Saying NO to the PIDs! The Great Moral Hazard of Oklahoma's State Question 833
Rarely do voters get the chance to weigh in on the complicated schemes that benefit special interests. SQ 833 is their opportunity.
The best government is a simple government, built on a small set of laws, that asserts its authority as minimally as possible.
It's one of the most important reasons to vote in November. That's because, rarely do the state's voters have an opportunity to weigh in on the many, many special interest programs designed to expand and complicate government, to the benefit of those special interests.
SQ 833, if approved, would create yet another form of special government district. To be known as a Public Infrastructure District (PID) and in a massive giveaway to developers, city government could decide to allow a developer to put his property in a special district, issue large amounts of debt—much to the delight of the high-powered attorneys and bond underwriters who would make bank on this whole deal—and pay off that debt with years of excess property taxation, which would increase costs long after the developer has gotten out from under the development.
To understand the moral hazard of this proposal, we only need to quickly analyze the harm cause by already existing, similar schemes; specifically, an older sibling of the PID, the TIF, aka Tax Increment Financing District.
A few years ago, after having long and closely observed Logan County’s politics, I noted a disturbing new trend: a special interest financing of the county's elections for county commissioner.
Up to that time, local county commissioner campaigns, in our county, had been mostly free of special interest influence. Commissioners spent little in the way of campaign funds, and that limited money that was spent likely came from the candidate himself or from friends and family. Their election was determined by issues of the county budget, the ability to articulate a plan for improving county roads, and, in the best campaigns, putting forward an encouraging vision of meeting core needs while downsizing the size and scope of government and taxation.
But a few years ago, I took note of the particular deep-pocketed special interest, who had previously shown no interest in these races, dropping significant funds into the county campaign.
Being a close follower of county politics, I knew immediately what this particular special interest wanted.
I was certain that this special interest wasn't the least bit concerned about the condition of the roads; or county budget policy; or the application of conservative thought and principle to one of the levels of government that's closest to the people, where the most immediate impact can be made if the commissioner is an intelligent, principled practitioner of conservatism.
In my view, this donor's interest lay in receiving a very special, lucrative benefit: the declaration of a TIF that would raise the value of a property he sought to develop.
Campaign financing in our county had been officially corrupted because the local commission had the political power to decide the winners and losers of the free market.
That’s because this complicated TIF statutory scheme allowed the commissioners to create the TIF. This benefited the well-connected developers and the highly paid experts who must be called in to establish a legal structure that will hold up in court; write and issue the bonds and massive debt that inevitably accompany the district; and maybe, even establish the local political cover by onboarding a local attorney who is drafted into the operation to keep the influence hot on the locals but who in reality offers little in the way of tangible value.
All of this debt and cost gets passed on to the special district, and eventually likely haunts the consumers who interact with the development, in one way or another; or, in the case of a development that doesn't materialize, remains as an ongoing financial risk for years into the future.
Of course, the ultimate beneficiary is the developer who now has a new highly-priced asset, which he might be able to cash out of, and thus, the long-term risks and costs of paying off that debt are now someone else's concern.
This creates a powerful, long term moral hazard.
A thoughtful observer of both human nature and economic principle knows what happens next.
The developments of the future aren't going to be based simply on the needs and demands of the free market, but rather on political considerations. Will the politicians support a special district?
If the answer is no, then can influence be wielded to un-elect those who are ethical and can't be influenced, and actually believe the free market, not government, should determine these things?
The developers of the future will be divided into two classes: those who have the political pull to receive the immediate benefit, and those who aren't able or willing to play the political game and who, as a result, will be at a great disadvantage to those who are favored by the politicians.
The principled politicians of the future, subject to this tremendous pressure, will likely become fewer in number. Few will have the bandwidth to understand what is going on; the principle to know that the smallest and simplest government is the government that governs best; and the incredible self-control to not play the game, give in to temptation, and thrive on the role of being big government economic developers, which is no doubt very alluring to the small-time, local-level officeholder who, because of these laws, now gets to play ball with the developers and the powerful of society.
All of these pressures inevitably corrupt the judgment of local elected officials. I recently observed this particular phenomenon occur in Logan County where the local commissioners, not content to incentivize new development, actually, suddenly, and without forewarning to the public, began chasing certain, already-existing development in an effort to surround them with new TIF districts, an action that made a complete mockery of the entire foundational logic for these districts in the first place, i.e., that the development otherwise wouldn't occur but for the district.
This provides the ultimate example of why these policies are bad in the first place. Once they are allowed to seed, mission creep takes over and now, if Logan County is to be the example, is there not almost no limitation for where a district can be placed? After all, all development was new at some point in time. How far back in the past will the government be able to reach as they seek to provide a benefit to their targeted beneficiary?
This bad policy has taken on a life of its own and is spiraling out of control. This can be demonstrated by the Department of Commerce's most recent listing of special purpose districts. The 2024 documents now contain a staggering 80 pages of special district listings.
At the end of the day, the myriad of special district laws such as TIF and the newly proposed SQ 833, put the politicians in charge of a complex scheme that melds government and industry in a way that technically keeps industry under private ownership, but in reality has the government calling the shots, a type of socialist economics that, while it doesn't technically give government the actual ownership of the means of production, still has government dictating and managing the tenets and deciding the winners of the free market.
The best government is a simple government, built on a small set of laws, that asserts its authority as minimally as possible.
By contrast, the ever-expanding government monstrosity that has been built by the special interests and the Oklahoma politicians over the past years is establishing a complicated tax and debt framework that few laypeople have the bandwidth to understand, much less reform. It's an absolute multi-tentacled monster that, short of slaying the whole thing and starting over from scratch, has become impossible to control.
SQ 833 adds yet another tentacle to that monster; and that's why it should be rejected, with extreme prejudice, by the voters.
Thank you for your continued support of The Oklahoma State Capital project. If you have found these insights helpful, consider forwarding this to your personal network. And, if you have yet to subscribe, to receive future analysis such as this, including upcoming insights on the 2024 ballot, visit OklahomaStateCapital.com/substack.