government via the Stephenville Economic Development Authority and the City Council through a tax break not available to competing restaurants. This incident shows, if not the unfairness of tax breaks for some but not for others, than at least the futility of tax breaks when other economic factors are in play.
The original report does not really explain why this project has been killed, or at least indefinitely postponed, but it’s not difficult to guess what’s going on. The would-be investors must have guessed that the project would not have made a big enough return on their money to be worthwhile. After all, Fiddle Creek, at the same location, failed. Why should a new steakhouse fare any better?
The takeaway from this incident is that the availability of tax breaks won’t bring a new business to Stephenville if the long-range profit potential isn’t there. That’s why Loew’s didn’t come: When its reps first came before the city council they said as much: The market was simply too small to generate enough profit to make the establishment of a new Loew’s worthwhile. (I mention Loew’s not because its case is relevant to this one, but because there’s evidently an unwritten law that says that whenever eco-devo issues are discussed, Loew’s must be mentioned, as someone did in a thread discussing the story on Facebook; go figure).
On the other hand, if there’s enough money to be made, businesses will come to Stephenville anyway, tax breaks or no tax breaks. Hampton Inn came, for example, AFTER the city council said it would not grant a tax break since to do so would give it an unfair competitive advantage over existing motels. Most other businesses in Stephenville got started without tax breaks as well.
So what should the city do now? As I’ve written before—and no doubt some of you are getting tired of reading this and could probably recite my prescription for effective economic development by heart anyway—it should maintain:
- Outstanding city services;
- A reasonable tax rate high enough to provide revenue to support outstanding city services but low enough to avoid confiscatory taxation;
- Simple, easy to understand, and easy to follow policies which facilitate the establishment of new businesses and thereby promote economic growth and job creation; and
- A level playing field, whereby the city plays the role of an impartial umpire, or referee, making sure everyone plays by the same set of rules, with fairness to all, and favoritism to none.
But what about our new SEDA Executive Director? What should he be doing? One hopes he’s able to help the city council make its regulations more simple, fair, and business-friendly, as well as compiling facts, figures, data, statistics, arguments, whatever, to sell Stephenville to potential business interests and thereby entice them to come here, even without tax breaks. In fact, it’s been reported that he’s in contact with other potential businesses. One can only wish him well.
And let me reiterate that while I oppose tax breaks and other forms of corporate welfare and favoritism as violations of the principle of even playing fields and fairness to all, there’s no good reason why the Chamber of Commerce or STEDCO, both of which are private entities, as well as other private organizations and citizens, can’t get into the act as well, offering financial incentives if, when, and where appropriate. The government must be limited in the actions it takes lest it favor some over others, but others need not be so limited. After all, it’s their city too.
Malcolm L. Cross has lived in Stephenville and taught politics and government at Tarleton since 1987. His political and civic activities include service on the Stephenville City Council (2000-2014) and on the Erath County Republican Executive Committee (1990 to the present). He was Mayor Pro Tem of Stephenville from 2008 to 2014. He is a member of St. Luke’s Episcopal Church and the Stephenville Rotary Club, and does volunteer work for the Boy Scouts of America. Views expressed in this column are his and do not reflect those of The Flash as a whole.