Mayor Brown's Legacy -- Cont'd
Lee Brown is the former mayor who just keeps on giving to the city.
We all know about the potholes. We all know about the disastrous state of public works. We all know about the Danger Train. We all know about flirtation with default on airport expansion bonds.
Now we can add a near-miss with junk-bond status to the Sports Authority that was created on former Mayor Lanier's watch but whose construction projects were largely conceived and executed during Mayor Brown's tenure:
The cost of building Minute Maid Park, Reliant Stadium and Toyota Center rose by $37.2 million this week when the Harris County-Houston Sports Authority voted to issue new bonds.
Issuing the bonds was necessary to persuade one of the three major investment rating agencies, Moody's, not to downgrade the authority's bonds from investment grade status to junk bonds, said Ric Campo, chairman of the authority's finance committee.
The new bonds were needed to make up for declining hotel and car rental tax revenues, which the authority receives to pay off bond debt. In 2002 and 2003, the revenues sagged 10 percent.
To meet the annual payments for $900 million in previously issued bonds, the authority had projected annual 3 percent increases in hotel and car rental tax revenues.
"September 11 came and the recession came, and the hotel and car rental taxes have not been growing 3 percent. They're declining," said Oliver Luck, sports authority executive director.
The three sporting venues cost $1.036 billion to build. (Reliant Stadium cost $500 million, Minute Maid Park, $286 million, and Toyota Center, $250 million.) With the bond issuance, the price tag has now risen to $1.073 billion.
That's B as in Billion, really an astounding amount of money to spend on playpens for three billionaire sports owners, several dozen or so millionaire athletes, and mostly affluent folks who can afford tickets in the "world class" playpens even as the city is falling apart all around us.
The Sports Authority tries to spin things:
Many of those who supported building the venues said the county's residents would not pay the bills -- they would be borne by visitors who stayed in local hotels and rented cars.
"The taxpayers of Harris County really aren't affected," said Sue Millican, the authority's chief financial officer.
But Paul Bettencourt, Harris County tax assessor-collector, has estimated that about half of car-rental taxes are paid by county residents and businesses and about one-third of the taxes collected by the sports authority come from within the county.
"It's just three, four, five years after the elections, and already they're selling more bonds," he said. "This is a big concern to me, and it should be to taxpayers."
It is a big concern, but Bettencourt really doesn't fully explicate (or he did and the newspaper cut him).
While it's true that the funding mechanism targets those from out of town (albeit it not exclusively, as Bettencourt points out), the assumption made by too many people is that there's simply an infinite amount of money that can be "taxed" out of the economy without harming it. I would reject that notion.
Instead, I would suggest that there's only a certain level of taxation that will be supported by taxpayers in a community (and by the local economy), and that the mechanism for extracting that revenue is not nearly as relevant as the level of taxation itself. When a local entity is sucking $1 billion in taxes out of the local economy over time, I would contend that some proportion of that money is forever extracted from the local tax pool, and made unavailable for other priorities. That is to say that the local economy is only going to thrive at a certain level of taxation, whether the mechanism targets out-of-towners or not. I would further suggest that pulling that $1 billion from the local tax pool to build playpens for billionaires and millionaires was a case of misplaced priorities, because some proportion of that amount coming from what I'm calling the tax pool is no longer available for other community priorities. The tax pool is not infinite.
Admittedly, I'm not an economist, and I may be way off base with these thoughts, but that's how I see it. Comments are welcome, as always.
Posted by Kevin Whited @ 08/07/04 12:44 | Houston | Technorati
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http://www.cato.org/researc...
And don't forget to add convention centers to the list. Those concrete behemoths are sinkholes of taxpayer money and they often "require" taxpayer funded hotels to go along with them. I have no idea the history behind Houston's CC, but in many cities they are disasters, for taxpayers.
http://www.city-journal.org...
Posted by Anne @ 09:11 on 08/08/04
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