I've been invited to pose questions at an event being put on by DMI on Monday, at the ungodly hour of 8:00 to 10:30 AM at the Harvard Club. The event headline is very timely: "Increasing accountability for economic development subsidies".

On September 18, 2006 the Drum Major Institute for Public Policy will host the latest installment of its 'Marketplace of Ideas' series featuring Senator John Hottinger of Minnesota.

Senator Hottinger sponsored Minnesota’s groundbreaking law instituting new standards of transparency and accountability for state and local economic development subsidies. The 1995 law and its subsequent enhancements required that companies who receive public subsidies but fail to reach job creation goals repay the subsidy with interest. The legislation also mandated increased corporate disclosure, wage standards for the jobs created, and public hearings before large subsidies could be granted. The law is credited with recouping millions of dollars in state funds and increasing civic engagement around issues of economic development.

I call this event timely for several reasons. Most importantly, this state will have a Democratic governor come January, one who is running on the slogan "On Day One, everything changes". If we're lucky, or more to the point, if we work very hard, Eliot will also have a Democratic majority in both houses of the legislature, clearing the way for the much-needed, oft-deferred reform of the state government. In short, the macro environment of governance in this state is about to change drastically.

Of more longterm concern are the development initiatives we can expect to move forward before the end of the decade. One is Atlantic Yards, the Brooklyn mega-project expected to cost the taxpayer about $2 billion in direct and indirect subsidies (with more to come, if opponents are right about the staggering impact of the project on the area's infrastructure); another is the ongoing revitalization of downtown Manhattan, specifically of the World Trade Center site (The New York Times announced today that the Federal and State governments have agreed to lease a million square feet of space in the as-yet-unbuilt Freedom Tower, with no pricetag given); a third could be the Second Avenue subway; a fourth will concern the West Side Railyards; and a fifth, possibly, would be whatever it is that Governor-to-be Spitzer will propose to revive the moribund economy of upstate New York. For example, in a speech at the Personal Democracy Forum, Spitzer proposed universal free broadband throughout the state as a tool of economic development.

There is little that is wrong, and much that is right, with the principle of spending public funds to make New York more competitive by improving our infrastructure. Largely missing in the implementation of this principle are the hallmarks of a small-d democratic society: transparency and accountability. Our famously Byzantine state government (not to cast aspersions on that vanished empire by the comparison) could use a large dose of both.

The structural problem in the relationship between the public and private sectors in terms of development is precisely this lack of accountability and transparency. For example, Forest City Ratner presently claims that its Atlantic Yards project will create 15,000 jobs; or more precisely, 1,500 jobs over ten years, as well as creating 2,250 affordable housing units. The problem is in the definition of the terms – what does "affordable" mean, exactly? – and the lack of any sanction, should the firm miss its publicly-proclaimed targets. This lack of any sanctions practically invites abuses, and glowing marketing; not least because, when the bulldozers are already moving, the natural logic of public finance – "we've spent so much, what's a little bit more?" – will ignore the broken promises in favor of just getting the damned thing built at whichever cost may be required.

If there is a bi-partisan consensus in this country, at least among voters, it is that public spending should be tightly monitored for effectiveness, frugality and results. This is, after all, how we run our personal finances (ideally) and our businesses (again, ideally). The taxpayer should be able to expect that the same care she uses in her personal finances and spending be reflected by the actions of the public purse. We have something to learn, it seems, from Minnesota.

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