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3.1.08

Bossier citizens still paying for city's wasteful spending

Bossier City citizens got another unhappy reminder about their elected officials’ $21 million blunder when it was announced during last year's City Council budget hearings that water rates were likely to go up in the future as a result of deficit spending in that area. They now are welcomed into a new year of higher rates.

This echoes the increase forced on overburdened ratepayers two years in order to halt yearly dipping into the trust fund established to collect gaming revenues. In the present case, the Water and Sewer Fund had a healthy projected surplus of almost $1 million in 2006 which within a year apparently has gone into the red.

Then as now, more prudent uses of surpluses in the fund could have avoided the need to hit up the citizenry. Instead of spending $21 million on a parking garage for the Louisiana Boardwalk that the developer could have built on its own, the million or more dollars a year from interest on this sum could easily meet water needs (many of which are infrastructural and would occur only occasionally).

Of course, every time news comes out that shows the poor quality of that decision, city officials and their media sycophants try to spin it to make it look half-decent, trumpeting impressive-sounding figures like the property making $21 million in sales taxes and $1.5 million in property taxes in its first 25 months of operations, $5.63 million in sales taxes specifically for Bossier City. But let’s cut through the spin and look at the comprehensive fiscal picture.

For example, in the seven months it was open in 2005, the facility itself generated sales taxes of $1.57 million – more than the increase from 2004 through all of 2005 for the entirety of Bossier City sales tax collections, although in percentage terms the increase was not unusually high given historic figures. The same is true for the next couple of years (although the 2007 figures aren’t very reliable because the city’s predicted sales tax take will not be met).

In other words, looking at the property in isolation of the entire retail scene in Bossier City misses the fact that the Boardwalk has cannibalized existing Bossier City retail business. As a result, retail growth hasn’t increased much past historical norms. The same applies to the property taxes.

Proponents also try to divert attention away from costs the development imposes. For example, go to the Boardwalk and you’ll see the several police officers on duty, their cars parked in that garage. The city never has released figures on its costs for police and the myriad other services it expends on the Boardwalk but it probably is in the hundreds of thousands of dollars a year.

And the real elephant in the room the uncritical boosters ignore is the opportunity costs – revenues forgone from the usage of the money in an alternative way, such as by investing it. Therefore, a reliable way to figure out breakeven costs of this kind of strategy is to treat the $21 million as if it were a loan. Generously assuming an interest rate of 5 percent, the development breaks even if, after all city revenues (sales and property taxes) from the property, less the reductions it has caused elsewhere in those, less the expenses, it brings in the city $1.35 million extra a year – in 30 years. And if it can clear only $1.06 million a year, the payback period will be 100 years! Chances are it’s not hitting the first target, and it may not even be hitting the second. Throw in another $15 million in spending questionable by the city for infrastructure for the complex and, well, Bossier City residents will get nightmares thinking of that.

(And there’s another unspoken assumption here: without the garage, the developer would have walked away. That’s highly unlikely: they would have had to raise their rents and economic activity would have been reduced somewhat as a result, but the lost tax revenues would be far less than what the city gave away with the gift.)

In the end, it’s a matter of priorities. Would the city rather try to keep taxes and fees lower by investing its gaming windfall and/or using it to build the really needed things like infrastructure items recently bonded out – an economic development strategy that would attract business, boost entrepreneurship, and generate revenues many times over what the foregone extra government spending could do? Or, does it spend the bonus on unnecessary luxuries of low to no return and worse that may boost politician egos and count coup but thereby require the citizenry to part with more of their hard-earned dollars than necessary?

That the most vocal journalistic shill of that latter strategy on which the garage gift is based likens the former view to thinking indicative of the “stone age,” an attitude which by their past actions seemed shared by Bossier City elected officials, tells us all we need to know of the foolish thinking behind what they call “economic development.”

1 comment:

baton rouge du nord said...

You are definitely on to something here. "Down South," we have seen recent bond issues and/or tax concessions for a new hotel in downtown BR and a new Bass Pro in Denham Springs. The developers always say that the deal can't be done without some "help," and the politicians always want feathers in their caps paid for on our dime.

The new enterprises pretty much reshuffled tax revenues from one part of the area to another. Sometimes, parochial interests were probably served by pulling revenues from one side of an arbitrary poli subdivision border to the other.

Your analysis suggests that when all is said and done, Bossier simply pulled tax revenues from one part of town to another. Net tax collection increase--probably zero. And existing businesses that have supported the economy without corporate welfare are placed at a competitive disadvantage.

Even if there were additional tax revenues for Bossier, they would probably come from just across the Texas Street Bridge.

Here's the most ironic thing. When I first went to the Boardwalk with my family, I was truly impressed with the nice way that Bossier made use of its scenic riverfront. The only way to see it in BR is from a high rise office or a gambling boat.

But I remarked to my wife that the huge, empty parking garage looked like a lot of overkill.

The "free market" would have better allocated resources on this one.