Lies we have been told (and how they affect policy)

What is a lie?  One meaning is, “a statement that creates a false or misleading impression.” By this definition it is fair to say that our government “lies” to us all of the time.

At the national level, we see constant manipulation of the “facts” and the distribution of “fake news.”

What about here locally? Do we get fed the same type of false and misleading information so prevalent at the higher echelons of government? The answer is unequivocally, “Yes!”

How does this manifest itself?

There are two striking examples that have driven local public policy for decades, ones that have caused us to undertake self-destructive actions and inflicted significant burdens on the community.

I became aware of the first Great Lie back in the mid-1990s. It was common to hear from the City staff and economic development bureaucrats that “If Kingsport could reach a population of 50,000, it would get more new businesses and be eligible for larger grants.” In essence, fifty-thousand was painted as a “magic number” that would turn on the spigot. It would open up, not just a bit, but a lot more opportunity.

This single belief drove much government policy for the next twenty years. Kingsport pursued an aggressive annexation program in large part to reach that figure. What mattered was what was “inside” the city limits. Sadly at the time, none of us stopped to question why it was important to simply move the same population from one arbitrary political boundary to another.

I originally believed the story and, like other elected officials, did not understand the nuances of economic development. We relied on “professional” advice.

It did seem to make some statistical sense. At the time, we believe Kingsport had retail sales “leakage” (people were spending their money elsewhere because we didn’t have adequate shopping choices). We became fixated on getting new retail and our small size was portrayed as a major reason that site-selectors passed Kingsport by. The “gold standard” (laughable today) was to get a Red Lobster restaurant.

However, it took on a life of its own. Getting bigger for bigger sake became our driving motivation. Much like in the Vietnam War, “body count” became our measure of success.

This drove a very destructive trend towards wholesale annexation into Sullivan County (one that I naively helped propagate when I was in office). When Kingsport couldn’t annex in urbanized upscale Colonial Heights, it turned to north Kingsport. This move was detrimental in two ways.

First, it brought in a significant low-income population (and I mean this statistically, not normatively) into the census. For example, Kingsport now has six schools designated Title 1 (having 40 percent or more of students receiving free or reduced-price lunches). While this may qualify them for additional funding, it hurts the outside world’s perception of us.

Later, Kingsport began rapid expansion into the Rock Creek area. Together, these annexations virtually gutted the Sullivan North and South school districts. They lost students (and consequently state funding) while trying to maintain their curriculum and school facilities. This losing proposition has driven consolidation and capital expenditure in the county. Ironically paid for, in part, by city residents.

One might optimistically ask whether the plethora of new developments and businesses resultant from reaching the “magic number” must certainly have outweighed the cost imposed on the community. Sadly, we did not see the perceived benefit materialize. Alas, no Red Lobster!

It was a hoax (perhaps innocently promoted) which was used to justify actions that had a demonstrable negative impact on the “overall” community.

The second “lie” (which is still in use) goes like this, “The use of tax incentives (like TIF-tax-increment financing or PILOT-payment in lieu of taxes) is really a win-win.” Both sides benefit.

Tax incentives are used to attract new commercial development. Both the city and county governments have granted property tax abatements for everything from business recruiting to retail development to apartment construction.

The narrative is this. “We get development growth and there is no real impact on property tax because if the project didn’t happen, we wouldn’t have had the tax revenue anyway.” In addition, the community gets some supplementary benefit (jobs, sales taxes, etc). There is a genuine belief that ultimately there is a net benefit to the community.

Recently, the Times-News reported that for the apartments currently under construction in downtown Kingsport, “The PILOT translates into $7.9 million in deferred property taxes over the next 20 years.” The developer gets the money that would otherwise accrue to the public coffers and the city (hopefully) gets new residents.

This seems like a reasonable deal. However, it is only true in a static analysis. The primary issue arises with the periodic property reappraisals (and here it gets really confusing).

During a reassessment, the overall value of the property in the county generally goes up. The state then sets a “certified rate,” which is the tax rate that would generate the same amount of money as before the reappraisal. Anything greater than that rate is a tax increase on property owners.

Unfortunately, the properties for which there is an abatement (all of those apartments and stores), there is no bump, so the certified rate won’t actually generate the calculate funds. Inevitably, the elected leaders raise the rate on everyone else to make up for the revenue shortfall.

This is a tax increase on the community as a direct result of the incentives we have given. The public is directly subsidizing the developments that received the tax incentive. Furthermore, it is unclear who is going to populate these apartments if there is no new job growth to drive population. This is not a “win” for the public.

As with most public policy, the devil is in the details. The intricacies are not fully understood by our elected leaders. Whether it is grasped by government bureaucrats is not clear.

This brings us to a second, more sinister definition of lie: “a false statement made with deliberate intent to deceive.”

Whether our leaders are guilty of omission (innocently stating misleading information) or commission (deliberately distributing false information) is difficult to determine; either way, the public narrative is, at best, confusing.

The real danger is that these “lies” have now become common wisdom, those stories that are presumed valid without further testing the hypotheses upon which they are based. As we have seen, such an uninformed approach leads to misguided policies and wasteful public expenditures.

The public deserves better. They at lease deserve to know the truth.