The economic impact of building a new jail--Part II | Eastern North Carolina Now

    Publisher's Note: This article originally appeared in the Beaufort Observer.

As Pogo said: "We have met the enemy and he is us."

    In Part I in this series on the Economic Impact of Building a New Jail we looked at the impact on downtown Washington. The downtown would suffer an immediate and direct loss of an estimated 80 jobs. But the long term implications are much greater as it is common sense that over time the "decision-makers" will decide that all the law enforcement/judicial functions need to be consolidated in one place. That will ultimately result in many of the law offices being moved also. The potential economic impact on Washington will be significant, if not irreparably devastating.

    Added to this will be a much larger impact that will come from the expenditure of $20-30 million dollars for this project. The annual debt service is expected to be approximately $2 million a year.

    The initial impact of the construction will likely go outside Beaufort County. There may be some local contractors who can handle such a project but chances are much of the money will go to out-of-county firms. Already most of the initial two million they've already voted to spend will immediately be sucked out of our local economy.

    But the debt service is what will be devastating to the local economy. Here's why:

    The two million or so a year that will be paid in debt service will nearly all go immediately leave our local economy. That will be money that local businesses would have used to sustain their business in the midst of this recession. Some will not be able to do so and will go out of business. That is two million dollars consumers could have spent in the local economy that will instead be sucked out and sent to Wall Street banks to service the loans.

    Most economists agree that to compute this impact one must apply the "multiplier" to this two million dollars. There is debate about how to compute such multipliers, but the common factor usually used is 7. That is, the two million could be reasonably expected to turn over seven times before it dribbles out of the local economy. That would be a $14 million negative impact.

    Assuming the multiplier is below average, say 5, then the impact would be ten million dollars. And that is every year. Think about how many jobs that would sustain in our local economy. At the average household income, that is approximately 285 families that would have a wage earner if this project were not built; or conversely, that many will be unemployed because that money is sucked out of the local economy.

    And that annual impact will be replicated every year for twenty years, until the loans are paid off.

    None of this takes into account the ripple effect of the loss of ten million dollars. If one assumes that a specific number of businesses will go out of business or seriously reduce their operations because consumers do not have this money to spend locally then the impact is even greater.

    Moreover, if you figure that a certain portion of our local businesses are operating now at the margin of just hanging on, then common sense would tell us that some of them will not be able to pay the taxes this will impose. They will shut their doors. As they do, it produces a domino effect on other businesses as these closed business pull expenditures for rent, insurance, supplies and other costs of doing business out of the local economy.

    In good economic times, as marginal businesses go under, other businesses take their place and offset the negative macro-economic impact. But in tough times that replacement activity does not come. We sink lower and lower into a depressed economy. It's like throwing a drowning person a concrete block.

    Sucking ten million dollars out of an economy as weak as Beaufort's is right now is a big deal.

    Furthermore, this impact is aggravated by the type of project this is. It produces little or no economic benefit. Jails don't produce very much economic "stimulus." They are economic liabilities in a local economy. They consume more than they produce.

    But all of this was not even a discussion point for the four commissioners (Belcher, Langley, Booth and Klemm) who voted to borrow all this money, knowing they will have to raise taxes to pay for this new jail/Sheriff's Office etc. But that is not surprising. Not one of these men has ever run a small business such as we are describing in the impact analysis above. They don't know what it is like on the 15th of each month have to file a 941 (to pay payroll taxes), to have to pay property taxes, sales taxes, unemployment taxes etc. when they don't have the money to meet Friday's payroll. These men have spent their lives not having to wonder where the money is coming from to pay the taxes they are dumping on struggling small businesses. Not a one of them has ever had to meet a payroll.

    And we can't help but point out another irony. These same four commissioners have, over the last decade, sucked ten more million out of those struggling businesses and from consumers and have given it to a few select businesses that were "dead men walking" which soon either failed to produce the jobs they promised or flat out closed up, sticking the taxpayers with the "clawbacks." Same four commissioners.

    Beaufort County is a poor county. While there are some wealthy families and businesses in the county, many struggle from paycheck to paycheck and to try to pay their overhead.

    If you total up the waste that these four commissioners have imposed on this county you soon realize that one reason it is poor is because of the bad business decisions that have been made. If we had just not wasted so much of our resources one has to wonder where we would be today instead of where we are. There's no question we would be better off than we are had they not wasted so much.

    The real problem is not the jail. The real problem is having a county run by people who have no clue about the economic impacts from the way they vote. But our criminals will have it made.

    Bless us and save us. From ourselves.
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