At first blush, there’s something intrinsically repulsive about the state’s decision to provide taxpayer handouts to the developers of a luxury hotel complex in Ketchum. Maybe it’s in the words “luxury” and “hotel,” conjuring images of “opulence” and “exclusivity” all funded with special tax breaks out of reach to the rest of us. Odious as it might sound, it’s actually a lot worse.
There is only one Ketchum, Idaho. If you want to build a destination resort to capitalize on the unique year-round recreation and tourism opportunities of the Sun Valley area, you pretty much have to build there. And yet, the state Department of Commerce decided to award a $132,000 tax handout for a 100-room luxury hotel complex that, according to press reports, will occupy a city block and include residences and timeshares.
Department of Commerce Director Jeff Sayer contends the project deserves a special taxpayer deal because the company could have chosen to focus its considerable resources elsewhere. “We are also competing for capital. (The resort’s developers) actually had capital that they could deploy in different locations,” Sayer told me. What this really means is Idaho is prepared to write a check to anyone to do virtually anything. This is the ultimate in corporate welfare.
If Sayer is correct, every business with a national presence and a plan to expand is equally eligible for corporate welfare. The Starbucks down the road could just as easily be built in Seattle as Idaho Falls. Every Walmart, every Holiday Inn and every AutoZone might deploy resources anywhere besides Idaho. Rather than take that chance, the state could take its preemption campaign of government handouts to every corporate headquarters in America. I understand Hilton is looking to build a hotel—somewhere. Taco Bell could build in Reno, but why not Challis.
This luxury hotel deal isn’t quite as glamorous as it appears to be. A big loser will be local entrepreneurs who might have entered the market with their own project to service the needs to the local community. They’ve been shut out. The bigger losers will be the residents, workers and customers of the area. Local businesses will have to compete against the newcomer, the business with a unique salary scale, price structure and profit margins because it’s the one competing with the one that has a sweetheart deal with the government.
As a result of the state government’s tinkering in the marketplace, you can fully expect artificially inflated wages and prices. Those artificially inflated wages will harm the number of jobs, the types of benefits and workable hours that non-subsidized businesses can offer.
Higher prices will mean a rougher time for those people already struggling to make ends meet. They’ll get to drive by it every day, and they’ll get to pay for it with higher marginal tax rates; but they’ll probably not have the money to rent a room in the luxury hotel they’re helping pay for. That’s what makes this deal as rotten as it sounds.