As financing becomes harder to attain due to a tightening credit market, some people in the private sector fear a drastic slowdown in commercial construction in 2008.
Developers may find it harder to finance projects for new office buildings, apartments and shopping centers as banks and commercial lenders reduce the availability of loans.
While many would argue this is a problem for the market itself to work out, the question arises as to whether government could or should lend a hand to private developers.
Freshman Assemblyman Marc Molinaro, R-Tivoli, said that with less money to go around, the instances where government should get involved have to be carefully selected on a case-by-case basis.
“The government can”™t be as efficient as the private sector,” he said. “If we are in the business of helping out the private sector, we should be making certain that what we”™re spending money on is a productive venture. There is now greater competition for public resources.”
Molinaro said it may be difficult for government to justify financing or giving tax breaks to commercial developments as residential foreclosures continue in the wake of the subprime crisis.
Individual homeowners need help, and that will make it all the more difficult to assist private industry, he said. “However, from my perspective, there should be consideration to state government giving increased dollars to quality and sustainable economic development.”
And New York state already has programs that offer public assistance to private development, he noted, such as the Empire Zone program.
“You have to weigh the benefit between all things,” he said. “You have to evaluate where we get the biggest bang for our bucks. We can”™t bail everyone out.”
Assemblyman Adam Bradley, D-White Plains, said the most important thing is to reform government programs that provide financing or tax breaks to private industry.
Like Molinaro, he noted the state does have programs like Empire Zones and county Industrial Development Agencies that serve that function.
“I think IDAs are an appropriate vehicle (for public financing of commercial projects), but they need to be straightened out,” he said.
He said IDAs should be held more accountable to ensure projects that receive financing from the agencies are following proper guidelines, such as providing the amount of local jobs promised.
“Do we continue them, and if so how do we make them more efficient?” he said. “We are facing an economic downturn, and that makes these discussions more timely and important.”
In Connecticut, state Sen. Bob Duff, D-Norwalk, said it would be easier to justify giving public assistance to projects for which there is a demand.
“There”™s always a give and take on this issue,” he said. “The government has to let the market be the market and let supply and demand work out.”
Norwalk, like most of Fairfield County, has seen its share of commercial development in recent years, which has been a boon to the city, he said.
And, he said, with the ever-increasing popularity of Fairfield County as a corporate destination, it may not be as affected by a lag in commercial growth as other areas.
“I think many developers still feel really bullish on the local economy,” he said.
Duff said public financing for development projects is more palatable if it is a “smart growth” project.
If it”™s something helping transportation, infrastructure and creating jobs, it is probably worthwhile,” he said.” But you don”™t want government involved in something that exacerbates suburban sprawl.”
