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BR smarter than Holden on "smart" growth snake oil

When referring to former Mayor Tom Murphy of Pittsburgh and his proffering advice about how to create an urban renaissance, the operative word is “rich” – not in the sense meaning following his tactics would produce much wealth, but in it being used as a simile for “laughable.” That’s because if Baton Rouge and other Louisiana central cities followed his course of actions, like Pittsburgh they also would become economic basket cases.

Murphy, who prior to entering elected office had a job similar to that of the nation’s 44th president, was in town to speak at the Louisiana 2011 Smart Growth Summit in Baton Rouge. Having served as mayor from 1994-2006, he oversaw a period of in Pittsburgh where the city’s economic landscape made a transition away from heavy industry. As a result, more service sector jobs, many concentrated in higher-end industries such as higher education and health care, developed.

The strategy Murphy followed involved heavy government infrastructure spending, tearing down and clearing areas, building sports facilities, and pumping money into downtown.
He also created and vigorously maintained an economic development fund siphoned from taxes to attract users of cleared and refurbished areas. Some jobs came, some areas were developed, and it all looked nice.

But the city government became a pauper, eventually during Murphy’s term teetering on the edge of bankruptcy and having to surrender some of its functions to the state in order to stay out of it. Less–astute observers scratched their heads and called it the first “Pittsburgh Paradox,” wondering how the city, economically transformed from three decades previously with roughly the same number of jobs as when it started, could be so poorly financed.

But to those who understand human behavior and economics, it was all quite simple. First, Pittsburgh has a 3 percent income tax, and as the economy changed, people began leaving the city in droves. As jobs came about in the city, they filled them, but preferred living in the suburbs, as has happened in New Orleans and increasingly is becoming the case in Baton Rouge and Shreveport. To try to squeeze this revenue out of the recalcitrant commuters, Murphy tried to invoke a state law to allow for a commuter tax but legislators checkmated him by passing another law putting more of the city under state control to prevent that. This onerous tax, as well as others that disproportionately hit small business (larger ones mostly are exempted), continues to discourage revenue-raising through growing all aspects of the city’s revenue base.

Second, with its steel industry background Pittsburgh has a high concentration of unionization. This led to enormous pension costs and overstaffing, inflating city expenses as revenues declined. Eventually, as part of the state takeover, the city engaged in tactics that, a half dozen years later in other cities and even states across the country, would be decried by overheated imaginations as “union-busting” in order to make the problem more manageable.

Third, Murphy had unshakeable faith in government as the engine of economic growth. Hundreds of millions of dollars over the years were pumped into incentives that never panned out, and in bricks and mortar that have not attracted a tax base to pay for it all. The result of all this as well as overstaffing, plus the city’s use of gimmickry over an extended period to try to make ends meet, drove up the city’s debt to levels that, by the end of Murphy’s time in office, reduced it to junk status.

Eventually, Murphy left office under an ethical cloud and has reinvented himself as some kind of urban economic development guru. But Pittsburgh still faces chronic budgetary problems forcing downsizing, and observers joke about how the city and Murphy seem to have garnered such a sterling turnaround reputation despite the evidence at hand.

No doubt Murphy’s message rings out as music to the ears of Baton Rouge Mayor-President Kip Holden, whose economic development strategy and intransigent insistence on raising taxes to fund the massive Baton Rouge Alive initiative and it poorer offspring have more similarity than dissimilarity to the course Murphy plotted. Its Metropolitan Council and citizenry have not acted as foolishly in their rejecting, on multiple occasions, this tired and failed siren song that its government’s job to create economic development, rather than government getting out of the way to free people in order to encourage them to do what it by nature cannot.

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