Posts tagged ‘Phoenix’

Writing A More Accurate Headline: Phoenix Cities Take Big Loss on Superbowl

For reasons I will not get into yet again, cheer-leading local sports subsidies is essentially built into the DNA of most big city newspapers.

Last week our paper ran this headline:

'15 Super Bowl visitors boosted tax revenue by double digits

Wow!

Combined sales tax revenue for January and February totaled $14 million in roughly similar categories for restaurants, bars, hotels and retail in downtown Phoenix, Westgate and Scottsdale. That was up 19.5 percent over the same time a year ago.

That sounds awesome.  Take that, all you public subsidy skeptics.   Giving the Superbowl the benefit of the doubt and ignoring things like growth and the really good weather this winter, that is $2.28 million increase in taxes which we will generously ascribe all to the Superbowl.  And probably mostly taken from non-Arizonans, so its like free money.

It is only later in the article that the paper sheepishly inserts this:

Phoenix, Glendale, Scottsdale and tourism bureaus from Phoenix, Scottsdale, Tempe and Mesa combined to spend more than $5.6 million on Super Bowl events and public safety.

So we spent $5.6 million (probably under-estimated) to make $2.28 million (probably not all Superbowl related).  The headline was thus a total crock of Sh*t but typical of how, in small ways and large, the media helps push for bigger and bigger government.  I am sure the hotels and restaurants did well -- if so, then they are free to form a consortium to pay for the Superbowl's cost next time.  Or better yet, have some other sucker city host it and I will happily watch on TV.

Update:  I missed this part:

The Arizona Sports and Tourism Authority and Glendale provided a $6.2 million rebate to the NFL on Super Bowl ticket sales, said Kevin Daniels, authority chief financial officer.

I can't tell from the article if that $6.2 million is or is not in the numbers above.  I presume it is netted out before hand so that the gain in sales tax would be $6.2 million higher than reported above if this provision did not exist.  But this does mean that another valid headline would be:

Nearly 75% of Superbowl Sales Tax Gains Given to the NFL

Oceania, Arizona

My little town that in the Phoenix area is apparently setting up surveillance cameras all over town, hidden in fake cacti.   This never once was discussed in any public meeting, and residents only found out about it when the cameras starting going up.

Residents were alarmed to see the cactus cameras popping up throughout the town over the last few days with no indication of what they were being used for as city officials refused to explain their purpose until all the cameras were installed.

Town leaders initially declined to even talk to local station Fox 10 about the cameras, with Paradise Valley Police saying they were “not prepared to make a statement at this time.” The network was similarly rebuffed when they attempted to get answers on license plate scanners that were being installed in traffic lights back in February.

Fox 10’s Jill Monier was eventually able to speak to Town Manager Kevin Burke, who admitted that the cameras were being used to “run license plates of cars against a hotlist database.”

When asked why officials had been secretive about the cameras, which are being placed on the perimeter of the town, Burke asserted that there was “nothing to hide” and that the cameras wouldn’t be activated until privacy concerns had been addressed.

“Shouldn’t that have been vetted before they even went up?” asked Monier, to which Burke responded, “It probably is fair.”

This appears to be part of the on-again-pretend-to-be-off-again DHS program to set up nationwide tracking of license plates.  Ugh.  Really gives a creepy Owrellian vibe to our town name of "Paradise Valley".  More good news:

The American Civil Liberties Union subsequently revealed that the cameras were also using facial recognition technology to record who was traveling in the vehicle “as part of an official exercise to build a database on people’s lives,” reported the Guardian.

Lack of Hotel is Not a Market Failure -- It Was a Market Success

For some reason, it appears that building hotels next to city convention centers is a honey pot for politicians.  I am not sure why, but my guess is that they spend hundreds of millions or billions on a convention center based on some visitation promises.  When those promises don't pan out, politicians blame it on the lack of a hotel, and then use public money for a hotel.  When that does not pan out, I am not sure what is next.  Probably a sports stadium.  Then light rail.  Then, ?  It just keeps going and going.

I thought we in Phoenix took some kind of prize with this:

The city-owned Sheraton Phoenix Downtown Hotel has lost so much money — more than $28.2 million total — that some city leaders say the hotel must be put in the hands of the private sector.

They also worry that the hotel, Arizona's largest with 1,000 rooms, could harm other projects in the downtown core.

When Phoenix leaders opened the Sheraton in 2008, they proclaimed it would be a cornerstone of downtown's comeback. They had one goal in mind: lure big conventions and tourism dollars. Officials argued the city needed the extra hotel beds to support its massive taxpayer-funded convention center a block away.

But apparently things are even worse in Baltimore:

The city-owned Hilton Baltimore convention center hotel lost $5.6 million last year — a worse performance than 2013 despite its close location to Camden Yards and the Orioles' playoff run.

It was the seventh consecutive year that the hotel has underperformed financially, according to an audit of financial statements presented Wednesday to the city's Board of Estimates. Under the deal's initial projections, the hotel was supposed to be making $7 million in profit by now — pumping that mone into the city's budget....

The hotel has lost more than $70 million since it opened.

I am sure that politicians in both cities called the lack of a hotel a market failure.  But now we see that it was a market success.  All the companies who chose not to build a hotel with private money obviously knew what they were doing, and only the political benefits of pandering the the public at large and a few special interests in specific made it seem like an attractive investment to city politicians.  Which is all pretty unsurprising, since hotels have pretty much been built off every exit ramp in this country, so there seems to be no private inhibition towards building hotels -- just towards building hotels in bad locations.

Government's Systematic Indifference to Capital Maintenance

There is one thing you can almost always assume with government managed land and infrastructure -- facilities will likely have a large deferred maintenance backlog.  Two examples:

These problems are ubiquitous.  You can point to any government parks agency, and most any transit agency, and you will find the same problems.

Why?  Well, I have not studied the problem in any academic sense, but I am face-to-face with the problem every day in parks.

Let's start with the reason that is not true -- that somehow budgets can't support capital maintenance.  I know for a fact that this is not true in parks.  We operate over 100 public parks and are totally up to date with all maintenance and have no deferred maintenance backlog.  This is despite the fact that we work with only the fees paid by visitors at the gate.  Government agencies typically supplement fees at the gate with an equal amount of tax money and still don't keep up with maintenance.  So the issue may be costs or priorities, but the money is there to keep parks fixed up.  (I am willing to believe the same is not true of large transit projects, but these projects are known in advance not to be able to cover their lifecycle costs with revenues, and simply hide that fact from taxpayers until it is too late.  Thus the sales tax increase that is being requested in Phoenix to keep our new light rail running).

I think the cause lies in a couple areas related to government incentives

  1. Legislatures never want to appropriate for capital maintenance.  If the legislature somehow has, say, $100 million money it can spend on infrastructure, their incentives are to use it to build new things rather than to keep the old things in repair (e.g. to extend a rail line rather than to keep the old one fixed).
  2. If you want to understand a government agency's behavior, the best rule of thumb is to assume that they are working to maximize the headcount and the payroll budget of their agency.  I know that sounds cynical, but if you do not understand an agency's position or priorities, try applying this test:  What would the agency be doing or supporting if it were trying to maximize its payroll.  You will find this explains a lot

To understand #2, you have to understand that the pay and benefits -- and perhaps most important of all -- the prestige of an agency's leaders is set by its headcount and budgets.  Also, there are many lobbying forces that are always trying to pressure an agency, but no group is more ever-present, more ubiquitous, and more vocal than its own staff.   Also, since cutting staff is politically always the hardest thing for legislators to do, shifting more of the agency's budget to staff costs helps protect the agency against legislative budget cuts.  Non-headcount expenses are raw meat for budget cutters, and the first thing to get swept.  By the way, this is not unique to public agencies -- the same occurs in corporations.   But corporations, unlike government agencies, face the discipline of markets that places a check on this tendency.

This means that agencies are loath to pay for the outside resources (contractors and materials) that are needed for capital maintenance projects out of their regular budgets.  When given the choice of repairing a bathroom at the cost of keeping a staff person, agencies will always want to choose in favor of keeping the staff.  They assume capital maintenance can always be done later via special appropriation, but of course we saw earlier that legislators are equally unlikely to prioritize capital maintenance vs. other alternatives.

The other related problem faced is that this focus on internal staff tends to drive up pay and benefits of the agency workers.  This drives up the cost of fundamental day to day tasks (like cleaning bathrooms and mowing) and again helps to starve out longer-horizon maintenance functions.

As proof, you only have to look at the mix of agency budgets.  Many parks agencies (e.g. New Jersey state parks, which I have studied in depth) have as much as 85% of their budget go to internal staff.  My company, which does essentially the same thing (run parks) has about 32% of our budget go to staff.  State parks agencies have 50% or more of their staff in headquarters or regional offices.  In my company, 99% of the staff is in the parks.

I don't think that these incentives problems can be overcome -- they are simply too fundamental to how government works.  Which is why I spend my working hours trying to convince states to privatize the operation of their recreation facilities.

Phoenix Wants to Double the Light Rail Tax

Our great city is proposing to double the sales tax increase dedicated to light rail and make the increase permanent.  This all so we can spend more money to shift people from busses to a mode that is more than 10x more expensive per passenger mile.

I Believe the Trend Was Caused by All the Things I Believed Before I Investigated the Trend

This is so common that there ought to be a name for it (perhaps there is and I just don't know it):  Writer does a story or study on some trend, in this case the downfall of the enclosed shopping mall.  In each case, the writer discovers that such malls died because of ... all the things the writer already holds dear.  If the writer hates American consumerism, then the fall of such malls is a backlash against American consumerism.

It is interesting to note that all of the ideas quoted are demand-side explanations, e.g. why might consumers stop going to large enclosed malls.  And certainly I find the newer outdoor malls more congenial personally, but this can't be the only explanation.  Here in north Phoenix, I can see the dying enclosed Paradise Valley Mall out my window, but just a few miles away is the Scottsdale Fashion Square, a traditional mall that appears to be going great guns.  Ditto the Galleria in Houston.  Perhaps part of the answer is that enclosed malls were simply overbuilt and that people are willing to drive a bit to get to the best enclosed mall in town rather than a smaller version closer to their home (certainly Mall of America made a big bet on that effect).

But it also strikes me there are supply side considerations.  The mall out my window is a huge waste of space, surrounded by parking lots the size of a small county.  And it's just retail.  Modern outdoor malls allow developers to mix shopping, living, and office space in what looks to my eye to be a much denser development.  All these malls have stores on the ground floor with condos and offices up above.  To my not-real-estate-trained eye, this would seem to increase the potential rents in a given piece of land and provide some synergies among the local businesses (e.g. office workers and residents eat and shop in the mall shops).  In some sense it is a re-imagining of the downtown urban space in a suburban context.  This is ironic because it is something urban planners have been trying to force for decades and here comes the free market to do it on its own.

People also like going to newer facilities.  Just ask hotel owners.  If owners do not totally refresh a hotel every 20 years or so, people stop visiting and rates fall.  The same is true of gas stations and convenience stores.  When I worked at Exxon briefly, they said they budgeted to totally rebuild a gas station every 20 years.  So it is not impossible there is a big supply-side explanation here -- if people are reluctant to go to establishments over 20 years old, then visitation of enclosed malls should be collapsing right about now, 20 years after they stopped being built.  A shift in developer preferences could be a large element driving this behavior.  I don't insist that the supply side and real estate incentives are the only explanation, but I think they are a part of it.

Is Phoenix Light Rail Fudging Its Charts to Look Better?

I bring your attention back to this chart from this post the other day about light rail killing transit growth.

ridership_140903_annotated

I have no evidence that this chart was deliberately manipulated, but somehow the light rail ridership bar for 2014 got exaggerated.  It certainly seems suspicious.  Light rail ridership went up from 2013 to 2014 by only about 45,000, or 0.3%.  This is negligible  We should not even see the bar move.  Note the total ridership in 2011 and 2010 when ridership fell by 86,000 but the bar lengths are almost indistinguishable.  The rail ridership looks to my eye like the bar is 7-9% longer, not 0.3% longer.  In fact, the bar for 2014 clearly goes past the halfway point between 10 and 20, despite the fact that 14.3 should be less than halfway.  In fact, the 2014 rail increase of 45,000 is graphed as visually larger than the 1.3 million decrease in busses.

The Graveyard of Cronyism

Phoenix businesses add hundreds of jobs every week.  However, the only jobs that every get subsidized are in sexy businesses.  That is because the subsidies themselves make zero sense, from an economic or public policy standpoint.   The point is not to create jobs, but to create press releases and talking points for politicians and their re-election campaigns.

And there is little that is sexier to politicians spending taxpayer money to get themselves re-elected than solar and Apple computer.  Which brings us to this plant in Mesa (a suburb of Phoenix), which I am calling the Graveyard of Cronyism.

GT-Advanced

This plant was built by First Solar to build solar panels.  I would have to quit my day job and work full-time to figure out all the ways this plant was subsidized by taxpayers -- special feed-in tariffs for First Solar customers, government tax breaks for solar panel purchases, direct government subsidies and grant programs for solar panel purchases, the DOE loan guarantee program for solar... etc.  In addition, the City of Mesa committed $10 million in infrastructure improvements to lure First Solar to the site.  I can't find what economic development incentives there were but there must have been tax abatements.  In addition, the company was promised a further $20 million in economic development funds from the County, but fortunately (unlike most such deals) the funds were tied to hitting employment milestones and were never paid.  First Solar never produced a single panel at the plant before it realized it had no need for it.

More recently, Apple and sapphire glass manufacturer GT Advanced bought the empty plant from First Solar.  And again there was much rejoicing among politicians locally.  Think of it -- Two great press release opportunities for politicians in just three years for the same plant!  I never feel like we get the whole story on the development deals offered for these things but this is what we know:

Brewer and the Arizona Legislature approved tax breaks related to sales taxes on energy at manufacturing plants. The state also put the Apple/GT plant into a special tax zone that pays a 5 percent commercial property tax rate. Most Arizona companies pay a 19 percent rate this year and an 18.5 percent next.

[In addition,] Apple was slated to received [sic] $10 million from the Arizona Competes Fund for the Mesa factory. The Arizona Commerce Authority — the privatized state economic development agency which administers the $25 million sweeten-the-deal fund along with Gov. Jan Brewer — said neither Apple nor GT Advanced (Nasdaq: GTAT) have received any money.

Well, it turns out that artificial sapphire sounds really cool (a pre-requisite for crony deals) but it is not so great for cell phones.  Apple went another way and did not use the technology on iPhone 6 -- not just for timing reasons but because there are real issues with its performance.

So a second crony buys the plant and does not even move in.

What's next?  I am thinking the best third tenant at the sexy-crony nexus would be an EV battery plant, or even better yet Tesla.  It is too bad Fiskar motors went out of business so soon or they would be the perfect next crony fail for this site.

Phoenix Light Rail Update: We Spent $1.4billion+ to Reduce Transit Ridership

Check this graph out from the Phoenix Metro web site.  It shows bus ridership in years past, and more recently both bus and light rail ridership.

click to enlarge

 

You can see a few things.  First, note that almost all the rail ridership came at the expense of bus ridership.  It  was almost a pure 1:1 substitution.  The bus ridership, even with a half year of light rail being open, was 65.7 million in 2009.  Total ridership was only 67.6 million in 2010 and 2011.  Yes there is a recession here, but of the 12 million or so in light rail ridership, at least 10-11 million of that came out of buses.  Essentially, we paid $1.4 billion in capital costs to move 10 million riders to a mode of transit that is at least an order of magnitude more expense.  Nice work.

Second, note that after over 12 years of growth, with the onset of light rail transit ridership has stagnated for 6 years.  Some of this, at least initially, is likely due to the recession but in fact recessions are supposed to spur transit ridership, not reduce it, as people look for lower cost alternatives.  There is a good explanation for this.  Because light rail is so much more expensive, the cost per rider for the entire transit system has skyrocketed.  With budgets unable to be increased this fast (and with fares covering only a tiny percentage of rail costs), the system must cut back somewhere.  Since rail can't really be cut back, bus routes are cut.

If we had seen the same growth rate from 2009 to 2014 as we had seen in the twelve years prior, we should have over 86 million trips in 2014 (note these are fiscal years, and fiscal year 2014 is already closed, so this is not partial year data).

We paid, and continue to pay (since rail must be subsidized heavily) billions of dollars to reduce transit ridership.

More Bipartisan Cronyism in Phoenix: Subsidizing Real Estate so that Future Transit Expenditures Can Be Justified

Yuk.  $14 million giveaway to developer

Last week, Phoenix City Council members approved a deal for the $82 million high-rise, mixed-use Phoenix Central Station. The development at Central Avenue and Van Buren Street will include about 475 apartments and 30,000 square feet of commercial space.

As part of the deal, Phoenix would give the developer, Smith Partners, a controversial tax-abatement incentive called a Government Property Lease Excise Tax for the tower portion of the project. The agreement allows developers to avoid paying certain taxes through deals that title their land or buildings to a government entity with an exclusive right to lease the property back.

In this case, the city already owns the land, but the developer will eventually take title over the building. The arrangement allows them to not pay property taxes for 25 years, which a city official estimates would be $600,000 to $900,000 per year based on conversations with the developer. However, the developer will make smaller lease payments back to the city, and, after eight years, pay taxes on those lease payments.

The agreement requires the developer to pay the city a portion of its revenue, which will net the city an estimated $4.4 million over the first 25 years

The difference from the $4.4 million they will actually pay and 25 years at $750,000 in property taxes is about $10 million (fudging concerns about present value and such).  I used to be OK with anything that reduced taxes for anyone, but now I have come to realize that discounting taxes for one preferred crony just raises taxes for the rest of us.  [Props to Republican Sal Deciccio for being one of two to vote against this]

Here is my guess as to what is going on here.  Phoenix paid a stupid amount of money to build a light rail line that costs orders of magnitude more money than running the same passengers in buses.  One of the justifications for this gross over-expenditure on the light rail boondoggle was that it would spur development along the line.  But it is not really doing so.  Ridership on light rail has been stagnant for years, as has been transit ridership (most of the light rail ridership gains simply cannibalized from bus service, shifting low-cost-to-serve bus riders to high-cost-to-serve train riders).

So they need to be able to show transit-related development to justify future light rail expansions.  Thus, this subsidized development along the rail line.

I will make a firm bet.  Within 5 years we will have Phoenix politicians touting this development as a result of the light rail investment with nary a mention of the $10 million additional taxpayer subsidy it received.

Penny-Ante Police Harassment and the Poor

The other day I wrote:

[Cars owned by African-Americans in Ferguson] are stopped at about a 6x higher rate for "equipment" deficiencies than whites.  Nitpicky regulations on car conditions (in Arizona your licence plate frame cannot cover any part of the word "Arizona" on the licence plate) are the great bugaboo of the poor and a nearly unlimited warrant for the police to stop minorities.  Mexicans here in Phoenix will tell me "woe to the Mexican who drives around here with a broken tail light -- he will be pulled over 3 times a day to have his immigration status checked".  In Phoenix, at least, stops for equipment issues are roughly the equivalent of pulling someone over for "driving while brown."  Even beyond the open-ended warrant these silly violations give the police, the fines and court costs create meaningful indebtedness problems for the poor which are hard to overcome.

Alex Tabarrok highlights some numbers from Arch City Defenders

new report from Arch City Defenders, a non-profit legal defense organization, shows that the Ferguson municipal courts are a stunning example of these problems:

Ferguson is a city located in northern St. Louis County with 21,203 residents living in 8,192 households. The majority (67%) of
residents are African-American…22% of residents live below the poverty level.

…Despite Ferguson’s relative poverty, fines and court fees comprise the second largest source of revenue for the city, a total of $2,635,400. In 2013, the Ferguson Municipal Court disposed of 24,532 warrants and 12,018 cases, or about 3 warrants and 1.5 cases per household.

You don’t get $321 in fines and fees and 3 warrants per household from an about-average crime rate. You get numbers like this from bullshit arrests for jaywalking and constant “low level harassment involving traffic stops, court appearances, high fines, and the threat of jail for failure to pay.”

If you have money, for example, you can easily get a speeding ticket converted to a non-moving violation. But if you don’t have money it’s often the start of a downward spiral that is hard to pull out of

I can testify to that last point.  I worked in the Emerson Electric headquarters for a couple of years, which ironically is located in one corner of Ferguson.  One of the unwritten bennies of working there was the in house legal staff.  It was important to make a friend there early.  In Missouri they had some bizarre law where one could convert a moving violation to a non-moving violation.  A fee still has to be paid, but you avoid points on your license that raises insurance costs (and life insurance costs, I found out recently).  All of us were constantly hitting up the in-house legal staff to do this magic for us.  I am pretty sure most of the residents of Ferguson do not have this same opportunity.

Racial Profiling in Ferguson

The Washington Post has numbers on the much higher rate at which blacks are stopped and/or searched in Ferguson vs. whites.  By itself, while that is a useful pointer to a discrimination issue, someone might argue that blacks in the area commit more crimes per capita and thus warrant more stops.

There is one bit of data in the Post's numbers that can be used to partially address this.  The data says that blacks have their cars searched much more frequently than whites.   Blacks have their cars searched 12.13% of stops while whites have their cars searched only 6.85% of stops.  But this understates the disparity, since blacks are stopped at a higher rates than whites.    Taking the disparity in stops in to account, blacks are searched at a rate 6 times higher than for whites.

The interesting part is in the data on contraband hit rate, ie the rate that searches uncover something illicit.  The contraband hit rate for white car searches is 57% higher than for black car searches.  In other words, it is more likely searches of white cars will yield something illegal.  Which tends to undercut the argument that the greater rate of black car searches is somehow justified.

By the way, I want to highlight one other figure.  Black cars are stopped at about a 6x higher rate for "equipment" deficiencies than whites.  Nitpicky regulations on car conditions (in Arizona your licence plate frame cannot cover any part of the word "Arizona" on the licence plate) are the great bugaboo of the poor and a nearly unlimited warrant for the police to stop minorities.  Mexicans here in Phoenix will tell me "woe to the Mexican who drives around here with a broken tail light -- he will be pulled over 3 times a day to have his immigration status checked".  In Phoenix, at least, stops for equipment issues are roughly the equivalent of pulling someone over for "driving while brown."  Even beyond the open-ended warrant these silly violations give the police, the fines and court costs create meaningful indebtedness problems for the poor which are hard to overcome.

(As a mostly irrelevant aside, I worked essentially in one corner of Ferguson in the Emerson Electric headquarters for a couple of years.  Like many of the inner ring of suburbs in St Louis, this is not a wildly prosperous area but it also is not Somalia.  Driving at night I was much more nervous in the neighborhoods both due south and due East of Ferguson).

Update:  Via Zero Hedge

20140814_shoot (1)

In Defense of Phoenix Parks

Apparently Phoenix does not rank so well among cities in terms of parks.  I find these surveys next to worthless, since they tend to reflect the biases and preferences of the authors.  If the authors really like public pools, your city better have a lot of those or they will be ranked low.

For those considering the Phoenix area, here are three dimensions on which our parks are fabulous:

  • We have large wilderness areas and whole mountains right in the middle of the city.  South Mountain park, Piestewa Peak (formerly Squaw Peak park) and Camelback Mountain are all right in the middle of town.  The offer some of the best urban hiking and climbing I have ever encountered.  I can't think of a city I have been in with anything similar -- Boulder Mountain park is kind of similar (and better) but it is adjacent to the town, not right in the middle.
  • If you or your kids play soccer or baseball, we have some of the best sports fields options in the country.  Soccer is a huge game hear for kids and adults, and we have lots of options, including a number of indoor locations for the hot summer time.  Our baseball fields are unparalleled.  I don't like the fact we have built so many spring training locations for professional teams with public money, but the one upside is that there are a lot of beautiful baseball fields available any month except March.  My son has been playing on MLB fields since he was in 8th grade.
  • We have tons and tons of golf.   I am not a golfer, but we have over 200 courses in the county.  This means competition.  Which means reasonable rates.  And they are all open to the public (I can only think of 3-4 courses in the area that are country club courses for members only).  I can walk to two different, quality courses that have great rates, particularly after 1PM and during the summer time.

One other dimension related to recreation.  I know places like Boulder and Portlandia have the reputation of being biking cities, but Phoenix is a pretty big biking town.  No, we don't bike to work much due to the climate, but wide flat streets and large areas without much traffic and nice vistas (e.g. the Paradise Valley area) make it a popular biking area.

Exaggerating Transit Use for Fun and Higher Taxes. Or How PIRG Supports the 1% over the 99%

The Arizona PIRG has a report that can be summarized as "transit is increasing fast, driving is falling, all of our future investment should be in transit".  The Valley Fever blog has the story:

Arizonans are driving less, and relying more on public transportation, according to a report from the Arizona Public Interest Research Group Education Fund.

The shift is causing the Arizona PIRG Education Fund to recommend that public officials shift funding away from more highway projects, and more toward other transportation options."

"We recommend that transportation officials and elected leaders look at the data today, and not outdated assumptions, to make sure that any highway projects are absolutely necessary," Arizona PIRG Education Fund executive director Diane Brown tells New Times....

In the Phoenix metro area, the light rail opened in late 2008 and is already experiencing ridership numbers that weren't projected to be reached until the year 2020. In 2013, the Valley Metro transit system experienced a record high annual ridership, and between 2007-2013, boardings on Valley Metro transit service jumped from 60 million to more than 75 million - an increase of 25 percent. The Northern Arizona Intergovernmental Public Transportation Authority recently saw its highest monthly ridership in October 2013. And in Yuma, ridership on Yuma County Area Transit has tripled since 2011.

The report suggests that public officials re-allocate their focus and funding, away from building new highways and toward more transportation options.

This is a fantasy.

There is an enormous amount of obfuscation going on here.  The percentage rise of public transit trips is actually the miracle of small numbers -- small changes on an even smaller base.  The point of these charts is to try to say that Arizonans use a lot of transit and we should dump more billions into these projects.  As it turns out, despite all the huge public investment, transit is still a rounding error.

Note that, from their own report, driving vehicle miles per capita are 9175 per person per year.  So lets look at transit.  They exaggerate by showing averages for Phoenix and Tucson, where transit use is higher, not for the whole state like they show vehicle miles.  The total state transit miles per person in the same year, using their numbers, turns out to be as low as 64 (if no one outside of Phoenix or Tucson uses transit) and as high as 110 (if everyone outside of Phoenix and Tucson uses transit at the same rate as in the cities).  The likely number is around 75.

This means that after all these billions and billions of transit spending, transit trips are 0.8% of vehicle trips (75 vs. 9175). That is a rounding error.  You sure wouldn't get that impression from the report.  The Public Interest Research Group has a funny view of "public interest", putting the desired transportation mode of the 0.8% over the desired choice of the 99.2%

Well, you say, I should compare the increase in transit to the decrease in driving.  OK.  Again using their numbers:  Vehicle driving miles went down 348 per capita over the study period.  In the same time, per capital transit miles went up by about 26 in Phoenix and Tucson (likely less in the state as a whole).  So, at best, transit ridership accounts for about 7% of the drop in driving.

This is not nothing, but hardly justifies the enormous increase in transit spending over the last 15 years and the billions and billions in capital investment.

Oh, and by the way, Phoenix Light Rail ridership has cannibalized bus ridership about 1 for 1.  That means all that investment in light rail has just shifted riders to a more expensive, less flexible transit mode.  But that is another story.

Trend That Is Not A Trend: Creating a Trend From Measurement Changes

I was watching some excellent videos of recent Phoenix dust storms roll across the city.  I started thinking about a joke story:

Scientists report that the number of Phoenix dust storms have likely increased substantially since 1990.  Before that date, almost no cell phone videos exist of large dust storms in Phoenix.  Today, one can find hundreds of such videos on Youtube, mostly from the last three or four years.  Obviously we are seeing some sort of climate change

This would clearly be absurd -- there has been a change in measurement technology.  No cell phone cameras existed before 1990.  But equally absurd examples can be found every day.

  • With the summer of the shark, an increase in frequency of media coverage of shark attacks was mistaken for an increase in frequency of shark attacks themselves.
  • With tornadoes, improving detection of smaller twisters (e.g. by doppler radar and storm chasers)  has been mistaken by many (cough Al Gore cough) for an increase in the frequency of tornadoes.  In fact, all evidence points to declining tornado frequency
  • With electrical grid disturbances, a trend was created solely by the government owner of the data making a push with power companies to provide more complete reporting.
  • I have wondered whether the so-called cancer epidemic in India is real, or the results of better diagnosis and longer life spans

Postscript:  I remember when I first saw one of these storms rolling towards me after I moved to Phoenix.  Perhaps I should not have read Stephen King's The Mist, but I honestly wondered for a minute if I would live to regret not hopping in my car and racing to stay ahead of the wall coming towards me.

 

"Trend that is not a trend" is an occasional feature on this blog.  I could probably write three stories a day on this topic if I wished.  The media is filled with stories of supposed trends based on single data points or anecdotes rather than, you know, actual trend data.  More stories of this type are here.  It is not unusual to find that the trend data often support a trend in the opposite direction as claimed by media articles.

Reminder: Until Very Recently, The Left Was Touting the VA as a Great Model for Government Run Health Care for All

This is from Kevin Drum in 2007:

As regular readers may know, Phil Longman thinks the VA model of healthcare is the best around. In the October issue of the Monthly, he takes his admiration to another level, suggesting that the best way to provide healthcare to the 45 million uninsured in America is via — what? I guess you'd call it a franchised version of the VA. Basically, the federal government would offer struggling municipal hospitals a trade: if you adopt the VA's management guidelines, the government will pay you to care for all those uninsured folks currently jamming up your emergency rooms and driving you bankrupt. Deal?

The supposed reason is that great panacea, electronic medical records, cited by the Left as the solution to all woes as often as the Right mentions the Laffer Curve.

"Since its technology-driven transformation in the 1990s...the VA has emerged as the world leader in electronic medical records — and thus in the development of the evidence-based medicine these records make possible." Hospitals that joined Longman's "Vista network" (his name for the VA-like franchise he proposes) would have to install the VA's electronic medical record software and would "also have to shed acute care beds and specialists and invest in more outpatient clinics." By doing this they'd provide better care than any current private network and do it at a lower cost.

Since that time, the Left has mostly stopped talking about the VA as a miracle solution, because it is becoming clear that the VA cuts costs the same way every state health care agency cuts costs -- by restricting capacity, leading to huge waiting times, and rationing care.  The scandal here in the AZ VA is just the latest

The chairman of the House Committee on Veterans Affairs said Wednesday that dozens of VA hospital patients in Phoenix may have died while awaiting medical care.

Rep. Jeff Miller, R-Fla., said staff investigators also have evidence that the Phoenix VA Health Care System keeps two sets of records to conceal prolonged waits that patients must endure for ­doctor appointments and treatment.

"It appears as though there could be as many as 40 veterans whose deaths could be ­related to delays in care," ­Miller announced to a stunned audience during a committee hearing Wednesday.

Supporters of government health care like t o waive their arms about magic bullets, but the only strategy that has ever reduced costs in government health care systems is rationing and queuing (which is also a form of rationing).  Resources are always scarce, but the question is whether we want our health care rationed by government beauracrats or by ourselves.  The latter can only happen if we get away from first dollar and single payer medicine and find a way to get real, transparent price signals (which is the way every other service in this country is managed).

Update, Via Greg Mankiw:

"In Britain, even though they're already paying for the National Health Service, six million Brits—two-thirds of citizens earning more than $78,700—now buy private health insurance. Meanwhile, more than 50,000 travel out of the U.K. annually, spending more than $250 million, to receive treatment more readily than they can at home."

Which is the exact same way we run our education system -- everyone has to pay for a basic crappy level of the government monopoly product, and then if you can afford it you pay again to get a better private product.

Why Do We Manage Water Via Command and Control? And Is It Any Surprise We Are Constantly Having Shortages?

In most commodities that we consume,  market price signals serve to match supply and demand. When supplies are short, rising prices send producers looking for new supplies and consumers to considering conservation measures.  All without any top-down intervention by the state.  All without any coercion or tax money.

But for some reason water is managed differently.  Water prices never rise and fall with shortages -- we have been told in Phoenix for years that Lake Powell levels are dropping due to our water use but our water prices never change.  Further, water has become a political football, such that favored uses (farmers historically, but more recently environmental uses such as fish spawning) get deep subsidies.  You should see the water-intensive crops that are grown in the desert around Phoenix, all thanks to subsidized water to a favored constituency.   As a result, consumers use far more water than they might in any given year, and have no natural incentive to conserve when water becomes particularly dear, as it is in California.

So, when water is short, rather than relying on the market, politicians step in with command and control steps.  This is from an email I just received from state senator Fran Pavley in CA:

Senator Pavley said the state should consider measures that automatically take effect when a drought is declared to facilitate a more coordinated statewide response.

“We need a cohesive plan around the state that recognizes the problem,” Pavley said at a committee hearing. “It’s a shared responsibility no matter where you live, whether you are an urban user or an agricultural user.”

Measures could include mandatory conservation, compensation for farmers to fallow land, restrictions on the use of potable water for hydraulic fracturing (“fracking”), coordinated publicity campaigns for conservation, increased groundwater management, and incentives for residents to conserve water. Senator Pavley noted that her hometown Las Virgenes Municipal Water District is offering rebates for customers who remove lawns, install rain barrels or take other actions to conserve water.

Pavley also called for the state to create more reliable, sustainable supplies through strategies such as capturing and re-using stormwater and dry weather runoff, increasing the use of recycled water and cleaning up polluted groundwater basins.

Note the command and control on both sides of the equation, using taxpayer resources for new supply projects and using government coercion to manage demand.  Also, for bonus points, notice the Senator's use of the water shortage as an excuse to single out and punish private activity (fracking) she does not like.

All of this goes to show exactly why the government does not want a free market in water and would like to kill the free market in everything else:  because it gives them so much power.  Look at Ms. Pavley, and how much power she is grabbing for herself with the water shortage as an excuse.  Yesterday she was likely a legislative nobody.  Today she is proposing massive infrastrure spending and taking onto herself the power to pick winners and losers (farmers, I will pay you not to use water; frackers, you just have to shut down).  All the winners will show their gratitude next election cycle.  And all the losers will be encouraged to pay protection money so that next time around, they won't be the chosen victims.

Surprise: Near Bankrupt City Finds that Throwing Good Money After Bad is Not a Good Investment

I have written here any number of times about the crazy ongoing subsidies by Glendale, Arizona (a 250,000 resident suburb of Phoenix) to an NHL franchise.  The city last year was teetering at the edge of bankruptcy from past hockey subsidies, but decided to double down committing to yet more annual payments to the new ownership of the team.

Surprisingly, throwing more money into an entreprise that has run through tens of millions of taxpayer money without any hint of a turnaround turns out to be a bad investment

Revenue from the Phoenix Coyotes is coming up short for Glendale, which approved a $225 million deal to keep the National Hockey League franchise in 2013.

City leaders expected to see at least $6.8 million in revenue annually from the team to help offset the $15 million the city pays each year for team owners to manage Jobing.com Arena. The revenue comes from ticket surcharges, parking fees and a split of naming rights for the arena.

Halfway through the fiscal year, the city has collected $1.9 million from those sources, and nearly $2.3 million when including sales-tax revenue from the arena.

Even including the rent payments on the publicly-funded stadium, Glendale is still losing money each year on the deal.

The source of the error in forecasting is actually pretty funny.  Glendale assumed that it could charge very high monopoly parking fees for the arena spaces ($10-$30 a game).  In some circumstances, such fees would have stuck.  But in this case, two other entities (a mall and another sports stadium) have adjoining lots, and once parking for hockey was no longer free, these other entities started competing parking operations which held down parking rates and volumes (I always find it hilarious when the government attempts to charge exorbitant monopoly prices and the free market undercuts them).

Had the parking rates stuck at the higher level, one can assume they still would have missed their forecast.  The Coyotes hockey team already has among the worst attendance numbers in the league, and hockey ticket buyers are particularly price sensitive, such that a $20 increase in the cost of attending a game likely would have driven attendance, and thus parking fees and city ticket surcharges and sales taxes, down.  Many private companies who are used to market dynamics still fail to forecast competitive and customer reaction to things like price increases well, and the government never does it well.

Emulating North Korea

I have little tolerance for enforced patriotism of any sort.  In fact, having loyalty oaths and singing songs and genuflecting to flags all seem more consistent with totalitarianism than the values of liberty that patriots are nominally trying to promote.  If I were rotting in a crappy Phoenix jail for being caught with marijuana or busted for driving while Mexican, I would be even less patriotic

Dozens of Arizona inmates will eat nothing but bread and water for at least seven days in the latest punishment by one of America's toughest sheriffs.

Maricopa County Sheriff Joe Arpaio handed down the sentence after inmates defaced American flags hung in each jail cell. He says the men tore the flags, wrote or stepped on them and threw them in the toilet.

The flags are part of a push for patriotism in county jail cells. Arpaio has ordered thatGod Bless America and the national anthem be played daily in every jail facility.

This isn't Arpaio's first controversial move. He made headlines for keeping thousands of inmates outdoors in repurposed military tents in weather that was hotter than 117 degrees. He also made male inmates wear pink underwear.

He banned smoking, coffee and movies in all jails. And he's even put his stamp on mealtime. Inmates are fed only twice a day, and he stopped serving salt and pepper – all to save taxpayers money, he says.

Dear Rest of the Country

Remember making fun of our Phoenix summer temperatures?  Who's laughing now?

PV-weather

Special Discount for Our Readers to the Nutcracker by Ballet Arizona

I may have mentioned in the past that my wife is on the Board of Ballet Arizona.  Phoenix has a reputation as a cultural wasteland, but our Ballet is certainly an exception to this.  Our artistic director Ib Andersen is fabulous, garnering top reviews even from the fussy New York press.  We have several young dancers, including one young lady who recently defected from Cuba, who are astonishing and whom you should frankly come see now before they are lured away to the bright lights of New York or Washington.

Anyway, they have a promotion running for the Nutcracker this holiday season and have allowed me to offer this same promotion to our readers, with discounts up to 50% on tickets.  See this pdf for details: Link Fixed to Ballet Arizona Offer.

What I Hate Most About Political Discourse...

..is when people attribute differences of opinion on policy issues to the other side "not caring."

I could cite a million examples a day but the one I will grab today is from Daniel Drezner and Kevin Drum.  They argue that people with establishment jobs just don't care about jobs for the little people.  Specifically Drum writes:

Dan Drezner points out today that in the latest poll from the Council on Foreign Relations, the opinions of foreign policy elites have converged quite a bit with the opinions of the general public. But among the top five items in the poll, there's still one big difference that sticks out like a fire alarm: ordinary people care about American jobs and elites don't. Funny how that works, isn't it?

Here are the specific poll results he sites.  Not that this is a foreign policy survey

blog_public_elite_cfr_priorities

 

The first thing to note is that respondents are being asked about top priorities, not what issues are important.  So it is possible, even likely, the people surveyed thought that domestic employment issues were important but not a priority for our foreign policy efforts.  Respondents would likely also have said that (say) protecting domestic free speech rights was not a foreign policy priority, but I bet they would still think that free speech was an important thing they care about.  The best analogy I can think of is if someone criticized a Phoenix mayoral candidate for not making Supreme Court Justice selection one of her top priorities.  Certainly the candidate might consider the identity of SCOTUS judges to be important, but she could reasonably argue that the Phoenix mayor doesn't have much leverage on that process and so it should not be a job-focus priority.

But the second thing to note is that there is an implied policy bias involved here.  The Left tends to take as a bedrock principle that activist and restrictive trade policy is sometimes (even often) necessary to protect American jobs.   On the other hand many folks, including me and perhaps a plurality of economists, believe that protectionist trade policy actually reduces total American employment and wealth, benefiting a few politically connected and visible industries at the expense of consumers and consumer industries (Bastiat's "unseen").  Because of the word "protecting", which pretty clearly seems to imply protectionist trade policy, many folks answering this survey who might consider employment and economic growth to be valid foreign policy priorities might still have ranked this one low because they don't agree with the protectionist / restrictionist trade theory.  Had the question said instead, say, "Improving American Economic Well-Being" my guess would be the survey results would have been higher.

Whichever the case, there is absolutely no basis for using this study to try to create yet another ad hominem attack out there in the political space.  People who disagree with you generally do not have evil motives, they likely have different assumptions about the nature of the problem and relevant policy solutions.  Treating them as bad-intentioned is the #1 tendency that drags down political discourse today.

Postscript:  This is not an isolated problem of the Left, I just happened to see this one when I was thinking about the issue.  There likely is a Conservative site out there taking the drug policy number at the bottom and blogging something like "Obama state department doesn't care about kids dying of drug overdoses."  This of course would share all the same problems as Drum's statement, attributing the survey results to bad motives rather than a sincere policy difference (e.g. those of us who understand that drugs can be destructive but see the war on drugs and drug trafficking to be even more destructive).

 

The Public Rail Spending Game

Kevin Drum has a very good, succinct description of how the rail (light rail, high speed rail, commuter rail) spending game works, in the context of California High Speed Rail (HSR)

As near as I can tell, the HSR authority's plan all along has been to simply ignore the law and spend the bond money on a few initial miles of track. Once that was done, no one would ever have the guts to halt the project because it would already have $9 billion sunk into it. So one way or another, the legislature would keep it on a funding drip.

It's a time-tested strategy, and it might have worked if not for a meddling judge.

Here is a great example of this from Chicago, where all they could afford at first was a single station.

I applaud Drum for opposing this boondoggle, but if he really understands this so well, I wonder why he seldom demonstrates any skepticism about other rail and mass transit projects.

Rail projects, particularly light rail projects that are being constructed or proposed in nearly every major city, are a classic example of a nominally Progressive policy that ends up hurting all the people Progressives want to help.

Bus-based mass transit is an intelligent way to help lower income people have more urban mobility.  Buses are relatively cheap and they are supremely flexible (ie they can switch routes easily).  Such urban bus systems, which like any government run function often have their problems and scandals, never-the-less can be reasonably held up as a Progressive victory.

But middle and upper class people, for whatever reason, don't like buses.  But they do like trains.  And so cities, under middle class pressure, have shifted their mass transit investment to trains.  The problem is that trains are horrendously expensive.    The first 20-mile leg of Phoenix light rail cost over $1.4 billion, which amounts to about $70,000 per daily round-trip rider.  Trains are also inflexible.  You can't shift routes and you can't sell them-- they have to follow fixed routes, which tend to match middle class commuting routes.

Because the trains are so expensive to operate, cities that adopt them quickly start cutting back on bus service to feed money to the rail beast.  As a result, even transit poster-boy cities like Portland have seen the ridership share of mass transit fall, for the simple reason that rail greatly increases the cost per rider and there is not an infinite amount of money available to transit.

 

Republicans Often Trash Property Rights As Well

It appears that Arizonans are all for property rights until a Goodwill store tries to open in their neighborhood.  And then not so much.  A group led in part by my former Republican Congressman John Shaddegg believes that their "right" to determine how other people's property is used were trampled by allowing a local strip mall to rent a large vacant store space to a legitimate business.

goodwill-protest1

 

Basically, these residents live in a small prosperous neighborhood called Moon Valley surrounded by less prosperous areas.  There are apparently not enough residents in this neighborhood to support the upscale commercial boutiques they would like to see, so their preference is that this poor landlord leave his property vacant rather than rent it to a business that might cause these folks to encounter a poor person on the street.  I am sure these folks would say they have no problems with poor (likely mostly Hispanic) folks per se, but not in their neighborhood!  (By the way, in this town we have the nicest Goodwill stores I have ever seen -- my daughter loves to shop for funky stuff there).

I don't think I am being too hard on them.  Here is one letter to the Mayor's office from a resident:

What does this mean? Quite simply, we now have a mega store/WAREHOUSE in Moon Valley. Goodwill has closed all the surrounding stores to create a "funnel" effect whereby all the surrounding neighborhoods will flock to Moon Valley for a deal. And, they are now free to import as many goods as they like from anywhere they choose to fill up their new mega store and bring loyal Goodwill shoppers to Moon Valley by the droves.

I sat in the parking lot of the Shaw Butte Plaza today and was so saddened. I thought, "We are such a wonderful, unique, special neighborhood, why would you do this to us? Was furthering your political career worth it?" Because, make no mistake, you have sold us out.

I guess all that brown skin walking around is going to destroy her little bit of specialness.  Tough.

We have the same thing going on in our neighborhood.  The country club on whose golf course many of the houses in my area are located was recently revamped.  It was redesigned into a links-style course that is very unusual in the Phoenix market.  I actually thought this was a pretty smart move -- when there are something like 200 golf courses in the area, it makes sense to try to be unique.

Well, most everyone in the neighborhood thinks it is ugly -- I don't live on the course but I actually kind of like it.  But the sort of shaggy, wild look they adopted for it is not at all what Arizonans are used to.  I will confess they did some things that seem crazy to me, like removing all the trees, but my general reaction has been, well, its their land.   My neighbors do not share my insouciance however, and have freaked, writing letters and threatening lawsuits.   Everyone wants property rights for themselves but veto power over what all their neighbors do with their property.

Disclosure:  I grew up in Houston, so zoning is foreign to me.

Lesson: Don't Be the Last Merger in an Industry Consolidation

I was reading about the DOJ push back on the proposed American-US Airways merger.  It strikes me that you never want to be the last merger in an industry consolidation.  When the consolidation begins, say with 8 players, a merger -- even if it results in a very big company -- reduces the number of competitors from 8 to 7.  After a while, though, the later mergers are proposing to reduce the players from, say, 4 to 3.  This will look worse to the DOJ, who by this point in a consolidation may be feeling remorseful, in retrospect, that it let some of the earlier deals go unchallenged.  So the last deal gets to catch up / payback from the earlier deals.

I think this is in part what is happening with the American merger.  I don't have the data, but my sense is that earlier mergers (e.g. United and Continental) were far more problematic from an anti-trust standpoint.

Disclosure:  living in Phoenix, whose US Airways hub will likely get downsized or eliminated in the merger, my life will be worse likely if the merger is approved.   Executives swear Phoenix will remain a major hub but most residents here consider this a "If you like your hub you can keep it" type promise.