Monday, July 5, 2010

Public-Private Partnerships & The Chickens Coming Home to Roost

Recent letters to the editor in the Indianapolis Star have praised how Indianapolis' forefathers got together some 35 years years ago and designed a very successful downtown. Some of these editorials have encouraged us to look for the next generation of leaders to continue with the policies. These letters have generally ended with dire warnings that if even more taxpayer money isn't spent the carefully pieced together vision of downtown will collapse in a pile of rubble and we taxpayers will lose our original investment in the public-private partnership that built downtown.

Public-private partnerships work like this: Government agrees to subsidize some big downtown project that the private sector found unprofitable to do on its own. The project is built. Years later the private company running the project is, as predicted, losing money and demands larger taxpayer subsidies or it will take a walk. The Government, having already gone out on the limb investing millions in taxpayer money on the project doesn't want to lose its original investment so it agrees to "invest" millions more in the public-private partnership.

Sound familiar? It's going on all over downtown Indianapolis. The chickens are coming home to roost. Whether it be Conseco Fieldhouse or the downtown mall or some other project, the next round of government subsidies are coming to perpetuate what is nothing more than a Ponzi scheme requiring bigger and bigger public subsidies to stay afloat. In the end, it will be the taxpayers holding the bag.

It is misguided how we idolize the City's leaders from decades ago. Those leaders pursuit of downtown development using taxpayer money to subsidize private business was in many cases reckless and astonishingly lacking in foresight. Much of that investment had to do with subsidizing professional sports, which virtually every economist says is a bad investment for local government. The policies of these leaders have left Indianapolis taxpayers holding the bag on money-losing investments, heavily taxed for those downtown subsidies, and deeply in debt. We don't need another generation of leaders like those whogot us into this mess. This City needs leaders who will look more closely at the use of taxpayer money to subsidize downtown private business development. We need leaders who will not neglect the City's neighborhoods in favor of downtown. We need leaders who will finally put taxpayers' interests first. Right now those leaders are not on the horizon. But we desperately need them.

8 comments:

Citizen Kane said...

Ponzi scheme says it all! Unfortunately, every level of government is engaging in their own form of a Ponzi scheme (or in some cases, several of them simultaneously).

And, in other times, the term public-private partnerships would be viewed for what is is - a form of corporatism.

But unless we rise up and fight every single day, they will continue to roll over us and steal from us in every way possible.

Jon said...

Where is the new money? From the IBJ we learn that Indianapolis is in debt over 1 billion dollars and that derivatives were not such a good deal, the mayor wants to talk about funding for mass transit, the city wants 20+ million for a new park, the Pacers deal is still in the wind, the water deal is a work in progress with another huge price tag and that is just this year. We are mired in the worst recession since the depression, state and local revenue continue to fall and all we hear about are increased expenses and increased spending. Someone downtown needs to have some basic accounting and basic math skills; when expenses exceed revenue that is called a deficit. With a billion plus in debt we need to know; when will that debt be retired, what is our current debt service ratio, what will be the effect of adding more debt?

Marycatherine Barton said...

I agree with you three, Paul, Citizen Kane, and, of course, Jon. I hope that whoever wrote those letters and editorials for the STAR, respond to your facts and arguments.

CarmelParis said...

Paul:

Thanks for bringing this issue to the forefront...in such a clear and concise manner.

I have to agree that this seems to be a unfortunate too common practice.

Have you taken a look to the "edge city" to the north - Carmel.

It too, with it's current "republican" mayor Brainard, has committed huge amounts of taxpayer dollars - current and over the next 20-25 years to these types of projects (I seem to remember that Carmel was recognized by some trade magazine as a leader in public-private partnerships) and TIF Tax Increment Financing. As for debt...take a look at the huge amount of debt that Carmel has accumulated in the last 8 years of Brainard's tenure as mayor.

What is critical is to understand that the political motivation of our leaders (other than ribbon cutting ceremonies - you dong get to have a grand ceremony when you do day to day maintenance) is that they are able to get huge contributions to their campaign re-election war-chest. In the 2003-2007 election cycle, Mayor Brainard was able to accumulate over $750,000 - 98% of which came from people who did not live in Carmel....these contributors were the engineers, architects, attorneys and developers who were either doing business directly with the city in these "public-private" partnerships or were doing other work doing other business in the city, where the Brainard political machine had some type of control.

It would appear that Indianapolis' Mayor Ballard has also fallen prey to this type of pay for play which has gotten so much media attention in Illinois.

I have a close friend who likens todays politicians and their grandiose spending to her 18 year, old freshman at college son, who gets his first credit card and immediately charges it out to max. limit. All of this spending is "necessary" and "visionary" ....until and when the bill comes due, which is has unfortunately done to the American people, it seems that the politicians have been lagging in their recognition of the need to live responsibly, within our own private and public financial means.

Had Enough Indy? said...

As each of these gentlemen have been given the spotlight letter location in the Star, which allows longer letters to the editor, I have wondered where each lives and if they pay the exorbitant taxes the 'small people' have to pay so as to ensure their personal prosperity and these lavish playgrounds for the wealthy.

TIFs, abatements, grants of land and infrastructure, securing debt instruments at lower rates, and more, need to be totaled somewhere and the size of the aggregate 'investment' critically examined.

Downtown Indy said...

The whole concept is to play now and pay later. Clearly, most voters don't look beyond the next 6 months (if that far).

The politicians know this and use it to their advantage. They know full well that the 'stuff' won't hit the fan until they are long gone.

So they play the game, reap the immediate perks and rewards, then bail out - all before reality kicks in.

It really IS a Ponzi scheme. A politician's lifespan in office is brief so all they need to do is make sure things are stable at least until they leave office.

If they are lucky, they can hand the office to a successor who can keep the machine greased and humming along awhile longer.

The trouble this time around is the financial worls has clamped down and so it's much harder to keep that machine running.

Hence, we get total corrupt silliness like 'selling' one utility to another and making a 'profit' on the deal that they can turn around spend elsewhere.

Joe Izuzu would be proud, even envious of it all.

Marycatherine Barton said...

Yes, government units should not be allowed to borrow money from private banks. Listen to what Thomas Jefferson and George Washington told us would happen to us if the federal government allowed a private bank to control the currency (that's the so-called Federal Reserve}.

Paul K. Ogden said...

Gee whiz I must have hit a nerve with this topic. I thought it was maybe too boring to get much response...I was wrong.