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13.7.05

Area city governments already good at turning taxpayer resources into sludge

The latest woes of Shreveport with Bioset’s default on its sod production contract prompts The Times editorial page to speculate about the value of local government trying to enter the free market. The answer, as a number of recent episodes on both sides of the Red River shows, is emphatically “none.”

A number of elected officials seem enamored with the idea that local government can operate and/or own enterprises typically operated by the private sector, and a review of the past decade or so shows their lack of wisdom on this account:





  • No need to make any more than a passing mention of Shreveport’s convention center hotel, a train wreck awaiting to happen which could cost taxpayers, according to the only estimate ever made about it, over a half million dollars a year
  • Shreveport also got taken on the Red River Entertainment District, left holding the bag on a $5 million loan for which it may never see any recompense.
  • While it’s current mayor Keith Hightower who has made the disastrous decisions regarding the hotel and district, he was left holding the bag (although he did favor it as it a city councilman) for former Mayor Robert “Bo” Williams’ deal to subsidize the Shreveport Pirates Canadian Football League team up to $1 million a year.
  • Across the river, Willis-Knighton Health Systems wanted to buy city-run Bossier Medical Center. Instead, the city refused the easy money, Willis-Knighton built its own hospital which pummeled the city facility into the ground, and the city ending selling to Christus-Schumpert Health System for a price perhaps more than $10 million less in actual money that it could have gotten.
  • At the end of the century Bossier City decided it had to have an arena. The $40 million cost eventually went to about $60 million and despite good sales, like practically all publicly-owned sports facilities, its direct and indirect costs exceed its benefits and the hype that it would trigger economic development near it (made by politicians still in office) has turned out to be just that, hype (the only business near it recently went out of business).
  • Bossier City plowed in $40 million to the recently-opened Louisiana Boardwalk, of which $20 million went to the parking garage. The entire project is off to a great start, but how long will it take to turn over enough additional sales (not otherwise plucked from elsewhere in Bossier City) that at the city’s sales tax rate it would need to “pay back” the amount -- in the neighborhood of $800 million? (City finance director Charles Glover says “five to seven years” – in a city whose total sales tax receipts per year are just a small fraction of this amount.)

    The Times muses that the city being involved in the sod business would save roughly $700,000 a year so the city would have its own sod, as opposed to spending $26 million on advanced technology to deal with the waste that can be converted to sod (mandated by the federal government). But, think again, the Bioset contract was for $2 million a year and there’s no reason to expect the city can do it any more cheaply than that, making for a loss of $1.3 million a year. In other words, not accounting for interest payments, 20-year bonds at that amount times 20 would pay for the waste disposal technology now.

    To anybody who has ever studied government and economics, these incidents just go to show yet again that introducing an agent who does not operate to make a profit and has an unlimited ability to coerce money from the citizenry has no incentive to make business decisions that are efficient, in both decisions about buying and selling assets and in their operations. Therefore, government should involve itself in enterprises only when there’s an absolute need for the service; it is incapable of providing an enterprise that in and of itself (that is, not in an ancillary way) economically develops its economy.

    If politicians remembered this, there would be no convention center hotel, the Red River Entertainment District wouldn’t have gotten a city loan, the parking garage would have been paid for by the developer, and the CenturyTel Center would be sold to a private concern. None of these are vital city services, but they are here because some politicians forget this truth in the rush to puff their chests out to make themselves seem like bigger fishes in small ponds.
  • 1 comment:

    Shelley said...

    WOW!