House Of Cards Built On Voodoo Economics Cheats The Needy
Written by Michael Lewis on January 11, 2008
By Michael Lewis
Cash-strapped local governments have miraculously found nearly $2 billion to finance a bundle of pet projects, the first of which, a baseball stadium, comes up for a county vote this week.
Plans like a Port of Miami tunnel that were impossible to fund are suddenly to roll in money — and new projects are being shoved onto the list on the back of this alleged windfall.
Some are worthwhile, others boondoggles. But there’s plenty for all, we’re told, so why worry about which have merit and which will become future public burdens of the sort we’re all too familiar with?
The key problem: billions didn’t just float in on the tide. They’re merely being reshuffled, spent on grandiose projects that please politicians who will be out of office before troubles surface. It’s great to play visionary if you’re not responsible for making the vision reality.
The money, however, is falling not from the sky but out of future property taxes intended to aid the city’s impoverished. Money meant to aid the poor will aid the rich — reverse Robin Hood.
Some civic leaders like auto dealer Norman Braman are actively opposing the voodoo urban economics. So are those most affected by the funding sleight-of-hand, residents of needy areas. And so are careful observers who want projects to be weighed one by one, on their merits, rather than shoved into a giant piñata of gifts.
These thoughtful groups are unlikely alone to derail an express train bent on spending big and spending long. Each vaguely crafted piece of the package has supporters willing to swallow the unpalatable and unworkable in order to achieve their own aims.
But elements of this massive plan, unveiled last month and quickly rubberstamped by commissioners, are already unraveling:
Miami, which is to assume nearly a half billion in construction debts of the struggling Carnival Center for the Performing Arts from Miami-Dade County, is looking for more say in center operations, which now rest under the county’s thumb.
The county promises in the overall agreement to seek to extend an expired deadline to develop the huge Crosswinds’ Sawyers Walk project in Overtown, but county Mayor Carlos Alvarez and Commissioner Audrey Edmonson want instead to reclaim the land from the city, killing the project. That, in turn, would strip at least $250 million in taxable properties from a so-called bonanza meant to fund the whole bushel basket of deals.
The city has just sued the county to keep the Crosswinds land, adding another element of discord that could impede the overall deal.
Already fallen is the vow to repay federal loans used to build private Jungle Island, formerly Parrot Jungle. A city attorney has discovered that it’s illegal the use Community Redevelopment Agency money to repay the $25 million balance to the US Department of Housing and Urban Development.
The city’s promised 12,000 parking spaces at a baseball stadium have just become 6,000 — plus neighbors’ lawns. The city says that despite the accord, it never intended to do more than build a 6,000-space garage.
That’s four shaky or missing pieces of this house of cards. How many more will be removed as discords surface, and how will the other interlaced cards remain standing? Don’t expect smooth sailing. In the end, government may do more than opponents to tumble this shaky structure.
As noted, parts of the package, if properly presented and financed, are valuable.
The Miami streetcar, for one, could meet a major need by easing transportation in a growing and congesting city.
For another, performing arts center construction costs must be repaid — just not on the backs of the city’s needy rather than the county, which dug the black spending hole into which the center fell.
Others elements are questionable.
Why strip poverty area funds to develop a museum park on Biscayne Boulevard?
Why subsidize a baseball team that’s already profitable?
And why plan for a soccer stadium without ironclad league guarantees that not only will Miami get a team but that it will keep playing, because new sports franchises often fail or leave town. That could leave us paying off bonds on a vacant stadium. Remember, the Miami Arena went dark after just a decade and was sold for half the city’s remaining construction debt.
Add to those questions the actual form of the baseball deal up for a vote this week. Commissioners expect changes from last month’s plan but don’t know what they’ll be — and won’t until just before a vote, when there’s little time to analyze a complex package. They should, of course, back away until they know everything, not just a last-minute sketch. Whatever happened to study?
Factor in a broad economic downturn and the likelihood of major revisions in Florida’s property tax structure that could shrink county and city revenues just as they’re ramping up a massive spending plan built largely on those taxes. This is a time for caution if ever there was one.
Each project must be made to stand on its own — and not on the backs of Miami’s poorest residents, either. And each should be approved or rejected only after close study of full details.
Voodoo urban economics looks good to politicians but will come back to bite taxpayers right in the pocketbook. That $2 billion windfall never was a windfall in the first place.