An Economic Lesson From the Ball Brothers
Indiana Writers Group column for release Oct. 3 and thereafter
By Ron Reinking, CPA
The coffee group in my hometown read the news two ways. Despite heavy municipal subsidy there was only one bidder on a downtown hotel project. Either the city fashioned its incentive package to fit a specific developer or the other developers judged the project economically and politically infeasible, as one pointedly said in his letter to the city. (1)
There of course is room for various points of view on any downtown development project. You should be concerned, though, when one side confuses itself with another. It is then that the discussion becomes a shell game. In the shuffle, we risk losing the pea — that is, a logical strategy for growth becomes impossible.
Local government, using tax revenue from myriad sources, has confused itself with private investment. This is a consequence of the legislature removing traditional constraints on how tax revenue can be used. A tax on restaurants meant only to add a wing to a coliseum, for example, might now be used to build competing restaurants, sports stadiums, hotels, retail shops and condominiums.
That lesson is ironic, as it turns out. For there is a more authoritative story about how Ball Glass came to Indiana. It is told by Frank Clayton Ball in his 1937 memoir. And although his story has the same ending, it teaches a different lesson.
Dr. Cecil Bohanon of the economics department of Ball State University explains that Ball had narrowed his search to Muncie and Bowling Green, Ohio, both having the requisite supply of natural gas for firing glass.
In Bowling Green, the city council had argued for 10 days over an incentive package that required issuance of a municipal bond secured by property taxes. The use of property tax unavoidably split the community into two factions, one with property and one without.
And as we Hoosiers seem to be learning the hard way, the politics of taking money from some people and giving it to other people can be complex. Ball left for Muncie before the council could reach a decision.
In Muncie, a decision was ready and waiting. A syndicate of businessmen (independent of local government) had purchased 120 acres surrounding the site proposed for Ball’s glass plant. Here is Dr. Bohanon’s analysis of their ultimately successful proposal:
“I doubt if they gave the gift ($5,000 and seven acres) to the Balls entirely out of public spiritedness. I think they gave it on the promise of the development that would ensue, from the prospects of an increase in the value of their property adjacent to the Ball plant. Yes, these folks may also have been public-spirited; I have no question that they were. But they also had private interests. Back in Bowling Green, where public spiritedness was supposed to rule, everyone was arguing and trying to pick each other’s pockets.” (2)
Throughout Indiana, it is déjà vu. The argument on city councils is between those who think growth should be prompted by government and those who think not.
Perhaps in your community both sides have the economic well-being of their city at heart. Nonetheless, it would be wise to ask proponents of downtown development in your city which school they favor — Muncie or Bowling Green.
Beware the one who says both. The two are miles apart on the economic map and only one uses its own money.
Ronald R. Reinking, a certified public accountant and adjunct scholar of the Indiana Policy Review Foundation, owns an accounting firm with offices in downtown Fort Wayne. He is the author of numerous articles and studies on local economic development.
1. Benjamin Lanka. “Incentives Deter Hotel Bids.” The Fort Wayne Journal Gazette, Feb. 18, 2007.
2. Cecil E. Bohanon, Ph.D. “How the Balls Came to Muncie: The Real Story.” The Indiana Policy Review, pp. 7-8, spring 2004.