Coyote Blog

This post at Houston Clear Thinkers is just a devastating analysis of Houston light rail.  In it, we see the age-old story -- rail is enormously expensive, and starves the rest of the system for money, ultimately leading to fewer people riding at much higher costs.  He quotes from Bill King:

Decline in Ridership. Since 2004, Houston population has grown by over 10% from just over 2 million to 2.25 million. At the same time gas prices rose 47% from $1.81 per gallon to $2.67 per gallon. These two factors should have virtually guaranteed an increase in transit. However, exactly the opposite has occurred as bus boardings dropped almost 24% from 88 million in 2004 to 67 million in 2009. Instead of increasing bus service by 50% as it promised the voters in the 2003 referendum, Metro has slashed bus routes and increased fares by over 50%. Today Metro actually operates 225 fewer buses than it did in 2003. An outside performance audit in 2008 found that on-time performance fell by 29% from 2004 to 2008.

Financial Disaster. Since 2003, Metro's sales tax revenues have increased by 43%, rising from $357 million to $512 million. At the same time, its fare revenue increased by 41% from $42 million to $60 million by charging an ever dwindling ridership more. Yet, Metro is in the worst financial shape in recent history. At year end 2003 Metro's current assets exceeded its current liabilities by $125 million. The budget just adopted by the Metro board projects that it will have current accounts deficit of $165 million by the end of this fiscal year, a stunning loss of nearly $300 million in just five years. Over the same period, Metro's debt has swelled by nearly 50% from $546 million to $816 million. [.  .  .]

In the meantime, the cost of the [Metro's Light Rail Transit lines] has risen from the $1.2 billion originally estimated to something well in excess of $3 billion. Metro is seeking to borrow $2.6 billion to build the LRT, over four times what it promised the voters would be the limit in the 2003 referendum. Originally, Metro assured voters that it could build the LRT without tapping the mobility payments that are so critical to the Houston and the other member cities. Metro's projections now show that it can only afford the LRT if those payments are terminated in 2014. [.  .  .]

One of the government habits that consistently irritate me is the public funding of stadiums.  Never has so much public money been transferred for so little economic benefit to so many billionaires who don't need it.  For example, Seattle ponied up hundreds of millions of dollars for a stadium for Paul Allen, one of the five richest people in the world (and who probably has spent more than the cost of the stadium searching for aliens). 

Credit the owners of sports teams, I guess, for they have learned to use gun-to-the-head threats of moving the team out of town to get local taxpayers to vote them new stadiums.  I mean, for god sakes, we are building a stadium here in Arizona for the hapless Cardinals (and here is our new Glendale Arena, constructed by taxpayers just in time for the NHL strike - but we get roller derby!) Some thoughts:

• Public funding is totally unnecessary.  Many private owners have built their own stadiums, either through private capital or Personal Seat Licenses.  In fact, with naming rights and luxury boxes, there are more revenue streams than ever to pay for these stadiums.
• Its all about blackmail. If the mayors of the 50 largest cities in the country got together tomorrow and made a no-public-stadium funding pledge, then owners would be forced to build their own stadiums.  Congrats to Los Angeles for resisting the the NFL's outstretched hand.  What the owners have created is a classic prisoners dilemma for the cities (see update#1 below)
• Sports teams bring little net economic benefit.  No disinterested economist has found any justification for the premise that they improve the local economy - instead, they just shift benefit around.
• Teams take better care of stadiums they actually own.  Private stadiums are steadily improved, year-in and year-out.  Public stadiums (I am thinking of Veterans Stadium and the Astrodome in particular) are used up and thrown away.
• Teams always underestimate the tax burden of the stadium and the implied subsidy.  Often you see them arguing that the stadium will be funded only out of the revenues from the stadium itself -- well if that's the case, then why does the public need to be involved at all?

Here is a Cato paper debunking the economics of the proposed new DC baseball stadium.  Matt Welch has a great article on this topic in Reason here.  Hit and Run has an update today on the Angels' jacking both Anaheim and Tempe at the same time.  Makes Me Ralph (lol) has a series of posts here, just keep scrolling.  For even more, see the website Field of Schemes and the related book Field of Schemes : How the Great Stadium Swindle Turns Public Money into Private Profit.

UPDATE#1

Marginal Revolution makes the counter-case for public funding, citing a study by two economists who try to put a value on the intangibles of having a team in town.

I have to disagree for three reasons:

• I am against taxing for such value.  If everyone finds value, find a free-market approach to get the same thing.  Have a telethon or something.  And by the way, this value is fleeting and much more limited than owners let on.  One good example - has anyone south of Chicago noticed that the NHL season has not started?
• This is a very slippery slope argument.  How many times have you heard politicians say something like "Everyone I know would pay a dollar a week to get this, its not that much".  Yeah, it sounds great, but a dollar a week per person in the US gets us a new $15 billion a year program or tax. 
• Most importantly, though, is that private enterprises don't NEED the public funding to make stadiums work.  If the product works, like the NFL, they don't need public funding.  And if the product isn't working, like the NHL, then no amount of public funding, like our new arena here, will save it.  Team owners get public funding only because they can, not because they have to.  And they can because of the threat of moving the team out of town.  This is a classic prisoner's dilemma.  If all major cities collude and refuse to fund public stadiums (like the two prisoners agreeing not to cooperate with police) then everyone except the owners is better off, because the NFL will still exist but without public subsidies. 

UPDATE #2

A nice post with lots of good links from Houston's Clear Thinkers.  A nice blog based in my old hometown and birthplace.