Friday's post about the Jackson convention center prompted a reader to send an old column opposing the construction of the convention center written by Howard Ross. (R.I.P.) It was written in late 2004 and was very prescient.
The past several weeks has experienced a sort of "on again - off again" effort in completing this compilation. With a short lull between conventions the decision was made to get this off to you this week. It is simply a matter of coincidence that this is sent to you on the same day of your editorial endorsement.
"Economic Development" financed by the government falls generally in the category of "swimming against the tide." It is oft times the government engaging in an activity which private enterprise shies away from because it knows better. In short, such efforts usually require ignoring the facts and one usually pays a penalty for doing this. The following justifies, so it is believed, such stark observation.
When the government undertakes an activity which private investors won't touch it might be termed entrepreneurial defenestration. Allow me to particularize in a somewhat disjointed manner.
The proposal, as I glean from the enabling legislation, is for a local government commission to construct a building solely for conventions. To pay for this construction the city of Jackson will issue its bonds.
To pay the principal and interest on these obligations new taxes are required. This, in itself, means the public pays for the project. It is not a project justified by the economy, but on the premise the public wants it and is willing to pay for it through taxation. In such case, it is no more than a new library, park, zoo, or highway. To tie it to private enterprise as a "money maker" is misleading and a distortion.
Another problem is, if the financial projections on the tax revenues are not accurate on the low side, look for an increase in taxes - ad valorem or sales taxes.
In short, Jacksonians will underwrite a venture with the hope that taxes on restaurant sales and hotel rooms rented will be sufficient to retire the indebtednesses incurred. If increased restaurant sales and room rentals are generated the profit goes to the owners of these establishments not the general public which made it all possible. The argument that the project is a joint venture between the public and private sectors is not defensible. It is public money financing private profit.
The arithmetic is rather simple: according to Mayor Johnson, restaurant meals and hotel rentals must generate $5 million each year from the increased sales and hotel taxes to pay for the convention center.
Experience throughout the country of late has been these centers actually lose money. As a result these new taxes must, therefore, generate additional funds to cover this operating loss.
Proponents claim a "multiplier effect" from tourists who spent their money while attending events in the center. Such folks claim money turns over and over all adding up to cash in everybody's pocket. People who know about convention centers tell us, "Don't you believe it." Mayor Johnson says the center will generate $38 million annually. Experts in the field contradict our mayor.
What is patently obvious but never mentioned is Jacksonians will be investing millions in a grand monument solely to protect downtown property values. That is the real reason Capitol Street property owners are such avid fans of this project. Jackson parking garages built in the early 80s were financed by the public so private enterprise could rent its office space.
It is a similar syndrome one sees in cities with major league baseball or NFL franchises. The cities put up the money for a stadium and the team owners make the profits. Convention centers are cut from this same bolt of cloth.
Interestingly, it is the folks urging that we spend our tax dollars to fund convention centers who are the ones claiming federal and state taxes are too high. That is why some experts call it a shell game. "Don't raise taxes unless it is for my benefit," is their apparent battle cry; a sort of corporate welfare for the bigwigs - a term you have heard me use before.
Common judgment tells us if this were a good deal private enterprise would have jumped on it years ago. In fact most major hotels already qualify as a convention center by almost any criterion and they are the ones who will make the real profits.
It creates jobs proponents claim. In Cleveland, Ohio they cost $160,000 each. And we know what type of jobs are created, too; waiters, parking valets, cleaning people and other minimum wage workers. Not so strangely, purveyors of high ticket items such as fancy foods (shrimp, oysters, lobster, etc.) are from outside Jackson anyway effectively limiting the multiplier assuming one exists. And if the convention goers decide to shop at the newest malls, they are located in Rankin County not Hinds. Northpark is in Madison County. Should they want to have at some one-armed bandits, well, Vicksburg isn't Jackson. To add insult, what out-of-town guest in his right mind will head out west Capitol Street and retail shops are virtually non-existent short of Highland Village. Taking a break from the convention to attend a movie means a trip to either Madison or Rankin County. There isn't a cinema in Jackson.
Feasibility studies paint a glowing future which experts tell us is baloney. Ask the folks in Houston or Los Angeles or Providence. In Dallas, with flagging attendance, the call last spring was for a hotel closer to the existing center to be built at public expense. Need a convention center? Must have a hotel to go with it.
But the problem is even deeper. Baltimore built three stadiums, several tourists attractions and a convention center yet it continues to lose residents while Virginia opted for improving its education system. The result: in the same time period Virginia created 196,000 jobs while Maryland created 13,400.
A real anomaly exists. Just when municipalities have been privatizing such services as garbage collection, sewage treatment plants and even potable water plants we are told tourism, which has always been private, is just the ticket for public funds; strange, indeed. I was heavily involved in these privatization efforts a quarter century ago and, where appropriate, we accomplished it with effect. There private enterprise made a profit for the government not the reverse.
Another factor, cities shouldn't construct a building at public expense and then give it to those plying the tourism trade or any other type of private enterprise.
And, for the most part, you can throw feasibility reports in the garbage can. History shows they all conclude: "Build it, you'll do great." Before you buy into any such projection, take a look at their previous recommendations to determine whether dreams really came true.
But if you want to put the proposal to the financial acid test, issue the bonds on a revenue basis; that is, principal and interest will be paid only from the avails of a properly defined sales and hotel tax and the bonds are not issued under the full faith and credit of the city.
Let's ask if it can pass muster in the nation's financial markets, not whether citizens are willing to increase their taxes? When I was city attorney a common expression, with much wisdom, was often bandied about. It was don't just throw money at a problem. It made good sense then and it still does. Revitalization of downtown Jackson may or may not be feasible, but simply throwing money at it doesn't make good sense.
Objective experts tell us convention center construction, ownership and management are best left to entrepreneurs who will do a better job wherever the bottom line is a consideration.
Dr. Heywood Sanders of the University of Texas or our own university professors who qualify as real experts in the field can give you information far beyond these "notes;" a real insight before Jackson falls victim to "irrational exuberance."
Across the street from the University Hospital is the twin brother of a convention center. It was constructed and enlarged on the "build it and they will come" philosophy. Ole Miss and Mississippi State won't touch it. In that instance the state of Mississippi picks up the tab; here a city with a dwindling tax base and declining population must do so. Certainly, Jacksonians can pay a little more for a meal, but this proposal has all the earmarks of a Memorial Stadium in the making.
With today's editorial one supposes the die has been cast as respects The Clarion-Ledger's stance. The original purpose of this memo was to give a word of caution to investigate further. In this connection I can give you a number of citations which are authoritative. Your staff is at least as well equipped as I at this sort of thing - although nearly 50 years of law practice was largely a "sifting through of the evidence." If nothing else these thoughts were prepared to give you a leg up. This memo comes too late for that, apparently.
Surely, your paper is entitled to its views on any matter of public interest. Therefore, in the interest of fairness may I suggest a two pronged course.
First, verify the numbers you cite as being reasons for construction of the convention center. It is assumed these "rosy scenarios" come from reports by those in the business of making projections. It is recommended some investigation behind these projections be made. I could, but refrain from, nitpicking either the projections made by you or Mayor Johnson. Since you chose these numbers as justifying your belief in the worth of this project I feel the responsibility for their accuracy lies with you. Similarly, the accuracy of statements I make in articles sent to you for publication is my obligation.
Second, give the public both sides of this venture. Many assertions are made in this memo. I believe they are accurate or I would not have included them. In whatever fashion seems fair to you, I would think these factors should be made available to your readers, or better still, solicit the detailed views of knowledgeable experts in the field. There are many of them and they should be happy to assist citizens in making an informed decision.
As you know, I am, and will continue to voice my views on issues affecting us. Frankly, I want to restrict myself to only a few columns each year and, more importantly, I do not want to give the appearance of being an expert on convention centers when manifestly I am not. The information offered in this memo was gleaned from what I felt was a responsible search for information on the subject, but even so, I do not qualify as an expert. As it happens, however, I was the City Attorney for several years and corporate finance was one of the areas in my law practice so I do possess a measure of expertise not shared by laymen generally. Taking the matter as far as I felt appropriate there is a real basis for these observations, or so I believe. I feel I must leave it at that.
I recognize this is an outsized memo. I make no apology for this, and, a fortiori, in a larger sense it is a memo in the interest of the citizens of Jackson. If you want me to forward it to others at The Clarion-Ledger let me know and I will do so. I don't want to impose on you or our friendship which I value highly.
Finally, there is nothing secret about this memo. You should feel free to use it in any manner you believe will benefit the people of the city of Jackson.