By Haddon Libby
Last week, the City of Rancho Mirage proved a sentence from George Orwell’s book, Animal Farm, “All men are created equal; some are more equal than others.” They did this by granting $70,000 in subsidies and $180,000 in low cost loans to the owner of Acqua Pazza, a restaurant at The River. This similar to Palm Springs which financially helped the same owner a few years back when he was starting Lulu’s.
Why would city governments do this?
Every city needs tax revenues. Making loans and grants to profit making businesses is typically done based on the tax revenues and jobs that the business can create or protect. This has been done for decades by government – it is only more recently that we see cities entering the fray in such an obviously manner.
In a vibrant economy, cities do not need to compete as much for tax paying businesses and jobs. In weak economic times such as these, cities step in to solidify their tax revenues while creating economic opportunity for their residents. It is simply good business.
The rub for many is that government – even local government – is choosing winners and losers. By helping one restaurant, are they not hindering other nearby restaurants competing for the limited universe of diners on any given night? Why didn’t all of those restaurants get assistance? Surely, many need it.
With government subsidies and grants for established businesses, corporate socialism remains strong for those with the connections and money.
As I’ve said many times in this column, the true unemployment rate is over 20% here in the Coachella Valley. While helping an established restaurant to do a remodel may protect dozens of relatively low paying job, is this the best use for public funds? Are their other ways to create tax revenues while whittling away at our stubbornly high unemployment rate?
How about providing seed capital and micro-loans to people who need only a few thousand dollars to get their businesses started?
Given the long economic slump, I cannot tell you how many people that I have run across who have the ambition, drive and ideas to build new businesses but cannot get those businesses started for a lack of funds. In many cases, those people are unemployed or underemployed and struggling mightily to simply pay the rent. Where do those people go to for the few thousand that they need to get their businesses up and running?
And what about the entrepreneur who was able to get a business up and running but doesn’t have the resources to buy that one piece of equipment that will make a difference between success and failure? Where does that person go for money?
Cities should help these people with micro-loans and seed capital.
Additionally, these same businesses typically need an experienced and knowledgable team of advisors who will help them to build a successful business while dealing with the pitfalls and challenges every business faces. While we have many good groups such as SCORE and Coachella Valley Women’s Business Center (which is for men, too) that help with business planning, resources are few and far between to help in the day-to-day challenges of the young business or struggling entrepreneur.
One organization that helps does with legal, accounting, strategy and operational challenges of the start-up or young entrepreneur is ShareKitchen, a local business incubator to those in the food industry that I co-founded.
In closing, your elected leaders believe that they are doing what is needed to strengthen the local tax base and create jobs. Hopefully, these same well intentioned civic leaders will consider expanding their assistance to those who need it most via micro-loans and seed capital.