The Bull Street Deal: Extreme Caution Advised
WHY TAXPAYERS DESERVE DETAILS – NOT VAGUE TALKING POINTS AND HIGHER TAXES
On June 25th, the mayor of Columbia, Steve Benjamin, unveiled what’s being commonly called the “Bull Street Development Deal.” The deal would involve the city committing to an estimated $70 million for infrastructure, two parking garages, and a minor league baseball stadium. The estimated economic impact is $1.2 billion a year, and 11,000 new jobs.
Two weeks later, on the 10th of July, Columbia’s Chief Financial Officer, Jeff Palen, released a document detailing some ideas for funding the deal. They included a $30.2 million TIF to pay for roads and utilities, a $28 million Meal Tax bond to pay for a baseball stadium, and $24 million of general obligation bonds (debt). Palen later made clear that this was supposed to be an internal document stamped with “PRELIMINARY – SUBJECT TO CHANGE.”
The point of contention is the project’s public funding. Mayor Benjamin has been relatively quiet on this point, divulging only suggestions for how the project might be funded. The mayor has said that a tax-increment finance plan, or TIF, is on the table, but has confirmed no details. A TIF would take future tax revenue for the specific area in which the project is located and dedicate it to a fund that would then be used for the project. There are numerous problems with TIFs – chief among them their vulnerability to corruption and cronyism. Creating a fund with broad rules about its use and letting politicians oversee it is arguably an invitation to both.
The mayor also has suggested borrowing the funds from water and sewer reserves, and paying the money back with the money generated through property taxes. Our water and sewer system is already in disrepair while politicians have constantly transferred funds from that account to other projects which have nothing to do with maintaining a clean and effective water and sewer system. Moving more funds from water and sewer reserves to yet another unrelated project is manifestly bad policy.
In short, it’s a familiar story: a development deal is agreed to by politicians, public dollars are committed, but no details about the project itself or funding are revealed to taxpayers. One prominent backer of the deal, a bank president, was asked by a reporter if he would approve a loan this large for a customer who hadn’t yet provided details of how he would repay the loan. His response: “We probably would have to have a serious talk.”
(a) $31.25 million has been committed for roads and utilities (infrastructure). While infrastructure may be a core government function, this much public money thrown at one project begins to look a lot more like corporate welfare than a core government service – a form of corporate welfare known as “targeted infrastructure”: infrastructure for one project (effectively, for one developer) as opposed to the city as a whole.
(b) The city is building two parking garages with a total of 1,600 parking spaces. The agreement doesn’t include a price tag, but merely estimates that it will cost about $20 million. (Bear in mind: government cost estimates are virtually always far below actual costs.)
And (c) the city has committed to pay an estimated $20 million for a minor league baseball stadium. The city and developer have met with owners of minor league baseball teams, but so far none has agreed to come. It’s certainly within the real of possibility that the city will build it, and no one will come. The more important question, however, is this: Why should city taxpayers be forced to pay for a sports team? Victor Matheson, an economist at Holy Cross who has studied the economic impact of stadium construction for decades, sums it up trenchantly: “Take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by ten, and that’s a pretty good estimate of the actual economic impact.”
So while development and private business ventures are a positive thing and a fundamental part of free market capitalism, they should remain exactly that: private business ventures, not secret deals between politicians and developers.