Earlier in the week, Steve Malanga wrote about the municipal debt racquet in this WSJ op-ed. Not surprisingly, a good part of the article examined dubious decisions that local governments have made in financing sports palaces:
State and local borrowing as a percentage of the countryís GDP has risen to an all-time high of 22% in 2010 from 15%, with projections that it will reach 24% by 2012.
Even more disconcerting is what the borrowing now often finances. One favorite scheme for muni debt is giant and risky development projects.
Californiaís redevelopment regime is an object lesson. Starting in the 1950s, the state gave localities the right to create public agencies, funded by increases in property taxes, which can issue debt to finance redevelopment. A whopping 380 such entities now exist. They collect 10% of all property taxesónearly $6 billion annuallyóand they have amassed $29 billion in debt never approved by voters for projects ranging from sports facilities to concert venues to retail malls, museums and convention centers.
Critics, including taxpayer groups, say most such agency projects add little economic value. Sometimes the outcome is much worse.
In 1999, Fresno conceived plans to revive its downtown area with various projects, including a baseball stadium for the minor-league Grizzlies, which it had lured from Phoenix. The cityís redevelopment agency floated some $46 million in bonds to build the stadium. But the Grizzlies fizzled in their new home, demanded a break on rent, threatening to skip town and stick taxpayers with the entire $3.4 million annual bond payment on the facility. The team is now receiving $700,000 in annual subsidies to stay in the city.
Adding to the cityís woes: Last June, another development project, the Fresno Metropolitan Museum, went bust, leaving the cityís taxpayers on the hook for three-quarters of a million dollars in annual debt payments.
Cities now also use taxpayer-financed debt to engage in fierce bidding wars that benefit private enterprises. Charlotte, N.C., for instance, won the bidding for the new Nascar all of Fame with a $154 million offer, funded by a new hotel tax dedicated to servicing bonds for constructing the hall. But the venue employs only about 115 peopleóand an economic development study estimated the increased annual tourism from the venture wonít even equal what a single Nascar race generates.
Why did politicians offer the deal? For the dubious and hard-to-quantify purpose of ìbrandingî the city with a major attraction, according to the Charlotte Observer.
Yeah, we in Houston know all about financing those minor league stadiums. Anyone taking into consideration what we are going to do with that thing if the Dynamo and/or the MLS doesnít make it?
If that werenít bad enough, the WSJís Chris Rhoads chimed in yesterday with this article on the wasting, publicly-financed ìassetsî that Greece built for the 2004 Olympic Games:
Georges Kalaras used to view with pride the sports hall built near his home here for the 2004 Olympic competition in rhythmic gymnastics and ping pong. Now, he gets mad every time he jogs by.
"Look, it’s locked!" shouted the 38-year-old Mr. Kalaras, who works for the Athens city water company. Two stray dogs tangling with each other behind a padlocked metal fence accounted for the only activity in the complex, which seats 5,200 people.
Mr. Kalaras figured the steel and glass hall, costing taxpayers $62 million, would provide recreational space in his neighborhood. Officials envisioned concerts or shops.
Instead, when the Olympic torch went out after the Athens Summer Games six years ago, the doors closed here, as well as at many of the 30-odd other sites built or renovated for the Olympics that summer.
The vacant venues, several of which dominate parts of the city’s renovated Aegean coastline, have become some of the most visible reminders of Greece’s age of excessive spending. Sites range from a softball stadium and kayaking facility to a beach volleyball stadium and a sailing marina. [. . .]
Even boosters of the Olympics are having second thoughts.
George Tziralis, a technology investor, in 2007 co-authored a glowing report declaring the venues as "greatly improving the quality of life of the inhabitants of these areas, providing valuable resources to the community and the economy."
On a recent afternoon, staring at a pile of bricks on the unfinished entrance behind a locked metal fence encircling the Olympic sailing marina, he was less upbeat.
"I hope you’re calling this article ‘The Nonsense of the Olympics,’" he said. Boats filled about a third of the 120 slips at the marina, which remains closed to people who aren’t boat owners.
Later, Mr. Tziralis, 28, gestured out the window of his Opel Corsa at a huge, locked complex of mostly vacant Olympic properties, located on the former site of the city’s old airport.
"There’s no way there shouldn’t be a park here six years after the Games!" he shouted.
That complex, which cost taxpayers $213 million, includes stadiums for field hockey, softball and baseballósports with little or no following in Greece. The facility for canoeing and kayaking slalom at the site was to become a water amusement park. It didn’t.
In light of the foregoing and last weekís lessons on governmental decision-making, what could possibly go wrong with this?