Wednesday, April 26, 2017

Hear Me Talk About Government-Granted Privilege

Date: This Thursday, September 27.

Time: 11:00 AM to 12:00 PM

Location: Lehrman Auditorium, Heritage Foundation, 214 Massachusetts Ave, NE, Washington DC, 20002-4999

You can register for the event here (if you can’t be there in person, you may watch on line).

My thanks to the Heritage Foundation and to Ambassador Terry Miller, in particular. It should be a fun discussion.

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Update: A previous version of this post erroneously said that the event was at 12:00 rather than at 11:00.

September 24, 2012

Xanadu Doomed, or just Delayed?

XanaduThis year was to mark the year that Xanadu, a 2 million square foot entertainment/shopping complex, was to open in the New Jersey Meadowlands. Promising an indoor ski slope, tunnel-diving, movie complex, and warehouse-sized shops, the project has few cheerleaders.

Bergen county residents call it “structural graffitti” with its proposed Pepsi Globe Ferris wheel blocking the Manhattan skyline.  Senate President Richard Codey says it’s “yucky-looking,” and the FAA wonders if the Ferris wheel will interfere with air traffic control.

Then there’s the timing: a Disney-meets-Vegas inspired retail center in the midst of a recession?

What’s worrying however is that it won’t matter. “The largest retail and entertainment complex in the United States” partially owes its existence to subsidies, bonds, and taxpayer-financed site remediation.  Can taxpayer life-support be far behind?

Xanadu is a hybrid: last decade’s euphoric consumerism kept alive by misplaced government bets.

The vision belongs to partially to the New Jersey Sports and Exposition Authority, a state agency that oversees New Jersey’s tracks and stadiums. The Meadowlands has been a government target for economic redevelopment for decades. Xanadu is the most recent attempt to fill unused parking lots next to the stadium. The vision also belonged to a real estate developer, the Mills Corporation, which has since backed out.

While not directly subsidized,the $2 billion center is being built on state-owned land, and nearly $80 million is being spent on transportation. Site remediation has cost $2 million. The NJSEA received a $160 million 15-year lease from the private developer Xanadu Meadowlands.

Today, the main players are in financial difficulties. Real Capital Analytics put the project on its “Troubled Assets List.” The NJSEA is in the red. Years of using surplus track betting revenues to finance stadiums, convention centers, and the authority’s penchant for issuing bonds have come to a screeching halt.

Now scheduled to open some time next summer, as Jeff Tittel, executive director of the New Jersey chapter of the Sierra Club notes, “We’ve given millions in incentives, tax breaks and transportation on a project that was pushed through because of political connections — not because we needed it.”

Consumer preferences will reveal how much it is loved or loathed next summer, in theory. Unless the state decides it is “too big to fail.”

Here’s a report from the Star-Ledger on Xanadu:

Ledger Live: Meadowlands Xanadu – A boon or boondoggle?
August 3, 2009

Point Pleasant Beach to Mayor: “No New Taxes, or Police Furloughs.”

Residents in Point Pleasant Beach, New Jersey have resorted to a seldom-used method to protest their mayor’s proposal to raise taxes: they want him recalled from office. The recall petition containing 1,250 signatures was approved this week, giving Mayor Vincent Barella until July 22 to mount a challenge to the motion being placed on the ballot in November.

point-pleasant-beachThe movement to recall Mayor Barella began in the fall, after he asked the state government permission to levy local special options taxes on beach badges, paid parking lots, and alcohol — and more controversially, proposed parking fees on all neighborhood streets — to meet the $11.5 $1.5 million gap in the borough’s budget.

Republican state representatives don’t  like the idea. “We don’t support raising taxes, and [Barrella] doesn’t accept that response,” said state Sen. Andrew R. Ciesla (R-Ocean), referring to the all-Republican northern Ocean County delegation to the legislature. “He believes that it is appropriate to raise taxes in order to cure the financial ills of the borough on the backs of nonresidents and residents alike.”

And the Mayor’s Democratic rivals who initiated the petition also disapprove, claiming he has other options. Said one petitioner, “We have eight too many cops…. Manasquan has 6,500 people with 18 cops. We have 26 cops for 5,300 people.”

Residents’ motives seem clear — “No New Taxes!” — but the solutions aren’t as easy.

The Mayor argues that Point Pleasant Beach needs extra police and sanitation during the tourist season. Property tax hikes are off the table. And while hotels charge customers a 15 percent tax, the state takes 12 cents and the borough keeps three cents.

Therein lies one root cause: the dysfunctional fiscal relationship between the state of New Jersey and its 566 municipalities.

In New Jersey, localities can only levy property taxes. The state levies all other taxes (including taxes that used to be levied by local governments), and redistributes a good portion of those revenues back to the municipal governments. The result is not property tax relief for localities, but years of fiscal illusion. State aid to local government is treated like money from above, and many lead local governments to systematically spend more than they would if the locality had to raise those revenues directly.

And then there’s the state’s incentives to consider.

In the case of Point Pleasant Beach, the town doesn’t get back much of what it puts into the state’s common revenue pool. The mayor argues, “The state derives a lot of benefit in sales and income taxes, but how much does the state put into it? We pay all the costs and they get all the revenues.” Taxes levied on Point Pleasant Beach’s motels don’t go to the town’s boardwalk repairs, they go to Trenton.

The Mayor’s other options including reducing the police force (he proposed laying off one officer), went down in flames this fall. And without budget cuts, the mayor won’t meet the state-imposed tax cap on local property tax rates.

Point Pleasant Beach could ask the state for more aid, but this plays right into the claims of Trenton. Small towns (Point Pleasant has under 5,300 residents) have long been targeted by the state government for municipal consolidation on the theory they are, by definition, inefficient.  This claim is hard to prove, considering the inefficiencies and bad incentives built into the state’s revenue/aid system.

An excellent solution comes from Stanley Fischer, one of the petition’s authors. The beaches and boardwalks belong to the bars, amusement parks and pavilions. To deal with the summer partygoer crowd,  let the boardwalk businesses hire additional police. Good idea, and it can be taken further. Point Pleasant need only look to neighboring Seaside Heights’ Business Improvement District. There are already about 80 Special Improvement Districts in the state.

The concept is simple: businesses establish a geographical boundary, a board of directors, and agree to a municipal tax. In exchange, the revenues are funneled back to the district to provide needed services: sanitation, street cleaning, boardwalk repairs, security, and marketing.

For more, read this paper by Robert Nelson, Kyle McKenzie and myself.

July 18, 2009