The Economics of “Good Corruption”

JoJo Giorgianni has given us his economic assessment of the value of corruption to a city.  His plan was to use Mayor Tony Mack like a puppet to enrich himself as developers bribed his version of Tammany Hall for the right to build in Trenton.  JoJo’ and Mack’s thinking was that they were facilitating investment and should get paid.  Why else would they have gone to the trouble of getting Mack elected?  In his conversation with an FBI informant, JoJo called this “Good Corruption”.

I guess that’s one idea.

But just to spell it out we, need to be clear about why corruption hurts a city.

Corruption distorts a market and creates uncertainty.

Investors HATE uncertainty!   When it becomes known that one developer has had to bribe city officials, all other developers become uncertain as to what level of corruption they will face as they consider investment in Trenton.  A developer would much rather play by a transparent and clear set of rules rather than the murky give and take of Trenton’s underworld.

Furthermore, in a climate of corruption, it is entirely likely that a developer could face a second round of shake-downs further into the project after there was no turning back.  This possibility opens the developer up to a high degree of risk.  What was to stop JoJo and Mack from ordering the building inspector to look again at a project, unless the developer had “Uncle Remus” visit again (their code for bribe money).

Our PILOT (Payment in Lieu of Taxes) negotiations are another source of risk and potential corruption.  Every developer negotiates separate deals with the administration on what taxes they will pay.  This kind of uncertainty makes evaluating a deal impossible.  Even when options for a “standard” PILOT have been presented to the Mack administration, they have ignored them.  Why give up the opportunity for graft.

Bribery and extortion create an unequal playing field that raises the cost of business in a place like Trenton. Developers have other options and we need them more than they need us.

Trenton politicians have a history of shaking down developers

Tony Mack isn’t the first politician to require that developers “check in” with the administration before doing business.  Other politicians have required contributions to campaigns as a pre-condition of cooperation.  We should all be suspicious of campaign war chests exceeding $200,000.  That kind of money doesn’t come from normal citizens hoping for better government.  It comes from people who want favors, at our expense.

We don’t want to make it expensive, risky or difficult for developers to build in Trenton.  We can see the results:  very little development happens in our city because of our corrupt climate and heavy handed administration.  I’ve talked to many Trenton developers over the years who’ve refused to work in our city again because of the bad taste it left in their mouths.

We need a completely different approach

In a new revitalization minded administration, we’ll:

  • Clean out our Housing and Economic Development and Inspections Departments and start over with a new attitude
  • Publish a process for development that does NOT include the Mayor’s office
  • Set prices for city owned land in a public Internet based auction system (For the time being, NO more deals).
  • Create a standard PILOT hopefully based on Land Value Tax system that rewards investment and discourages speculation

Trenton has been relatively closed to honest business development for many years.  Hopefully, with the Mack era behind us we can start fresh and turn our city into the easiest place in Central Jersey to develop instead of the hardest.  Given our other issues, we need to be better than everywhere else.

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One Response to “The Economics of “Good Corruption””

  • James E.:

    I couldn’t agree with you more. Even the incompetence and inconsistency I went through & witnessed with my developer/partner/friend regarding this city left his (us) exhausted and worse off for it. And that didn’t even touch much on the cronyism and corruption that is so commonplace.

    It’s a damn shame that most of our peers & fellow citizens don’t understand this.

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