Coyote Blog

On the way to work today, which is normally only a 5-minute drive for me, there was a small fender-bender among a couple of cars.  The cars did exactly what you are supposed to do:  they pulled off the road into a nearby parking lot so they would not block traffic.  The police could not be bothered, and just parked in the right lane, jamming traffic up for a mile or so.  I looked – there was no debris or anything in the road that they were trying to block (you can confirm that from the picture below), the police simply did not have the common courtesy that the other drivers had.

Yes, the police car below is actually parked and unoccupied in the right lane at morning rush hour.  The citizens involved can be seen pulled into the parking lot at the left.  Though it is hard to see from the picture, the traffic backup extends well into the distance.

For those of you not in Arizona that wonder from all the articles about him why Sheriff Joe is still elected by almost landslide majorities, and why Republicans all over the state still beg him for his endorsement, here it is:

A subsequent examination of the sheriff’s file showed that residents of Maricopa County wrote to him regarding the presence of Mexicans in greater Phoenix.

Citizens saw day laborers. They saw people with brown skin. They heard Spanish spoken.

And what the letters reveal is enormous anxiety about Hispanics:

• “I always see numerous Mexicans standing around in that area . . . These Mexicans swarmed around my car, and I was so scared and alarmed . . . I was never so devastated in my life regarding these circumstances . . . Although the Mexicans at this location may be within their legal right to be there . . . I merely bring this matter to your attention in order that all public agencies, FBI, etc., may be kept informed of these horrific circumstances.”
• “I would love to see an immigrant sweep conducted in Surprise, specifically at the intersection of Grand and Greenway. The area contains dozens of day workers attempting to flag down motorists seven days a week.”
• “The Mesa police chief drags his feet and stalls . . . the head of the Mesa police union is a Hispanic.”
• “As a retiree in Sun City, formerly from Minnesota, I am a fan of yours and what you are doing to rid the area of illegal immigrants . . . when I was in McDonald’s at Bell Road and Boswell (next to the Chase Bank) this noon, there was not an employee in sight, or within hearing, who spoke English as a first language — to my dismay. From the staff at the registers to the staff back in the kitchen area, all I heard was Spanish — except when they haltingly spoke to a customer. You might want to check this out.”

And Sheriff Arpaio did check it out.

None of the Hispanics described in the letters had broken the law. It is not against the law to speak Spanish or work as a day laborer.

Arpaio nonetheless gave the correspondence to Deputy Chief Brian Sands. Federal Judge Snow determined that raids and roundups quickly followed. Hispanics were rousted because white people were uncomfortable.

Sheriff Joe once did a roundup in tony Fountain Hills, which I would be surprised if it had even 5% Hispanic population, and managed to drag in for various petty violations (e.g. cracked windshield) a group that was about 95% Hispanic.  His favorite thing to do, when he isn’t busting into homes with Hollywood celebrities, is to send his deputies into a business and have them handcuff everyone with brown skin and refuse to release them until they or their family members have arrived to prove they are in the US legally.

This whole article is a good roundup of yet another abusive side of Arpaio, his flagrant disregard for public records laws and the rules of evidence.  In Maricopa County, “exculpatory evidence” and “shredded” have roughly the same meaning.

I know some of you live in Phoenix.  I am offering a deal to get rid of some B&W Nautilus 805 speakers that are in great shape.

Update:  sold

Well, it appears that Solyndra has not scared solar companies off from feeding at the state trough

More subsidies for the solar industry in Arizona are crucial to avoid being left behind by other states and China, a Phoenix business leader said today at a solar-power conference.

Tax incentives and loan guarantees “make a lot of sense” right now in Arizona, which is already a leader in the industry, said Barry Broome, president and CEO of theGreater Phoenix Economic Council at the Solarpraxisconvention.

Despite the high-profile financial failure of the Solyndrasolar plant this year in California, Broome told a packed conference room that solar power is destined to be a major force in Arizona and elsewhere. The only question, as he sees it, is whether sunny-skied Arizona will take full advantage….

Behind Broome on an overhead screen, a chart showed that Texas, Oregon, Nevada and other states provide more “aggressive economic development tools,” (a.k.a. public money), for solar power than Arizona, and the state can’t compete without doing the same thing.

What is this, a football game?  This strikes me as turn-of-the-century small town boosterism updated to the 21st century, with a dollop of tribal rivalry thrown in. He’s talking mainly about manufacturing of solar components.  I am left with a couple of questions

• Why should the fact that Arizona has sunny skies have any bearing on whether or not it is an appropriate spot to manufacture solar panels.   Should Seattle subsidize umbrella manufacture because it is rainy there?   My sense is that transportation costs are a small part of the price to end users.  Arizona clearly will be a great spot for solar panels to be installed — why does that mean we need to manufacture them?
• If other states like Oregon or China are subsidizing solar products that we might buy, shouldn’t we celebrate that?  Thanks, taxpayers of Oregon, for forking over your tax money so we can buy solar panels cheaper in Arizona.  Why in the hell should be try to out-do them at this?  Now we can go invest our capital in a business that actually makes money.
• I am obviously not a fan of government-led economic/industrial policy, but if I were, why in the hell would I want to direct my state’s capital and manpower towards a business that requires subsidies, ie can’t make a profit  on its own in the marketplace?

Its just too easy to snipe at about everything in this article, but this caught my eye in particular

To help move the industry’s message, Broome said, solar advocates must stop infighting over their competing technologies and present a unified and positive position.

Normally, I think an economist would argue that in an immature (both market-wise and technologically) product, competition and creative destruction between various competitors is critical to ultimate success.  So in fact this advice is totally senseless, unless you see the industry as a taxpayer-money-magnet rather than a real business, and then it makes perfect sense.  Politics, after all, demands simple sound bytes and a unified front.

Update:  In the first week of Harvard Business School, I learned a lesson from strategy class, in a series of two cases, that still may be the most important thing I learned there.  The cases were a hot, sexy electronics company, and a boring, dull as dirt water meter company.  To cut to the chase, the electronics company sucked as an investment, and the water meter company was a gold mine.  The moral, among several takeaways, is don’t get fooled into thinking the hot, sexy business of the moment is necessarily a good investment.  Our development agencies in AZ are making this mistake in spades.  In fact, the entire history of government economic development efforts in Phoenix has been to chase sexy businesses at the top of the market, spend taxpayer money to get some plant relocations, and then see the businesses struggle.  We certainly did this with semiconductor fabs a couple of decades ago.

For those of you in the Phoenix are, I would like to encourage you to check out the Arizona Ballet (disclosure:  my wife is on the board).

I was never a big ballet fan.  To be honest, the only times I really ever went in my younger days was when I was dating a girl who loved the ballet and when I was still in that relationship phase that I was bending over backwards to please her.

That being said, the Arizona Ballet is really doing a good job here.  In particular, we were dating far above our heads when we lured Ib Andersen as artistic director.  My wife wouldn’t like me saying this, but we are not going to keep this guy in flyover country forever.

As I have grown to appreciate the ballet, I really like the more modern, story-less dances more than the classic ballets, but that is a matter of taste.  But this week the company is putting on Prokofiev’s Cinderella, and the music, sets, and dancing are just fantastic.  This is not going to be the most daring or interesting dancing the company will do this year, but it is very likely the most accessible to the newcomer.  Everyone knows the story, so there are not any wtf? moments I get in some ballets, even ones as overdone as the Nutcracker.  And there is real humor in the ballet, in the form of the two stepsisters, that makes this perhaps the most accesible ballet for kids I have ever seen.

So go try it.

And he keeps getting re-elected by wide margins.  Unbelievable.  

In a performance worthy of a Mafia don, Sheriff Joe Arpaio dissembled under oath today in a disciplinary hearing for disgraced former Maricopa County Attorney Andrew Thomas, and Thomas’ ex-underlings, former deputy county attorneys Rachel Alexander and Lisa Aubuchon.

During more than two hours of questioning, mostly by counsel for the State Bar of Arizona, Arpaio’s favorite response was, “I don’t recall,” which he repeated numerous times.

He asserted that he had delegated all authority concerning the investigations of the Maricopa County Board of Supervisors, county judges, and various other county officials to former Chief Deputy David Hendershott, Arpaio’s hand-picked fall guy.

For those who don’t live here, I can assure you that at the time, Arpaio took personal credit for everything the department did, using his simply astronomical PR budget.

Here, for example, is one of the key cases Arpaio is being asked to discuss.  He and former county attorney Andrew Thomas waged a war for years against their bosses, the County Supervisors, who frequently had the temerity to try to circumscribe Thomas’s and Arpaio’s power.  Among other craziness, Thomas, backed by Arpaio, filed a RICO suit against the supervisors.  When a Judge hearing the case, Judge Donahoe, issued some unfavorable rulings in that case, Thomas and Arpaio filed a bribery case against Donahoe, their wacky theory being that since the Supervisors had authorized a new County Court building, this was a bribe to Judge Donahoe, whose court would now be in the new building.  Arpaio claims he had nothing to do with any of this.  Here is his uninvolvement, via the AZ Republic.

Maricopa County Attorney Andrew Thomas on Wednesday filed criminal charges against Gary Donahoe, presiding criminal judge of Superior Court, accusing him of hindering prosecution, obstructing a criminal investigation and bribery.

The three felony charges relate to Donahoe’s handling of criminal investigations into county officials, particularly a controversial court tower under construction in downtown Phoenix.

Thomas and Sheriff Joe Arpaio, who stood side by side during a news conference Wednesday, have repeatedly questioned the $340 million joint project of the Superior Court and Maricopa County government.

By the way, it is a nice touch, right out of some place like North Korea, for a prosecutor to bring a judge up on charges for “hindering prosecution” merely for issuing a ruling form the bench which wasn’t exactly what the prosecutor wanted.  Its more scary when you consider just how many judges truly are in the tank for local prosecutors.

From the Goldwater Institute, on the amount of money we in Phoenix are paying in taxes to support union management costs

Phoenix taxpayers spend millions of dollars to pay full salary and benefits for city employees to work exclusively for labor unions, a Goldwater Institute investigation found.

Collective bargaining agreements with seven labor organizations require the city to pay union officers and provide members with thousands of additional hours to conduct union business instead of doing their government jobs.

The total cost to Phoenix taxpayers is about $3.7 million per year, based on payroll records supplied by the city. In all, more than 73,000 hours of annual release time for city workers to conduct union business at taxpayers’ expense are permitted in the agreements.

The top officials in all of the unions have regular jobs with the city. But buried in the labor agreements are a series of provisions for those employees to be released from their regular duties to perform union work.

For top officers, the typical amount of annual release time is 2,080 hours, a full year of work based on 52 weeks at 40 hours each. They continue to draw full pay and benefits, just as if they were showing up for their regular jobs. But they are released from their regular duties to conduct undefined union business.

Union officials say the time is a good investment that leads to a more productive workforce. Critics say it amounts to an illegal gift of taxpayer money.

The “more productive workforce” line is just hilarious.  99.9% of the this work very likely is against the best interests of taxpayers, either raising future salaries or enforcing productivity-killing work rules or preventing the termination of incompetent employees.

I understand that there are similar provisions in some private union contracts, but if I was a shareholder in these companies I would be outraged about those as well.  As it turns out, private companies that have these deals tend to be among the most dysfunctional and uncompetitive in the country (e.g. GM).

What’s particularly ugly about this is that it is so reminiscent of a number of Soprano’s episodes, with the mafia guys all sitting around in no-work and no-show jobs at taxpayer expense.

Have you ever notices how “partisan bickering” seems to be defined asymmetrically?   In most of the media, when such a term is used, it generally means “folks trying to reduce the size of the state have gotten uppity of late.”   We have just such an example here in Phoenix:

A non-profit organization created by a former spokesman for the Phoenix Mayor’s Office is bankrolling the political committee aiming to recall Phoenix Councilman Sal DiCiccio.

The group, Protect Voters’ Rights, has contributed $50,000 to the anti-DiCiccio group called Save Phoenix Taxpayers, according to campaign-finance reports filed with the Phoenix city clerk. The contributions from Protect Voters’ Rights make up all but $100 of the funding Save Phoenix Taxpayers reported earning since the group formed to launch its recall campaign against DiCiccio in April.

Scott Phelps, a retired Phoenix employee who served as the spokesman for four different mayors during his 19-year tenure, said he formed Protect Voters’ Rights to protect the city from being destroyed by partisan politics.

“One of the things I find discouraging and destructive is the rush by folks to make city government more like Congress and the state Legislature,” Phelps said. “I can’t think of a single soul who looks at the partisan bickering there and says we can use a little more of that at City Hall.”

The latter statement is telling, as it seems to be in response to Republican and Tea Party influence in Congress since the last election.  Phelps longs for a return to one-party (Democratic) rule, and for him “bickering” means any sort of political opposition to his agenda, which seems to be the continued growth of government size and power.

DiCiccio is certainly a hell-raiser.  Most recently, he has complained about the mayor’s back-door efforts to slip large pay raises for city workers into the budget, despite the ongoing recession that has hit city finances hard.   Further, he has suggested that private enterprises might be able to do things, like maintenance, janitorial, or clerical work, cheaper than government employees.  It is this latter idea, which sounds good to me, which apparently puts him beyond the pale for agents of the state:

Save Phoenix Taxpayers received the first check because some of what DiCiccio has been doing is an example of what Protect Voters’ Rights aims to fight.

Phelps specifically cited DiCiccio’s lobbying of a bill during the last Legislative session that would have required Phoenix to competitively bid out city services that cost more than $250,000. Gov. Jan Brewer vetoed the bill.

“It’s not the right thing to do to run down to the Legislature and try to get that group’s leadership, which isn’t being filled by the deepest thinkers that have ever held those positions, to impose the will of one or two council members on the entire city,” Phelps said.

I will admit that seeking a state law to force Phoenix’s hand is an odd approach, but the core objection here is not the odd legislative approach but the threat to government worker jobs.  DiCiccio suspects the group is a front for government workers unions, and I think he is probably right.   After all, it is extremely odd to see a group that nominally calls itself a good-government group shocked by the very idea of seeking competitive bids for city services.

Lefties are struggling with the concept of a libertarian doing a good deed (in this case, Radley Balko’s great journalism leading to the release of Cory Maye.

Here is the real problem for the Left:  This is exactly the kind of story — a black man  railroaded into jail in Mississippi — that leftish reporters used to pursue, before they shifted their attention to sorting through Sarah Palin’s emails.  A lot of investigative journalism has gone by the wayside — in Phoenix, it has really been left to independent Phoenix New Times to do real investigative journalism on folks like Joe Arpiao, as our main paper the Arizona Republic has largely fled the field.

Well, the execreble Sheriff Joe Arpaio, America’s most-desirous-of-PR-exposure lawman, is at it again.  Phoenix will be mobbed by the press in a couple of weeks when the MLB All-Star Game comes to town, and of course Sheriff Joe will be hurt and depressed if he doesn’t get himself in front of all those cameras.

So this is apparently his plan for doing so:

Sheriff Joe Arpaio’s publicity stunt of choice for All-Star weekend: a female chain gang that probably will make a stop at Chase Field to pick up garbage as the national sporting press tries to cover a baseball game….

This particular gang is comprised of women convicted of DUI. They will be decked out in the standard striped uniforms. However, they will also be wearing pink T-shirts with messages about DUI.

Because nothing says “thoughtful and humane treatment for alcohol problems” like parading prisoners in front of national TV audiences like a modern remake of Cool Hand Luke.

We give special, unique powers to use force to the police, and it is horrifying to see them used for personal aggrandizement.

By the way, I will share my secret fear.  As you may know, Apriao enjoys leading raids on businesses that hire Mexican immigrants.  His MO is to zip-tie everyone with brown skin or an accent until they can produce proof of citizenship.  My deep fear is that he will run a raid of the concession operations at the ballpark during the game.

Several times in the past I have posited that folks in power simply hate buses.  How else to explain light rail and high speed rail projects that are both substantially more expensive and substantially less flexible than buses.  Some of the reasons for this include:

• Politicians like rail better because it is sexier.  Period.   They are trying to spend taxpayer money to support their own re-election talking points.
• Unions and city workers like rail because it is more expensive.  More money gets spent, either creating more union jobs or giving transit leaders bigger budgets which translate into higher salaries and more prestige for themselves.  And the lack of flexibility is good for them because it makes their job immune to budget cutting.  Just too many sunk costs.
• Middle and upper-middle class folks in the public have a deep disdain for buses, which they associate with poverty and blue collar labor.  Riding buses hurts their self image, even if the service is no worse than trains.  Rail is the Louis Vuitton handbag of transit.

In Phoenix, light rail requires a subsidy of $3.82 center per mile (that is the government spending above and beyond the fare), which is nearly 10x what we spend on buses.  And light rail uses more energy per passenger mile here than driving.

Anyway, this story from Iowa seems to support my point — the government is proposing to spend tens of millions of dollars to create a rail service that is slower and more costly than existing private bus service.

The latest in lunacy in high-speed rail lunacy: at Joel Kotkin’s newgeography.com Wendell Cox reports that the U.S. Transportation Department is dangling money before the government of Iowa seeking matching funds from the state for a high-speed rail line from Iowa City to Chicago. The “high-speed” trains would average 45 miles per hour and take five hours to reach Chicago from Iowa City. One might wonder how big the market for this service is, since Iowa City and Johnson County have only 130,882 people; add in adjoining Linn County (Cedar Rapids) and you’re only up to 342,108—not really enough, one would think, to supply enough riders to cover operating costs much less construction costs.

Oh, one other thing. Cox reports that there is already luxury bus service, with plus for laptops and wireless Internet, from Iowa City to Chicago. It’s part of a larger trend for private companies to offer convenient and inexpensive bus service. A one-way ticket on the bus costs $18, compared to a likely train fare of more than $50. And the bus takes only three hours and 50 minutes to get from Iowa City to Chicago. That’s one hour and 10 minutes faster than the “high-speed” train.

I am happy that my neighbors here in Phoenix are not allowed a hecklers veto to prevent grocery store chains, or any other business, from serving me at convenient locations.  I live walking distance from an intersection with three grocery stores (Whole Foods, Fry’s, Albertsons) and I love it.

Living in Phoenix I know a number of people who work for Apollo (University of Phoenix).  They have obviously been appalled by the Obama war on for-profit colleges and the egregiously-flawed report that came out last year.  Several have told me they have complained for a while that certain hedge funds were pushing this initiative in order to make money off of short positions on their stock.  I thought this was a bit paranoid, but now the accusation is coming from third parties, even those on the Left:

A proposed regulation from the Education Department threatens to devastate for-profit career or trade schools, but one thing is even more controversial than the regulation — how it was crafted.

Education Department officials were encouraged and advised about the content of the regulation by a man who stood to make millions if it were issued.

“Wall Street investors were manipulating the regulatory process and Department of Education officials were letting them,” charged Melanie Sloan of a liberal-leaning ethics watchdog called Citizens For Responsibility and Ethics in Washington….

Among others, Sloan is referring to Steven Eisman, a hedge fund manager and a figure in the book “The Big Short,” who testified in the Senate against for-profit career or trade schools, attacking them as “fundamentally unsound.”

At the same time, he was betting that the stocks of those companies would fall, a practice known as short selling. “Making sure that they were going to be defamed and that their value was going to be depressed,” said Harry Alford, head of the National Black Chamber of Commerce, who worries about the schools because they serve many minority students.

Simultaneously, through emails and conference calls, Eisman was advising Education Department officials — and one White House adviser — in detail on how best to write the new regulation, which he estimated would reduce the schools’ earnings by as much as 75 percent.

The proposed regulation from the administration is aimed at what are known as career or vocational schools. The rule would cut federal aid to programs where student debt levels are deemed to be too high and where students are struggling to repay their loans.

In other news, everyone seems A-OK with kids in not-for-profit universities running up $200,000 debts to get such lucrative, workplace-ready degrees as women’s studies, comp. lit. and poetry.

I have been following the story on this blog of how Glendale, Arizona has been throwing wads of taxpayer money at the Phoenix Coyotes hockey team and at any rich person who might be willing to buy the team.  The city of 225,000 citizens spent nearly $200 million on a stadium, promised to hand a buyer of the team $100 million to help with the purchase, plus hand the new buyer a stadium contract worth about $100 million over five years.  While this all plays out, Glendale paid the NHL $25 million last year to help cover the team’s losses and has agreed to pay another $25 million this year.

Wow.  This is just amazing, written all in one place.  But its not just hockey that the small corporate-state suburb on Phoenix wants to subsidize.  Here is the latest recipient of largess:

Bechtel Corp., one of Glendale’s largest employers, has agreed to stay until 2018 after city officials offered the company about $1 million in incentives.

By next year, the global engineering and construction company, with the city’s financial help, will move from north Glendale to a new, vacant building not far from the city’s sports district called the Glendale Corporate Center….

Under the agreement, Glendale would give $576,000 over the next two years to Bechtel for its costs to outfit the building shell for offices.

The incentive package also includes a waiver of $50,000 in city permit fees and a job-retention incentive of $1,250 per employee, up to $400,000. Each eligible employee must earn a salary of at least $50,000 per year.

Glendale offered a sports perk as well.

Bechtel can use the city’s suites, both at Camelback Ranch Glendale and Jobing.com Arena, for free twice.

LOL, Jobing.com arena is the hockey rink the city built, so it is giving tickets from its subsidized hockey club to its subsidized engineering firm.  The article includes the usual consultant figures who reliably take money from cities to report on all the indirect benefits and revenues and economic activity that result from their subsidies.

However, these are not the first subsidies paid to Bechtel by Glendale

The corporation first came to Glendale in 2002. Bechtel moved to Talavi Corporate Center from Phoenix after Glendale promised $1 million in incentives. The staff at the time was expected to grow to 500 from 300.

Bechtel’s staffing is only at 320 today, not 500, but this failure to actually grow jobs after getting subsidies for job growth is pretty typical of these deals.    My interpretation of this is that this is yet another move to get more tenants around its sports complex, to raise the stakes and apparent costs if the hockey team moves.  Glendale will cry that they can’t lost the hockey team, think of all the tenants in the surrounding real estate, when it was the city itself that spent money to put all its eggs in this one basket.

The only funny part of the article is the Talavi real estate folks.  They were thrilled to gain a new tenant in 2002 due to the city’s relocation subsidies, but now suddenly think such subsidies are unfair.

Bechtel’s landlords at Talavi aren’t happy about the move.

“We were actually a little surprised to hear Glendale was offering incentives,” said Damon Elder, spokesman for Daymark Realty Advisers, which was negotiating a lease extension with Bechtel for Talavi’s owners.

“We would think the city would be fair-minded with all of their corporate citizens. . . . I don’t know why the city would be pitting one location against another.”

For those of us who simply think of ourselves as residents of the Phoenix metropolitan area, or even broader just as Americans, we are surprised about the earlier subsidy as well, wondering why taxpayers of a small suburb are paying big bucks to move businesses back and forth a few miles across the town line.

But of course, this is not the worst example. A few years ago, Phoenix tried to spend $100 million in subsidies to move a Nordstrom and a Bloomingdales one mile and one freeway exit (out of Scottsdale).

By the way, Glendale’s economic development director has made it official, we live in a corporate state:

“[government relocation incentives are] just a modern, Fortune 100 corporate expectation,” Friedman said. “If you have a top-notch, world-class company in your community, your absolute goal should be to make sure they are successful and are content in your community and want to remain.”

I have to take this with a grain of salt, because it is coming from GE, the current American poster-child for rent-seeking, particularly in attempting to be a magnet for green energy subsidies.   But since the statement can be seen as under-cutting the subsidy argument, I have to take it more seriously:

Solar power may be cheaper than electricity generated by fossil fuels and nuclear reactors within three to five years because of innovations, said Mark M. Little, the global research director for General Electric Co.

“If we can get solar at 15 cents a kilowatt-hour or lower, which I’m hopeful that we will do, you’re going to have a lot of people that are going to want to have solar at home,” Little said yesterday in an interview in Bloomberg’s Washington office.

….GE, based in Fairfield, Connecticut, announced in April that it had boosted the efficiency of thin-film solar panels to a record 12.8 percent….The cost of solar cells, the main component in standard panels, has fallen 21 percent so far this year, and the cost of solar power is now about the same as the rate utilities charge for conventional power in the sunniest parts of California, Italy and Turkey.

I am all for that.  I have always had faith that solar would make sense someday, and that we would be ranking out cheap solar conversion surfaces like carpet out of Dalton, Georgia, but every time I have priced it to date on my house, even with huge government subsidies, it has not made sense.    In Europe, it requires 50-60 cent feed in tariffs (basically a subsidy in the form of above-market electricity prices paid by the utility for solar-sourced electricity) to get solar capacity installed, so 15-cents would be great and is approaching the cost of electricity in some high cost areas.

Here in Phoenix, FirstSolar does a ton of thin film.  I have always had mixed feelings about FirstSolar.  On the one hand, they live off subsidies and would basically not be in business if it were not for huge European subsidies of various forms.  On the other, though, they have been one of the few solar companies that actively have talked for years of a development path to a cost position that does not require subsidies.

The city of Glendale, Arizona (a 250,000 population suburb of Phoenix) continues to pour money into its NHL Hockey Team.  The city has already spent $200 million on a stadium and is trying to find a legal way to hand $100 million to a private individual to buy the team and keep it in Glendale.  But that is not even the end of it:

The Phoenix Coyotes are expected to stay in Glendale at least one more season, with or without a permanent owner, if the City Council pledges another $25 million to the National Hockey League.

The cash would go to offset team and arena losses…..

The pledge is the second financial promise in as many years.

Glendale this week paid $25 million it pledged the league a year ago in hopes of keeping the Coyotes in town until a permanent owner was found.

The city paid this year’s $25 million from a utilities-repair account.

It’s unclear whether that same fund would be used again and when the city would have to pay.

The NHL says the team and arena lost $37 million last season.

Just to give you a sense of scale, $25 million a year is larger than the city’s fire department budget.  It is over $100 for every man, woman, and child in the city, each of the last two years.  Residents of the town are subsidizing a money-losing team mainly enjoyed, to the extent it has fans, by people outside of the city of Glendale.  It is a $25 million city annual expenditure that mainly helps three or four bars and restaurants next to the facility.  Just paying off those obviously politically connected retail owners a few hundred thousand each would be cheaper.

Spend a few nights listening to the news on TV, and you will quickly discover the one of the bedrock logical fallacies of political discourse:

If it’s good, the government should subsidize it.  If it’s bad, the government should ban it.  If outcomes are in any way perceived by any group to be sub-optimal, then the government should regulate it.  Anyone who opposes these bans, subsidies, and regulations must therefore be a supporter of bad outcomes, hate poor people, want people to get sick and die, etc.

Just last night, I was watching the local news (something I almost never do) and saw a story of one of those kids’ bouncy houses that blew out of someone’s backyard into a road.  There was a girl inside who was scared but unhurt  (after all, she was surrounded on six sides by giant airbags).   Of course the conclusion of the story was a call for more government regulation of tie downs for private backyard bouncy houses.  And those of us who think it’s absurd for the government to micro-regulate such things, particularly after a single freak accident when no one was hurt — we just want to see children die, of course.

Which brings me to this little gem in a local blog, which reflects a feeling held by many area sports fans.  Remember that I have supported the Goldwater Institute in their opposition to the city of Glendale giving a rich guy $200 million to buy our NHL ice hockey team and keep it here.    My (and I presume Goldwater’s) motivation has been opposition to a huge government subsidy that equates to nearly $1000 for every man, woman, and child in Glendale.  This subsidy appears illegal under the Arizona Constitution.  But that is not how political discourse works.  We are not defending the Constitution, we just hate hockey (emphasis added)

If you believe Canadian newspapers, tonight’s game against the Detroit Red Wings will be the Phoenix Coyotes last game in the desert.

Canadians like hockey. Judging by attendance at Coyotes games, Phoenicians don’t (at least not enough to drive to west side), which is why Canadians are so optimistic that their beloved Winnipeg Jets will be returning to our overly polite neighbors to the north.

The Coyotes ended the season with the second worst attendance in the NHL. That, coupled with the Goldwater Institute’s crusade to drive the team out of the Valley, is not helping the city of Glendale’s attempt to keep the team.

A few facts to remember:

• As the article states, local residents have already voted with their feet, since the team has nearly the lowest attendance in the league despite going to the playoffs both last year and this year.  They have trouble selling out playoff games.
• The team has lost money every year it has been here.  It lost something like $40 million this year
• The team is worth $100 million here in Phoenix.  That is the going rate for warm-market teams.  The buyer is willing to pay $100 million of his own money for the team.   So why is a subsidy needed?  The NHL insists on selling the team for $200 million or more.  Though it piously claims to want to keep hockey in Arizona, it is selling the team for price than can only be paid by buyers who want to move the team.
• The City of Glendale appears to have lied outright in selling this deal to the public.  In particular, it claimed the $100 million was not a giveaway, but a payment for the team’s rights to charge for parking.  But many insiders say the City always retained this right, and it strains credulity that while losing money for seven years, the team would not have exercised this right if it really owned it.
• Glendale has only itself to blame, confounding an already difficult marketing task (ice hockey in the desert) by putting the stadium on the far end of a sprawling city.   The location is roughly the equivalent in terms of distance and relationship to the metropolitan area of moving the Chicago Blackhawks or Bulls stadium to Gary, Indiana.  The stadium ended up in Glendale because neither Tempe, Scottsdale, nor Phoenix was willing to make a $200 million, 30-year taxpayer-funded bet on the profitability of ice hockey.

I will be on the Radio at 9:00PM Arizona/Pacific time to discuss the Glendale / Coyotes subsidy.  I will be appearing on the Terry Gilburg show on 550 KFYI in Phoenix, also streaming here.

Sheriff Joe Arpaio constantly gets a pass for some of the most outrageous hijinx from Phoenix’s conservative population that sees him as the last bastion between them and brown-skinned people.  Tell someone he is above the law, and he is going to act above the law

​As Maricopa County Sheriff Joe Arpaio crows this morning about how his agency busted a total of six illegal immigrants for using fake IDs so they could work at a Mesa dry cleaner, county budget officials unveiled the results of a six-month investigation into how his office is misspending your money.

If you pay taxes in Maricopa County, it’s not pretty.

In total, the county finds that Arpaio and his cronies misspent $99.5 million over the last eight years, the majority of which came from the sheriff’s detention fund.

“For eight years, you have been signing paperwork that says your budget is balanced, but it’s not,” County Supervisor Mary Rose Wilcox reportedly told sheriff’s officials at this morning’s meeting of the Maricopa County Board of Supervisors.

Budget officers reviewed payroll records for 5,700 sheriff’s employee salaries from February 2004 to February 2011 and found that much of what employees were actuallydoing was not what they were getting paid to do.

Those of you who are regular readers are probably tired of hearing me rant about the proposed Glendale, Arizona subsidy of the Phoenix Coyote’s team (here, here, here), a subsidy that runs afoul both of our state Constitution and of common sense.  This week, George Will enters the fray, and actually quotes me at the bottom of his column.  Most of the column should be familiar to those following the story here, but of course being George Will it is so much pithier than I could tell the story.  I liked this bit:

NHL Commissioner Gary Bettman agrees with McCain that the world is out of joint when people can second-guess the political class: “It fascinates me that whoever is running the Goldwater Institute can substitute their judgment for that of the Glendale City Council.” He will learn not to provoke Olsen, who says, “It happens to fascinate me greatly that the commissioner thinks a handful of politicians can substitute their judgment for the rule of law.”

I wanted to leave Glendale’s proposed $100 million subsidy of the purchase of the Phoenix Coyotes hockey team by Matthew Hulzinger behind for a while, but I had to comment on something in the paper yesterday.

The Arizona Republic, which is an interested party given that a good part of their revenues depend on having major sports teams in town, had an amazing editorial on Tuesday.  Basically, it said that Goldwater, who has sued to bock the bond issue under Arizona’s gift clause,  needed to stop being so pure in its beliefs and defense of the Constitution and that it should jump down in the political muck with everyone else.

I encourage you to read the article and imagine that it involved defense of any other Constitutional provision, say free-speech rights or civil rights.  The tone of the editorial would be unthinkable if aimed at any other defense of a Constitutional protection.  Someone always has utilitarian arguments for voiding things like free speech protections — that is why defenders of such rights have to protect them zealously and consistently.  The ACLU doesn’t get into arguments whether particular speech is right or wrong or positive or negative — it just defends the principle.  Can’t Goldwater do the same?

My thoughts on the Coyotes deal are here and her.  Rather than dealing with the editorial line by line, which spends graph after graph trying to convince readers that Darcy Olsen, head of the Goldwater Institute, is “snotty,”  here are some questions that the AZ Republic could be asking if it were not in the tank for this deal

• How smart is it for the taxpayers of Glendale to have spent $200 million plus the proposed $100 million more to keep a team valued at most at $117 million? (several other teams have sold lately for less than $100 million)  And, despite $300 million in taxpayer investments, the city has no equity in the team — just the opposite, it has promised a sweetheart no-bid stadium management deal of an additional $100 million over 5 years on top of the $300 million.
• The Phoenix Coyotes has never made money in Arizona, and lost something like $40 million last year.  Why has no one pushed the buyer for his plan to profitability?  The $100 million Glendale taxpayers are putting up is essentially an equity investment for which it gets no equity.  If the team fails, the revenue to pay the bonds goes away.   The team needs to show a plan that makes sense before they get the money — heck the new owners admit they will continue to lose money in the foreseeable future.     I have heard folks suggest that the Chicago Blackhawks (Hulzinger’s home town team) are a potential model, given that they really turned themselves around.  But at least one former NHL executive has told me this is absurd.  The Blackhawks were a storied franchise run into the ground by horrible management.  Turning them around was like turning around the Red Sox in baseball.  Turning around the Coyotes is like turning around the Tampa Bay Rays.  The fact is that the team lost $40 million this year despite the marketing value of having been in the playoffs last year and having the second lowest payroll in the league.  The tickets are cheap and there is (at least for now) free parking and still they draw the lowest attendance in the NHL.  Part of the problem is Glendale itself, located on the ass-end of the metro area  (the stadium is 45 minutes away for me, and I live near the centerline of Phoenix).
• If taxpayers are really getting items worth $100 million in this deal (e.g. parking rights which Glendale probably already owns, a lease guarantee, etc) why can’t the team buyer use this same collateral to get the financing privately?  I have seen the AZ Republic write article after article with quote after quote from Hulzinger but have not seen one reporter ask him this obvious question.  I have asked Hulzinger associates this question and have never gotten anything but vague non-answers.  A likely answer is what I explained yesterday, that Hulzinger is a smart guy and knows the team is not worth more than $100 million, but the NHL won’t sell it for less than $200 million (based on a promise the Commissioner made to other owners when they took ownership of the team).  Hulzinger needed a partner who was desperate enough to make up the $100 million the NHL is trying to overcharge him — enter the City of Glendale, who, like a losing gambler, keeps begging for more credit to double down to try to make good its previous losses.
• Glendale often cites a $500 million figure in losses if the team moves.  Has anyone questioned or shown any skepticism for this number?  My presumption is that it includes lost revenue at all the restaurants and stores around the stadium, but is that revenue really going to go away entirely, or just move to other area businesses?  If your favorite restaurant goes out of business, do you stop going out to eat or just go somewhere different?
• We hear about government subsidies to move businesses from other countries to the US, or other states to Arizona, and these tend to be of dubious value.  Does it really make sense for Glendale taxpayers to pay $400 million to move business to another part of the Phoenix metropolitan area?
• Why do parties keep insisting that Goldwater sit down and “negotiate?”  Goldwater does not have the power to change the Constitutional provision.  Do folks similarly call on the NAACP to “negotiate” over repeal of Jim Crow laws?  Call on the ACLU to negotiate over “don’t ask, don’t tell”?  This may be the way Chicago politics works, with community organizers holding deals ransom in return for a negotiated payoff, but I am not sure that is why Goldwater is in this fight.  The Gift Clause is a fantastic Constitutional provision that the US Constitution has, and should be defended.
• Jim Balsillie offered to buy out the team (and move it to Canada) without public help and to pay off $50 million of the existing Glendale debt as an exit fee.  Thus the city would have had $150 in debt and no team.  Now, it will be $300 million in debt and on the hook for $100 million more and may still not have a team in five years when, almost inevitably, another hubristic rich guy finds he is not magically smarter about hockey and can’t make the team work in Arizona.   Has anyone compared these two deals?  Private businesses cut losses all the time — politicians almost never do, in part because they are playing with house money (ours).

I am becoming increasingly enamored of the Arizona Constitution’s “gift clause,” even if it has not been enforced evenly in the past.   This sensible Constitutional provision requires that neither the state nor any municipality in it may “give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.”

This has been interpreted by the courts as meaning that if a state or municipal government gives money to a private company, it must get something of value back – ie it pays money to GM and gets a work truck back.  But politicians will be politicians and have stretched this rule in the past out of all meaning, by saying that they are getting “soft” benefits back.  In other words, they could subsidize the rent of a bookstore because reading is important to the community.  Silly?  Not in California:

The city spent $1.6 million in federal grant money to bring Borders into the Pico Rivera Towne Center and to help pay its rent for nearly eight years.

Now the bookstore at 8852 Washington Blvd. is among the 200 Borders stores closing by April in the wake of the company filing for Chapter 11 bankruptcy reorganization.

But the city still faces paying rent on the soon-to-be vacated 18,100-square-foot site, along with other costs associated with 2002 agreements it made with Borders and with Vestar Development Co., which owns the Towne Center….

Officials said the decision to bring a bookstore into the community was a quality-of-life issue.

So the gift clause originally was authored to stop handouts to railroads and such, but certainly should prevent stuff like this.  When it did not, our Goldwater Institute sued, and it was successful in reigning in these gift clause exclusions.  This is the ruling from a suit over a $97 giveaway to a new mall (the giveaway was nominally disguised as a parking lot).

Indeed, in today’s unanimous decision, penned by Chief Justice Andrew D. Hurwitz, the five Supreme Court judges say that indirect public benefits — like, apparently, beating out Scottsdale for the sale tax from Bloomingdales — aren’t enough to justify a giveaway to a private party.

Previous courts who’ve held that, they say, have misread precedent.

“In short, although neither [of two Supreme Court precedents] held that indirect benefits enjoyed by a public agency as a result of buying something from a private entity constitute consideration, we understand how that notion might have been mistakenly inferred from language in our opinions,” they say. Now that they’ve clarified, the justices seem to be saying, the appellate court must examine whether the direct benefit the city of Phoenix gets — aka. those parking spaces — is enough to justify the giveaway.

For the record, the Supreme Court suggests that the parking garage is not, likely, benefit enough to justify such a tax giveaway.

“We find it difficult to believe that the 3,180 parking places have a value anywhere near the payment potentially required under the Agreement,” its opinion finds. “The Agreement therefore quite likely violates the Gift Clause.”

This was a particularly awful subsidy which tried to move a Nordstrom’s one whole mile, over the Scottsdale border into Phoenix (update here).

This is the heart of why Goldwater needs to continue to stand strong against the proposed $100 million Glendale subsidy of the Phoenix Coyote’s hockey team purchase.  The city of Glendale and the buyer Matthew Hulzinger (who claims the bond issues is totally guaranteed and safe, raising the question of why he could not have gotten private financing instead) have rallied everyone from our local paper to John McCain to to task of excoriating Goldwater for standing up for the state Constitution.  They claim the deal makes a lot of financial sense.

Beyond the cities BS “total impact” numbers, I ask, “so what?”  This is an important Constitutional principle.  As America slides into a European-style corporate state, I can’t think of anything more appropriate than drawing the line on corporate welfare here in Arizona (its certainly a more useful endeavor than some of the goofy legislation currently pouring out of our state house).  Heck, I would like to see a gift clause in the US Constitution

My column is up this week at Forbes, and discusses the role of taxpayer money in professional sports.

A  critical battle is underway challenging the very heart of the professional sports economics model — and it is not the NFL labor negotiations.  The unlikely fight is between a struggling league (the NHL), a suburb with delusions of grandeur (Glendale, Arizona), and a small, regional think tank (the Goldwater Institute).   At stake is an important source of value for nearly every professional sports team:  taxpayer subsidies….

Consider the Arizona Cardinals new football stadium in Glendale, for example.  In part due to the promise of a Superbowl bid, the local taxpayers paid $346 million of the total $455 million cost of the facility — a building that will be used just three hours a day on ten days a year for its primary purpose.  By contrast, in 2010 Forbes valued the Arizona Cardinals at $919 million, meaning well over a third of the franchise’s value accrues from the public subsidy of its retractable roof palace.  It can be argued that much of the increase in player salaries and team owner wealth in the NFL over the last twenty years has come at the expense of taxpayers.

If anything, this example from the NFL understates the importance of public funding of stadiums.  Why?  Because of all the major sports leagues, the NFL gets the lowest percentage of its total revenues from its stadiums.  Leagues like the NBA, and in particular the NHL, are far more dependent on stadium revenue for their well-being.

Let’s return to precocious Glendale.  In 2003, the city agreed to publicly fund $180 million of the $220 million cost of building a new arena for the Phoenix Coyotes hockey team.  Whereas Glendale’s subsidy of the Cardinals represented about a third of that franchise’s value, their $180 million subsidy of the Coyotes represents over 130% of the current $134 million value of the team.  Stuck in Arizona and losing as much as $40 million a year, the team is literally worthless without ongoing public subsidies.

The column goes on to discuss yet another bond issue proposed by Glendale to subsidize these teams.

I have never really liked to wallow much in the accusation and counter-accusations of media bias.  But I am coming around to the hypothesis that the media is neither liberal or conservative but has a big government bias.  Recently, as in this article, the Arizona Republic (our daily paper) has been going after the Goldwater Institute for opposing what amounts to a $200 million subsidy to a buyer of our hockey team.

The short story is that after the city of Glendale blew a bunch of money for a hockey stadium in the desert, it turns out hockey is not very popular here (surprise).  So the team went bankrupt, and threatened to move.  To keep it from moving, the city of Glendale wants to throw more good money after bad and subsidize the new buyer.   Goldwater is challenging the subsidy as illegal under AZ law.

As I noted in the previous article, third parties value the Coyotes at $117 million.  So with this new bond issue, they will have run up $380 million in debt to keep a $117 million asset in town.  Further, they will have basically paid the entire purchase price of the team (and more) without getting a drop of equity in return.  All they get is the right to charge for parking around the arena, which is currently free.  This at first makes some sense (though the value of the concession is never mentioned) but in fact it is ludicrous as well.  The entire reason for the subsidy, supposedly, is to protect the mall/apartment/office complex around the stadium that the city cut sweetheart deals with developers to make happen.  So now they are going to charge for parking — what is going to happen to all those businesses they supposedly are doing this for when their customer’s parking is not longer free?

Anyway, the Republic editorialized against Goldwater on Sunday (in an editorial titled “Back off, Goldwater Institute”) saying that they were hurting taxpayers because if the new bond issue and team sale fails, then there won’t be any revenue to pay the old bond issue.  Its hard to figure how this is any different from doubling down at the roulette table in hopes of making back one’s past losses.  And, Goldwater opposed the first bond issue too.

Now, the Republic has editorialized again, this time in a nominally news article.  They argue that by pointing out the potential illegality of the subsidy, Goldwater is messing up their bond interest rates.  I kid you not:

As Glendale prepares to sell bonds to finance its Phoenix Coyotes deal, the interest rates the city obtains make a big difference in how much debt Glendale would take on.

Team buyer Matthew Hulsizer says investors are demanding high interest rates due to nervousness among bond buyers about a potential Goldwater Institute lawsuit over whether the city is illegally subsidizing a private business. Glendale maintains it’s on firm legal ground.

This is exactly the line the paper took in its Sunday editorial.  Now they are giving an interested party the ability repeat it in a supposed news article.  The author deliberately puts Goldwater on the spot and in the center of blame

Late Monday, Hulsizer questioned whether the Goldwater Institute wanted the team to stay.

“If they do indeed want the team to stay, then wouldn’t they want the city to be able to complete financing at the best possible rate?” he said in a statement to The Arizona Republic.

He asked, if the Coyotes left Glendale, what Goldwater’s plan was for the city to pay off its construction debt on the arena and for businesses nearby to survive without hockey customers. The city spent $180 million to open the arena in 2003.

Why in heaven’s name is it Goldwater’s problem that an earlier bond issue they actively opposed as a bad idea might turn out to, you know, have been a bad idea?  The article goes on and on this way, quoting other people of the same point of view. Goldwater doesn’t get a quote until paragraph 24 or so, where Darcey Olson who heads the Institute says

She said Glendale has “unlimited options” to avoid a Goldwater lawsuit. “For instance, Hulsizer could get a private loan to buy this team like most businesses do,” she said. “They finance their investments not on the backs of taxpayers but take the risk privately where it belongs.”

The evidence of the article that Goldwater is shaking the very pillars of Wall Street is that the city expected one set of interest rates, but the market was giving them higher rates

Glendale officials in December hoped for a roughly 6 percent interest rate.

Todd Curtis, portfolio manager for Aquila Tax-Free Trust of Arizona, said he expected to see a 5 to 5.5 percent interest rate after Moody’s Investors Service in mid-February gave the Coyotes bond sale a fairly high rating.

More than a week ago, Curtis was hearing of proposed rates around 7 percent.

Of course, they present no evidence as to why this might be. We are left to assume it is because Goldwater is somehow creating unfair bad vibes. Except then we get this oh-by-the-way near the end of the article:

Moody’s and Standard & Poor’s raised worries in February about the city’s debt levels. As a result, Moody’s downgraded several city bond ratings and Standard put the city on a watch list, though the city’s ratings remain high.

Also, Glendale pledged to cover the Coyotes bonds with sales taxes, a revenue stream hurt during the recession. The city in its preliminary bond statement points out its sales-tax base is strong.

OK, lets check the reporter’s decision-making here.  We have five facts

• The major bond ratings agencies recently put the city on a credit watch list
• Sales tax revenues that pay for the bonds are way down
• The city is investing $200 million in a $116 million dollar asset without getting any equity
• The city has a history of failed bond issues, as evidenced by the previous $180 bond issue they are trying to bail out with this one
• A local think tank has raised legal questions about the deal — legal questions that turned out to be correct in a parallel case.

So our lede is that it is all about the fifth one, just because millionaire Matthew Hulsizer, who is set to feed at the public trough to the tune of $200 million, says its so?

Ask yourself, what is the first section of the paper many folks look at?  The sports page?  An extra professional sports team adds a hard to quantify but definite amount to the paper’s bottom line.  The AZ Republic clearly recognizes this and is all-in for any taxpayer subsidy that is required to keep this important part of their business running.

Here are apparently a couple of the new regs for-profit colleges are expecting:

One proposed rule, which is expected to be finalized this spring, will restrict students from using federal financial aid to pay for programs that rack up excessive loan debt but train students for occupations with relatively low entry-level salaries.

A second rule, which will go into effect this summer, will close loopholes that allowed admissions counselors to be compensated based on how many students they signed up

The first rule is particularly interesting to focus on, especially given that they do not apply to government-run schools.  This means that if you want to go to UCLA and run up loads of debt in economically dead-end majors like women’s studies or art history, you are still free to do so.  But go forbid you want to study to be a nurse or a teacher at the University of Phoenix.  This from the CEO of Apollo, the parent company of University of Phoenix

some of the trade-school-type programs may be more vulnerable because of gainful employment (the anticipated federal rule about debt and entry-level salaries). . . . Gainful employment will cause programs, in areas such as nursing or teacher education or law enforcement, (for) for-profits not to be able to offer them . . . (because the federal formula) uses first-year salaries.

I can tell you my first-year salary for what I wanted to do wouldn’t have qualified. It takes time.

Two things you can expect from any set of regulations.  1) Large companies will eventually benefit, because the compliance costs will weed out smaller companies and deter future startups.  2) Innovation will be reduced, as certain established business models and practices will become safe harbors under the rules, adding risk to anyone wishing to try an additional approach.