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Unions’ Manipulation and the Possibility of Revolution

As Rhode Islanders contemplate the significance of the AFL-CIO’s apparently getting its way and killing a public referendum on public financing of the proposed PawSox stadium, and as we consider the possibility of pouring hundreds of millions of dollars of debt into building and fixing schools that local governments failed to maintain, and as House Speaker Nicholas Mattiello collects around $90,000 at a single fundraising event, Megan McArdle’s musings on government unions and might-as-well-be-government unions are worth a read:

… as the Times notes, both the cost of labor and the amount of labor that’s used contribute a great deal to those bloated bottom lines. Why does Paris, with its feisty unions, manage to use fewer workers than New York City, and get jobs done for a fraction of the cost?

Because New York unions are politically connected, and for various reasons, the American government is particularly vulnerable to capture by these sorts of interests, especially as regional partisanship hardens. New York City is a one-party town in a very blue state; while New Yorkers may occasionally vote for a Republican mayor or a Republican governor, the down-ticket offices are filled in the Democratic primary. Those politicians have no interest in angering a large segment of their base that has a lot of cash for campaign contributions, and is well organized to turn out and influence elections. And the finance industry throws off such a vast river of cash that they can get away with bloated construction budgets. So no one has any incentive to crack down on wages or featherbedding.

Unionization and the sheer size of government have combined to create a political system that is in large part dominated by people voting to give themselves other people’s money.

In a free market, somebody selling something (including his or her labor) is constrained by the possibility that the customer will simply go elsewhere or forgo the purchase.  As insiders endeavor to make sure that Rhode Island taxpayers do not have the choice to forgo the purchase of a new PawSox stadium, we can see how the constraint on labor unions in modern Rhode Island is not far short of the possibility of actual revolution.

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If the Process Is Open, Why Are They on a Side?

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Something Rhode Island Needs to Stop Believing

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Is Reality Setting in for the Governor?

Perhaps it’s just the moment and the particular set of issues raised, but a quick-hit Providence Journal interview with Democrat Governor Gina Raimondo feels like a bit of a change in tone, from backing away from legalizing pot to holding back on school construction bonds.

A couple of points are worth teasing out:

“Look,” Raimondo said Tuesday, “I think it would be really sad if we lost the PawSox to Worcester …. But no, I am not going to get into a bidding war. We can’t afford a bidding war. We have a deal on the table now. I would say: Go ahead and pass that deal.”

“I am not going to get bid up, and pay more than we can afford, so we don’t lose it to Charlie Baker,” she said.

This is particularly nice to see.  Rhode Island has lost thousands of residents in recent decades because the state didn’t want, essentially, to bid for them to stay by making it easier to make it in Rhode Island.  Why should a minor league baseball team get better treatment?

Raimondo said her budget proposal will honor the next promised $25-million cut in local car taxes, part of a multi-year phaseout plan lawmakers approved earlier this year.

This is interesting.  Last week on the radio, John DePetro and I had some fun speculating that Democrat Speaker of the House Nicholas Mattiello of Cranston was sending signals to Raimondo.  First, he was seen chatting with her potential Democrat primary foe, Lincoln Chafee, and then his shadow could be seen around the edges of Joe Trillo’s bizarre declaration of his intent to stage a third-party campaign that would almost certainly split the vote against Raimondo.

Holding to the car tax elimination, which the speaker championed, could be a sign that the messages have been received and an agreement struck.

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The Mixed Up Economics of Government Economic Development

Not to overuse the word, but let’s just say that I’m cynical about the newly proclaimed interest in development around the proposed PawSox stadium in Pawtucket:

Pawtucket leaders Wednesday used the interest in developing Tidewater and inquiries from an unnamed hotel developer to build near a new stadium in support of their push for a state-backed financing deal for the proposed $83-million downtown ballpark.

But cynicism aside, Rhode Islanders should take Mayor Donald Grebien’s explanation of the economics as a warning sign about government officials’ understanding:

“The Ballpark at Slater Mill is the catalyst that Pawtucket, the Blackstone Valley and Rhode Island need to continue to move forward,” said Mayor Donald R. Grebien. “Pawtucket is a business-friendly city and investors and developers are already expressing support for the ballpark project. However, the private sector cannot wait forever. They will look elsewhere to invest. That is why it is so critical that the General Assembly act prudently and expeditiously to enact the enabling legislation and move our great state forward.”

Anybody who’s ever negotiated the price of a car should know that you never buy under time pressure.  In this case, Grebien’s attempt at pressure undermines his larger argument.

If the stadium really generates economic value then the private sector really will wait or come back.  On the other hand, if these two particular prospects (one anonymous) are critical to the venture, then taxpayers should take that as a warning.  After all, the whole deal relies on ancillary development to pay the debt.  If the “private sector” isn’t clamoring for spots, the deal is too risky.

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Can Worcester Really Support the PawSox?

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PawSox Hearings Giving Troubling Insight into Officials’ Thinking

The final Senate Finance hearing about the proposal for a new PawSox stadium in Pawtucket, as reported by Kate Bramson of the Providence Journal, has a couple of details that ought to be warning signs to Rhode Islanders with respect to the attitudes of government officials in the state:

[Pawtucket City Commerce Director Jeanne] Boyle said city payments could be made in early years from money set aside in a capitalized-interest account from bond proceeds. She said the city could also assess a fee on property near the stadium so some additional money would flow into the city’s general fund right away.

If this is correctly reported, then it’s new.  Up to now, the hints that we’ve heard have been that the city might expand the tax increment finance (TIF) area around the stadium so that more taxes would go to the stadium.  Ultimately, that’s just a sneaky way to force an increase in taxes without immediately blaming it on the development.

This sounds like a direct tax on businesses and residents around the stadium under the assumption that they’re profiting somehow from the stadium.  That would be a terrible way to go.

On a different matter, consider this evidence that Bristol, Portsmouth, Tiverton Senator James Seveney isn’t really representing his own constituents:

… Sen. James A. Seveney pinpointed that the legislation says money from a surcharge on premium tickets (in corporate suites, for example) might help the state pay off its $23-million contribution. But as it is written, the legislation doesn’t allow that for the city’s payments.

“Maybe that should be in yours,” Seveney said, to which Grebien responded: “We’d gladly take that. Having said that, it was very difficult negotiations.”

Seveney continued: “I’m not too worried about the state’s position, and I’m not worried about the team’s position. I think they’re going to be fine. I am worried about you guys.”

Why is an East Bay senator more concerned about Pawtucket taxpayers than about the liability of the people who elected him?  Sure, we should care about Pawtucket’s problems, but Seveney is essentially putting forward his constituents as a cash cow.

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About the Other Stadium…

Tim White raises an important point that seems to have been avoiding discussion related to the PawSox deal:

If approved, there will be another cost associated with building a new stadium in downtown Pawtucket to host the PawSox: tearing down McCoy Stadium.

The city of Pawtucket owns the land that 75-year-old McCoy is on, and officials have indicated there are no plans to keep the ballpark if the PawSox leave, whether by moving across town to the proposed Apex site or out of state.

The options on table range from likely to certain to require more government money and debt.  Rebuilding the high school on the spot will mean a big bond and a state taxpayer fund match and still leave the city with a plot of land to repurpose or dispose of.  A private buyer would probably negotiate and receive subsidies for some part of the property redevelopment.  Or just leaving it alone will mean a tax-free chunk of land in the city.

Whatever the final ask for the new stadium is, don’t forget that the project isn’t done with taxpayers, yet.

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Talking Yourself into Too Much Debt for Baseball

Obviously, there are some differences between a city-funded facility for a double-A minor league baseball team and a state-funded stadium for a triple-A team, but Joseph De Avila’s Wall Street Journal article on the Hartford Yard Goats caught my attention yesterday because it illustrates some of the perils:

Hartford, a city of about 124,000 residents that is facing a fiscal crisis and a high poverty rate, is on the hook for $68.6 million in bonds issued to cover most of the construction of Dunkin’ Donuts Park.

Mayor Luke Bronin, a Democrat who opposed the stadium but is now reluctantly dealing with it, said the ballpark alone will never generate enough money to pay back the debt. The original idea was that surrounding development will generate funds to pay off the loans and bring in additional tax revenue for the city.

Given the incentives and structure of government, advocates for some big expenditure have a narrow objective to get a project approved.  They just need some authority — whether an elected official or an electorate passing a ballot initiative — to give the go ahead.  Then, decision-making enters a weird realm beyond the reach of the people actually paying the bill, but with a those in charge obligated to continue on the public behalf.

So, we start out with promises and grand visions and wind up scrambling just to make something work without loosing too much money.

Mr. Bronin plans to borrow $20 million in bonds in the coming weeks to cover a shortfall in the city’s budget, and next year the city is already projecting a $65 million deficit.

Despite the challenges, Mr. Bronin said: “There is no question it’s better for the city to have a baseball park than a vacant parking lot.”

Why is there “no question”?  Hartford is now borrowing money for operating expenses.  That’s insane.  Unfortunately, many people have a vision of government in which it is a means of doing things that really make no sense at all.

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