Sunday, October 8, 2006

Some cities never learn

Where one municipal council in Canada has dared to lead in costly boondoggles, others have always been sure not to resist but to follow. Rick Fuschi has an excellent piece on the socialist economics of municipal pharaonic projects after Windsor city council, "on the eve of an election, has just committed the public to an expenditure of $50 million plus the cost of 30 to 40 acres right in the city, for an arena complex."

We have a fixation, in Canada, with public ownership, in spite of all the evidence that the services we own and render to ourselves are often inadequate. They are never cheaper, and the true cost is often hidden from us. They are seldom rendered in a timely fashion, or in the most effective manner. And, when we are exasperated with their deficiencies, we have only a brick wall to which to deliver our complaints. Not least, they are a refuge for labour levels that are not clearly tied to demand; wage levels that show little respect for the taxpayer; featherbedders that run their little fiefdoms for personal comfort and gain; and public service unions who’s demands seldom consider the job security advantages they have over private enterprise.

Examples grow like mushrooms in this country. Our flailing health-care system is victim to all of the above. Likewise our education and school boards. Ontario’s hydro generation and distribution system delivers increasing prices well into the future; is subject to growing brownouts; and must purchase emergency supply from American sources which used to buy it from us. Our fascination for publicly supported airlines has resulted in endless drain on our wallets and abuse for the traveller. You have a complaint about any of the above, stand in line.

These are only the obvious gorillas in the Canadian economy, and each, through its control of market, or through perverse government laws, manages to drive away more efficient and effective providers. In the end, everyone suffers; the taxpayer first, who must foot the bill; the consumer who must settle for second-rate service; the service provider who in spite of monopoly power, never seems to have enough resources to render better service; the economy which suffers huge drain to prop up these elephants, and is deprived of the economic activity which alternatives would generate.

None of this is new, but in spite of the hard-knocks lessons it teaches us every day, little is learned. Smaller public entities proliferate wherever local politicians have their fingers in the public purse - like Windsor’s arena project. The innocent glee in the eyes of the “street”, at the announcement of its approval, is further evidence that economics needs to be taught from grade-school levels. None of the city’s owned entities return a “real” profit, and this one will be no different. Like every other public enterprise it is sold to the taxpayer with siren songs about community pride, or national identity, depending on its size. In this case the focus on servicing “our Windsor Spitfires”, junior league children, and community centre users, has a nice wholesome ring to it, designed to blind supporters to the reality of a competing private entity going up nearby. It will be no match for the arena/ race track/ slots/ restaurant/ hotel complex being built by private competitors.

The Windsor project will saddle ratepayers with a facility which may approach $100 million when all is done and will be a haven for CUPE employment at arbitrary price and employment levels and unaccountable service. Surviving the competition will never be an issue, either, because once built, business fundamentals will never halt its operation. Competition may, in fact, have to survive taxpayer’s subsidy. And no one at city hall will ever reveal the true costs of this destructive competition between a public and private entity.

Socialist economics is never subject to life’s lessons.
Sound familiar? Our arena, the John Labatt Centre, costs London taxpayers $4.5 million a year in debt financing and produces a revenue of only $150,000 for the city. Not withstanding the direct costs to Londoners and the hidden costs of cutting private competition for entertainment dollars off at its knees, candidates in the upcoming election have been falling over themselves to pledge support for the affable-sounding recommendations of the Creative Cities task force. Arthur Majoor, candidate for Mayor of London in the upcoming election, continues:
This report is a cornucopia for the lucky members of the artistic community who are able to access the tax dollars being offered, and the centerpiece is the “Performing Arts Centre”, with an estimated price tag of $70 million dollars!

[…] Quality of life is achieved by being able to make choices, and the ability to make choices comes from having access to your own resources. London’s arts community needs an audience with the resources to choose to patronise the arts in all its forms. Loss of that base not only hurts artists, but also the support industry that is built around the artistic community; distributors, art suppliers, galleries and venues. Channelling even more tax dollars into extravagant projects like a $70 million dollar performing arts centre hurts the London arts scene in several ways. A large performing arts centre will have to concentrate on blockbusters in order to take in enough revenue to be even partially self supporting. Imported acts and artists will drive out local talent. The constant flow of tax dollars to subsidize the cost of the performing arts centre will pull funding away from other artistic endeavours, and indeed draw funds away from other civic mandates. Finally, even though most Londoners will not be able to afford the extravagant ticket prices, they will be paying for the centre for years to come through their tax dollars, limiting opportunities to patronize other forms of artistic expression and narrowing the choices of what artistic expressions get supported.