Mike Kueber's Blog

March 22, 2013

Local preference program

Filed under: Economics,Issues,Politics — Mike Kueber @ 6:56 pm
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Yesterday, the San Antonio City Council adopted the Local Preference Program, which grants a 3% preference to local companies in winning bids for selected city contracts.  As a conservative, my first thought was that this action reeks of protectionism, which is counter to my economic philosophy.  My second thought was that this action is consistent with the Council decision a couple of months ago to grant contracting preferences to minorities (75% of the city) and women (50% of the city).  Why does the City insist on tilting the playing field?

According to an article by Josh Baugh in the Express-News, the concept of a Local Preference Program had been approved by the legislature in 2011 (section 271.905), and Houston already had enacted such a program for their contracts.  Thus, it could accurately be argued that San Antonio was not starting a trade war, but rather was responding to one.

The article cited City economist Steve Nivin (a former co-worker) for the proposition that the program would help the San Antonio economy by facilitating the start-up of small businesses, which are the key to the city’s job growth.  I disagree with that proposition, not only because the program is not directed toward start-ups, but more importantly because, as I’ve previously blogged, job growth in San Antonio results primarily from mostly large businesses that export products and services, not those small businesses that service the exporters.      

Although the City Council unanimously adopted the Local Preference Program, I am troubled.  While we may be retaliating against Houston, what about all of the businesses in other cities, including the San Antonio suburbs, that have no such program?  And if this is such a good idea, why didn’t the City adopt the 5% preference, which is the maximum allowed by the state law? 

Texans would have been better off if the legislature hadn’t enacted the law.  Although I understand the Council’s yes vote, I would have voted no unless there was evidence that most other cities were adopting such an ordinance.


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