Why cities can’t stop poaching from one another

SAN FRANCISCO — Near the bottom of the lengthy ballot San Francisco voters considered this week, in this state famous for its abundant and oddball ballot initiatives, Proposition I asked voters to establish a policy of not coveting other cities’ sports teams.

The measure was part apology for poaching the Golden State Warriors from Oakland, part declaration of city principles (“San Francisco Will Not Endorse or Condone the Relocation of Any Team With an Extensive History in Another Location”). Voters, who said yes to several tax increases, looked at this symbolic measure and voted “no.”

That result was perhaps predictable; coveting what others have is implicit city policy nearly everywhere. The doctrine explains why corporations are so successful at extracting tax breaks from competing communities, why sports teams know their relocation threats usually work, why Amazon’s HQ2 sweepstakes has prompted such a bloated bidding war.

Economists largely agree that it’s bad economic development policy for communities to give in to this impulse, one-upping one another with handouts. That’s money diverted from education or infrastructure, and it goes to companies and teams that would most likely make many of these moves anyway. After all, they have to locate somewhere. If no one were playing the incentive game, someone would get them free. Instead, everyone is spending lots of money shuffling these prizes around.

The more intriguing question is not whether these deals make sense, but why politicians and voters are so keen on them. “It’s a little baffling, given that there seems to be such consensus on these programs,” said Nathan Jensen, a professor at the University of Texas at Austin.

He and Edmund Malesky at Duke University argue in a new book that much of what’s going on here is pandering by politicians. Voters want jobs, which are hard to deliver. Ribbon cuttings and splashy announcements about, say, a new Foxconn factory in Wisconsin, a new Boeing plant in South Carolina or more Nestle jobs in Indiana are the most visible way to show action on an issue voters deeply care about.

In survey experiments, Jensen and Malesky have found that people are more likely to say they’d vote for a governor when told the official helped secure a hypothetical thousand-job manufacturing plant. Independent voters even prefer a governor who offers generous tax incentives to score such a plant over a governor who secures investment without ponying up. These results suggest that politicians pick up votes by offering giveaways, whether they land companies or not.

Jensen and Malesky have also found that directly elected mayors offer bigger incentives and demand less oversight of deals than indirectly elected city managers. In other words, the politicians most responsive to voters offer the most. That dynamic may help explain why even some public officials reluctant to bid on Amazon did so anyway.

“What mayor could afford to be tagged as not being active on jobs?” said Greg LeRoy, executive director of the group Good Jobs First, which has fought against incentives. “In the fall of 2017, being active on jobs was defined as bidding for Amazon’s HQ2. Then how could you not?”