Anne Linehan over at BlogHouston.net continues to do a fine job of following the various rationalizations of several local governmental types over how to justify public financing for the proposed the Astrodome hotel project (Charles Kuffner comments, too). The latest proposal being floated is to give the deal $150 million in hotel and sales tax breaks over a ten year term to facilitate about half a billion in private financing for the deal. The rationalization is that the rebates are worth it because the tax revenue wouldn’t be there in the first place but for the hotel generating it. Plus, the hotel really is a good thing for Houston, so why worry about a measly $150 million over the long term?
Putting aside that dubious reasoning for the moment, the reason that this project is a boondoggle isn’t because of $150 million tax rebates over ten years. On a boongoggle of this potential magnitude, that’s peanuts. The real financial risk comes when the hotel falters in paying its private financing. In almost every case, the local government that backed the facility will be placed in the difficult position of either putting up additional funds and security for the project or face the politically untenable position of watching the project fail. Guess what politicians usually vote to do when the alternative is to be embarrassed with a failed deal on their watch?
The problem with boondoggles of this type is that they “eat” — they must be fed money when the operating losses start mounting. There is a reason that the promoters of this deal can’t arrange private financing. That is a reason for the county government to back off the deal, not to embrace it.