There was a time when local and state governments’ roles in attracting economic development consisted primarily of marketing and public relations. In fact, the idea of local governments providing tax breaks, rebates or other financial incentives is a fairly recent phenomenon, a strategy that began to emerge on a broad scale in the 1970s and 1980s.

Over the ensuing decades, there are plenty of examples where providing those incentives were a great success as well as examples where the incentives proved ineffective and poor use of taxpayer dollars.

Local governments have to balance the benefits of attracting new businesses – increasing the tax base, providing needed goods and services and creating jobs – with the investment it is willing to make with taxpayer money. Ultimately, it’s the local government’s responsibility for making the best deal it can make on behalf of its citizens.

Developers, naturally, want to get the best deal possible.

In some communities, where growth is stagnant or potential developers don’t prefer one city to another, it takes some convincing to bring in a new project. Ideas such as TIFs (tax increment financing) and fees in lieu agreements and tax rebate programs are important tools to help mitigate the risks for developers and make one city more appealing than another.

The city of Starkville and Oktibbeha County are currently considering a request for a $1 million tax rebate from a developer who wants to build an 85-room hotel on a vacant lot off Highway 12. The estimated cost of building is $10 million. In simple terms, the rebate would shave 10% off the developer’s investment.

Starkville currently has an estimated hotel shortage of 300 rooms.

In presenting the proposal to the city and county, LINK CEO Joe Max Higgins said the new hotel would address an estimated shortage of 300 hotel rooms in the city. Add to that a 31% population growth since 2000, and you have a growing city that needs hotel rooms.

It’s the kind of place developers are naturally drawn to, with or without tax handouts.

A good example of that came in 2016, when the city’s board of aldermen denied a TIF request by Walmart to build a Neighborhood Market on the east side of town. A consultant representing Walmart warned the city that the development likely wouldn’t proceed without the TIF agreement.

The city didn’t budge. The Walmart Neighborhood Market went up anyway, allowing the city to maximize profits for the taxpayers.

We wonder if the same situation doesn’t apply with this latest proposal. A 300 hotel room deficit doesn’t weaken the city’s position. It strengthens it. It tells prospective developers that demand for their product exceeds supply. That’s an opportunity worth seizing, especially in a city that is growing and prospering.

We are not necessarily suggesting that Starkville and Oktibbeha County reject this request. But we do believe the both may have far more leverage than they realize. It would be in the best interest of the taxpayers to see what negotiations can be made to maximize the benefit for the city without discouraging development.

The Dispatch Editorial Board is made up of publisher Peter Imes, columnist Slim Smith, managing editor Zack Plair and senior newsroom staff.

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