Tax Incentives Are A Study Of Stories, Data, And Best Guesses

Courier Herald column for the week of June 25th:

When you want to explain something to someone, you tell them a relatable story. When you want to prove something to someone, you show them the numbers to back it up. 

In the world in which I live, which is a cross section of journalism, public relations, and public policy, the difference between these two concepts is generally referred to as “anecdote versus data”.  Today I’m going to try to illustrate that the two aren’t opposing concepts, but are in fact complementary in understanding the issues of the day.  And yet, are still limiting.

This morning I read a headline that “The Battery” – the Cobb County mixed use development which is anchored by the Atlanta Braves ballpark – signed a tenant for a new corporate headquarters.  It is the third such company to decide to place its home and top executives there.

The Battery has already exceeded its original revenue projections and commitment to Cobb County taxpayers who invested in the development via tax abatements and infrastructure improvements.  Yet it is still difficult to read these stories without the “taxpayer funded” subtext that journalists – pro and con – continue to frame the narrative of stories about The Battery. 

That’s the first part about anecdotes in journalism. Stories should be consumed with the reader questioning “why is this being told to me?’.  If the answer is that it is trying to frame an issue or anoint good actors versus bad ones, it’s best to ensure that there is corresponding data to back up the anecdote that is being told.

This particular story appeared to be just about a company planting its flag at an address, so no hidden agenda or debate about tax credits should be presumed.  It was not written to argue or persuade.  For those inclined to do so, however, there was another big nugget well beyond the lede. 

The company was relocating from Wildwood, an older development that was once the crown Jewell of suburban Atlanta corporate offices. It’s within a decent jogging distance of the Battery, also in Cobb County.  If you were trying to read the headline of the story as an anecdote to support the contention that the Battery has been an unquestioned success for Cobb County taxpayers… you now have a valid question as to whether this was a win.  And you need more data.

But we already have the data we need you say?  I’ve already referenced the net additions to Cobb County’s tax base to prove the point. 

But…what if we took a tenant already paying rent to a building on Cobb County tax rolls and moved it to the Battery?  Did Cobb County win?  Or was it a wash?

Well…we could go through the tenant lists at The Battery – at least for the office side – and probably determine which tenants were new to the county and which just moved within the jurisdiction.  That would be a simple way to get the right answer, right?

Well…no.  Because nothing involving money and time is ever simple.  Another article in the same publication this week noted that a trophy office building in Buckhead could not arrange financing for a sale announced years ago, amid the declining market for office real estate.

In the post-Covid world of “work from home/anywhere”, there is less demand for office space. Companies are either reducing their footprint or giving up office leases altogether as their leases expire.  Newer, trophy properties in hip areas across the country (like The Battery) continue to command peak rents, but older offices and those off the beaten path are struggling to find tenants even at reduced rates.

So…where would that HQ have signed if The Battery hadn’t been built? We’ll never know.  Maybe in Cobb, maybe just across the Chattahoochee in Atlanta’s hip new West Midtown district. 

The point here is this. Even data has its limits. Data can tell you what happened if it is captured correctly.  It can’t tell you what might have happened under hypothetical scenarios.  This is why economics falls short of being a science.  You can’t run repeatable experiments to confirm you have the right answer.  You can only observe what actually happens, in hindsight.

Why does any of this matter?  One of the most closely followed study committees by the Georgia Legislature this summer will be one to review the entire catalog of Georgia’s tax incentives.  Those for and against will come armed with anecdotes and data.  Each side will tell compelling stories, and will then add in supportive numbers.

With each presentation, we need to look beyond the lede.  We need to not only see what is presented, but ask what is not, what is missing.  We need to understand that some incentivized activity would have happened here anyway.  We need to understand that there could and likely will be a cost to doing nothing – possibly greater than the tax dollars invested.

At the end of the day, there will not be a definitive answer.  There will only be best guesses. 

Let us hope they guess right.  A decade of being the “Best State for Business” is riding on these decisions.  Let’s hope the right questions are asked – and answered to the best ability possible.