Coyote Blog

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.

Last year, there were about 3.2 trillion passenger miles driven by urban drivers in cars in the US.  My point about light rail is that we can barely afford it for just a few people, given that we spent $1.3 billion to build a rail line for just 17,000 daily round trip riders in Phoenix.  If it were truly a sustainable technology, it could be applied to all commuters.  But at a national average taxpayer subsidy per light rail passenger mile of about $2**, this means that to roll light rail out to every urban commuter would cost $6.4 trillion a year in government spending, almost half our annual GDP.  If it required the subsidy rates we have in Phoenix per passenger-mile, such a system would cost over $12 trillion  year.  In fact, the numbers would likely be even higher in reality, because light rail in most cities is almost certainly built on the highest populated corridors with the most bang for the buck (though some of the diminishing returns would be offset by network effects).

Light rail only works today because we drain resources from millions of taxpayers to benefit just a few generally middle class commuters.    This is not a model that will scale.

** This includes both service on the debt, which is payment for the original construction costs, as well as annual operating losses.  This subsidy is required essentially forever.  After 20-30 years when the original bonds are paid off, by that time systems generally have to be rebuilt in their entirety   (as folks in places like Washington DC are learning).  There are probably only 5-6 cities in this country that have the urban population densities to make rail systems come even in the ballpark of working financially, and places like Phoenix, Seattle, Houston, Portland and LA are NOT among them.

Let me offer up a definition of sustainability that I think most environmentalists and progressives would accept:

We are acting in a sustainable manner if we are achieving our goals in a way that does not hamper the ability of other people in the world, or of future generations, to achieve their goals.

Most environmentalists and progressives would call light rail lines in US cities a “sustainable” technology because of its notional impact on fuel use and CO2 output (yeah, I know, but we are not going to address those assumptions today).

Let me present one fact, from Federal Transit Administration’s 2009 survey of public transit authorities, whose data is linked in various ways here.  Or you can download the summary spreadsheet here.  For all US light rail systems in total:

User fares paid per passenger-mile:           $0.18

Total cost per passenger-mile:                     $2.22

Taxpayer subsidy per passenger-mile:       $2.04

Since I live in Phoenix and the Phoenix light rail system seems to get particular praise as a “success” from light rail supporters, here are the Phoenix light rail numbers;

User fares paid per passenger-mile:          $0.07

Total cost per passenger-mile:                     $3.89

Taxpayer subsidy per passenger-mile:       $3.82

So there, folks, is your sustainable technology.  As I have written before about sustainability, “I do not think that word means what you think it means.”

Nationwide, non-users of light rail pay for 92% of its costs.   In Phoenix, non-users pay for 98% of the costs.  Taking the Phoenix system as an example, resources are drained from literally millions of people so that 17,000 or so people can ride it round trip each day.   Using resources from millions of people, and building up debts that will last into the next generation, to support the transit of just a few people, seems to be the antithesis of sustainability.

If there is any common denominator among progressives, it is that they have little respect for how individuals spend their money.  So they might be unmoved by the loss of resources from so many.  So lets just look narrowly at transit, which I presume the do care about.

Before Valley Metro operated a light rail system in Phoenix, they also operated a bus transit system.  This system still requires a subsidy, but it is much lower than the light rail subsidy.  In 2009, the bus subsidy was $0.74 per passenger-mile.  This means that for the same amount of taxpayer funds, Valley Metro can provide 1.0 passenger-mile by train or 5.2 by bus ($3.82/$0.74).   I can guarantee that cities building light rail are not having their budgets quintupled.  So the result is that, as light rail gets built, total transit ridership falls in most cities as rail costs crowd out existing bus services.

Update: Most light rail articles in our local papers, which have been mindless boosters of the system, generally consist of asking riders if they like the system, who inevitably answer “yes!”  This is somehow a proof the system is great.  Well, duh.  I too am likely to be happy with a service where I only pay 2% of the costs.

Update #2:  Last year, there were about 3.2 trillion passenger miles driven by urban drivers in cars in the US.  My point about light rail is that we can barely afford it for just a few people, given that we spent $1.3 billion to build a rail line for about 17,000 daily round trip riders in Phoenix.  If it were truly a sustainable technology, it could be applied to all commuters.  But at a national average taxpayer subsidy per light rail passenger mile of about $2, this means that to roll light rail out to everyone would cost $6.4 trillion a year, almost half our annual GDP.  If it required the subsidy rates we have in Phoenix per passenger-mile, such a system would cost over $12 trillion  year.  In fact, the numbers would likely be even higher in reality, because light rail in most cities is almost certainly built on the highest populated corridors with the most bang for the buck (though some of the diminishing returns would be offset by network effects).

I love maps like this one, and a year or two ago I linked an earlier version.  This one is from the Economist via Carpe Diem, and shows the name of the country whose GDP is similar in size to that of the state.

I have to criticize the map-maker, though.  They used Thailand at least four times on this map — the original version managed to do it without repeats.  But I am amazed that Arizona ranks right there with Thailand.  This is not to diss the rest of the state, which has a lot going for it, but in terms of population and economic activity, a huge percentage in in just one city, Phoenix.

I do have to wonder whether New Mexico being matched up with “Angola” is really very flattering, and pairing Mississippi with Bangladesh is funny on a couple of levels.

I have this same problem all the time now in Arizona:

To understand how badly we’re doing the most basic work of journalism in covering the law enforcement beat, try sitting in a barbershop. When I was getting my last haircut, the noon news on the television—positioned to be impossible to avoid watching—began with a grisly murder. The well-educated man in the chair next to me started ranting about how crime is out of control.

But it isn’t. I told Frank, a regular, that crime isn’t running wild and chance of being burglarized today is less than one quarter what it was in 1980.

The shop turned so quiet you could have heard a hair fall to the floor had the scissors not stopped. The barbers and clients listened intently as I next told them about how the number of murders in America peaked back in the early 1990’s at a bit south of 25,000 and fell to fewer than 16,000 in 2009. When we take population growth into account, this means your chance of being murdered has almost been cut in half.

Its almost impossible to convince folks that AZ is not in the middle of some sort of Road Warrior-style immigrant-led wave of violence.  In fact, our crime levels in AZ have steadily dropped for over a decade, in part because illegal immigrants trying to hang on to a job are the last ones to try to stir up trouble with the law (charts here, with update here)

In Phoenix, police spokesman Trent Crump said, “Despite all the hype, in every single reportable crime category, we’re significantly down.” Mr. Crump said Phoenix’s most recent data for 2010 indicated still lower crime. For the first quarter of 2010, violent crime was down 17% overall in the city, while homicides were down 38% and robberies 27%, compared with the same period in 2009.

Arizona’s major cities all registered declines. A perceived rise in crime is one reason often cited by proponents of a new law intended to crack down on illegal immigration. The number of kidnappings reported in Phoenix, which hit 368 in 2008, was also down, though police officials didn’t have exact figures. [see charts above, these are continuation of decade-long trends]

But over Thanksgiving my niece visited from the Boston area for a national field hockey tournament and her teachers and coaches had carefully counselled them that they were  walking into a virtual anarchy, and kidnapping or murder would await any teen who wandered away from the group.

OK, I have to call bullsh*t on a certain cultural phenomenon.  At the risk of uttering a blasphemy, I have to say that In and Out Burger is simply not very good.  It seems to be hot among teens, so I get dragged to it from time to time by my kids, but the burgers are just meh and the fries are simply bad.  Among fast food joints, Wendy’s is much better and we have a veritable explosion of gourmet burger places here in Phoenix  (a trend I applaud as mightily as I did the craft beer phenomenon) that are all much better.  As a regional phenomenon that builds a cult following as it spreads east, it reminds me of nothing so much as the similar Coors beer craze in the 70′s, where easterners used to illegally carry Coors over state lines to bring some back home (e.g. Smokey and the Bandit).  And Coors sucks too.

Folks who read this site know I have been critical of Phoenix light rail since well before it was opened.  So often, folks just willfully misinterpret my criticisms.   The actual rail line and its service is pretty nice, and the facilities are quite attractive (lets see what they look like in 10 years though).  If Santa Claus had just delivered the Phoenix light rail system for free to Phoenix, I would be thrilled with it.   But Santa unfortunately was not involved, and instead the rail line was paid for by area residents, and it cost them over $75,000 per daily roundtrip rider to build, plus annual operating deficits infinitely into the future.   I would be thrilled if an Aston Martin Vanquish showed up in my garage tomorrow, but I am not going to fork over a quarter of a million bucks for one.  Ditto the light rail system.

Anyway, the 2009 FTA transit database is out, and Randal O’Toole has helpfully summarized it in spreadsheet form, which you can download here.  You can peruse your own local system.  Probably the hardest thing to figure out are the mode codes, which are deciphered here.  Since 2009 was the first full year of operation for Phoenix light rail, we can finally look at data for Phoenix on an apples to oranges apples basis with other transit systems  (it is really, really hard to squeeze useful information out of the data Valley Metro posts on their site).

I am just going to highlight two numbers for Phoenix light rail (TRS_ID 9209 in the data).

• The public subsidy per individual trip (that is one person boarding and riding one way) is $32.73!!   No one would pay this amount if it were the fare.   This equates to a public subsidy (beyond the fares paid) of $3.82 per passenger mile.  Remember, this is not a hostile analysis, but based on the numbers Valley Metro itself submits to the FTA.   Note the IRS reimbursement rate for the total cost (capital and incremental expense) of driving a car is 50 cents per mile, which drops even lower per passenger mile when the car has more than one person in it.  The average occupancy of a car is something like 1.5, which would make the cost per passenger mile of the average car to be about 33 cents per mile.  Ignoring the passenger fares, the public subsidy alone for light rail in Phoenix is 11.6 times larger [note: and yes, this includes the gas tax, so it includes a lot of the maintenance of the road infrastructure.  To include full cost of maintaining and building highways, it might have to be a few cents higher, but its not going to come anywhere in the ballpark of the light rail number].
• But we are paying more for rail to save the environment, right?  Well, the BTUs expended per passenger mile for Phoenix light rail was 4402.  This compares to the average for passenger cars as determined by the DOE at 3437 BTU/PM.  So the train actually uses 28% more energy to move one rider one mile than does the average car.

Years before the light rail system was completed, I made my light rail bet:  That with the capital cost, I could easily buy a Prius for every daily rider, and still save money.  And for less than the annual operating subsidy, I could give all the new Prius owners free gas each year.  Already my bet has proved more than correct.  But now we know that under my Prius plan, we also would have saved energy, since the Prius uses less than 1700 BTU/pm, less than a third of what Phoenix light rail consumes.

I was absolutely astounded several years ago when the city of Glendale (a suburb NW of Phoenix) agreed to shell out $180 million to build an arena to try to keep a pro hockey team (the Coyotes) in town.   Now, they are considering doubling their investment:

Will the Glendale City Council vote to shell out nearly $200 million in a deal aimed at keeping the Coyotes in town for at least 30 years?

But there is nothing simple about the decision facing elected officials in the West Valley city that has yearned to build its reputation as a sports and entertainment hot spot.

The deal involves Glendale taxpayers giving $100 million to Matthew Hulsizer, a Chicago businessman poised to buy the Phoenix Coyotes from the National Hockey League.

And, the Arizona Republic‘s Rebekah Sanders reports that “Glendale would pay Hulsizer $97 million over the next 5 1/2 years to manage the arena, schedule concerts and other non-hockey events.”

Unbelievable.  The value destruction here is amazing.  A few years ago, the Coyotes were only valued at $117 million.  So the government will have subsidized an entity worth just north of $100 million with $400 million in taxpayer dollars?  Nice investment.  Of course they have a BS study about net economic impact of the Coyotes, with a sure-to-be exaggerated figure of $24.5 million a year.  But even accepting this figure, they are spending $400 million for at most $24.5 million in economic impact, which at best maybe translates into $2-3 million a year in extra taxes.  That works, how?

Losing more than 40 major events, that is hockey games, per year at the arena would be a punch-in-the-gut to bars, restaurants and retail shops that also call Westgate home.

Here is a hint:  I pretty much guarantee the buyout value or moving cost of these businesses is less than $200 million.  But here are the most amazing “economics”

that would only further jam up Glendale, which counts on sales tax revenues those businesses generate to pay off the debt it has amassed in trying to build its sports empire.

So we are going to spend $200 million to make sure we can keep up the debt service on the previous $180 million?  So where does the $200 million come from.  I am increasingly buying into Radley Balko’s theory that the media is not liberal or conservative, just consistently statist.  Here is the comment on the Goldwater Institute’s legal challenge

City officials also may face a legal challenge from the Goldwater Institute over the conservative think-tank’s belief that the deal Glendale has cooked up violates state laws that prohibit government subsidies to private entities.

That, of course, means that the city will rack up untold legal fees to defend their deal.

Waaaaa!  More legal fees.  Is that really their biggest concern?  How about the strong possibility that Goldwater is correct, or a mention that they have won in court recently in similar cases.  But we will end with this happy thought:

Now, if they say yes to the $200-million giveaway, they may keep the team in town but are only piling on to that massive debt.

And as their initial deal with the team and previous team owners has proven, there are no guarantees that the $200 million will be enough.

Postscript: Local papers have never seen a sports team subsidy or new stadium they did not love.  Given the quality of their news departments, local sports teams sell newspapers.

PS#2: Long ago I wrote a post on subsidies for business relocations and the prisoners dilemma.

I obviously need to go out and buy an SUV to reverse this:

Phoenix-area temperatures could drop as low as the mid-20s early Tuesday morning, possibly breaking the record low temperature of 30 degrees set in 1911.

In 8th grade, my son won his science fair with this easy and fun project to measure the urban heat island effect around our city.  I know parents and kids alike can struggle to find a good project.  This is one that not only is interesting, but helps to prove the existence of a phenomenon that many climate alarmists work hard to deny.  Imagine a temperature measurement point in downtown Phoenix, which we found to be 7-10F hotter than the outlying areas just 30 miles away.

What did that thermometer read 100 years ago?  How much of measured global warming is due to this effect, particularly since our airport, the typical place where temperature records are based for large cities, is right in the center of town?

Anyway, we had to kluge together some stuff to make this work, but the Weather Shop now offers a simple kit. The site suggests keeping track of position in a log vs. time, which is what we did the first time and works just fine.  However, the second time through, we got fancy and also had a GPS logger.

Radley Balko has a fascinating discussion about a switch in government policy in Fountain Hills, AZ  (a suburb of Phoenix and a town I visit for various reasons all the time).  Apparently, residents of the town got to actually select from competing trash vendors (lucky folks!) until recently when the town selected and enforced a monopoly trash provider.  Balko has a fascinating discussion of why progressives seem to universally support this decision and oppose the previous choice-based approach.

It may be odd at first to see a self-styled progressive mocking someone for criticizing a corporation for exercising too much power.  John Cole writes sarcastically:

My GAWD. I feel so violated. I’m going through my bills before the Steelers game and I just realized that Allied Waste is contracted to pick up my trash, so my personal liberties have been impinged by the creeping totalitarianism of nanny-statism. To show solidarity with the oppressed Fountain Hills trash protesters, I am going to dress up in my “Don’t Tread on Me” t-shirt, stand at the edge of my driveway at dawn during trash pick-up on Thursday, and throw pocket constitutions at the sanitation workers. We shall overcome, patriots!

This from a progressive bunch who runs to the government for legislation when their Big Mac has one too few pickles on it.  If you can understand why progressives attack any corporation that they voluntarily do business with for having too much power, but defend any corporation backed by government authority, you will start to figure out exactly what progressives are really after.  Just remember that progressives have a deep distrust of individual choice related to any activities that don’t touch on sex.  And they are much more comfortable with lines of accountability that run through government officials (elected or not) rather than accountability enforced by competition and individual choice  (more on progressives here).

I will just add this to the story — Fountain Hills is a suburb to which the verbs tony, wealthy, and exclusive could all apply.  Given its position in the foothills around Phoenix, it is perhaps one of the most attractive suburbs in the metropolitan area.  It is the last place one would point to as having some sort of problem with unkept houses and rotting garbage.  This is entirely a power play by the city — it has nothing to do with the quality of the area.

Brad Warbiany has even more on the story here.

Mostly unrelated facts about Fountain Hills

1. Fountain Hills was a development of the McCulloch family (of chain saw fame) as was parts of Lake Havasu City.  Both developments had a centerpiece attraction.  Fountain Hills has a spectacular fountain (one of the five highest in the world) while Lake Havasu City has the transplanted London Bridge.  As to the latter, the story goes that McCulloch thought he was buying the much more dramatic Tower Bridge, which American tourists often confuse with London Bridge.  As a further aside, I met the guy once who did the gunnite on the bottom of the transplanted London Bridge.  He was a pool guy and applying it over his head rather than under his feet was fairly new to him.  He said he never allowed his little kids to sing “London Bridge is Falling Down” in his presence, it made him too nervous.
2. Our egregious Sheriff Joe Arpaio lives in Fountain Hills.  On a recent crime sweep of his home town, which he claimed had nothing to do with immigration, he arrested (or at least detained) almost all people of Mexican decent, in fact more Mexicans than I thought one could find in Fountain Hills, even on a bet.

As predicted by skeptics of light rail, like myself, the Phoenix light rail system is starting to kill bus service.  This is a familiar pattern — in most cities that have added rail, from LA to Portland, total transit ridership has fallen as light rail systems have been built.  That is because rail is so expensive, and its costs are mostly fixed (ie bond payments for construction costs) and absolutely inflexible (ie you can’t shift routes).  Since rail costs far more, even orders of magnitude more, per rider than buses, this means that even with modest increases in total transit budgets, total ridership falls when capacity is being shifted to much higher cost rail.  Bus service is inevitably cut, because even if you close rail lines, the costs remain.

So here we are, in Phoenix.  The article is mainly about the regional transit coalition falling apart, which I have no opinion or interest in, but you can see what is going on anyway.

A bad economy has meant that building a regional bus system in the Valley is no longer a regional endeavor.

A half-cent sales tax was supposed to be the magic bullet that paid for transit and roads. But as tax revenues continue to shrink, cuts to the plan have become inevitable.

Avondale leaders say the toll includes the decimation of future West Valley bus routes and the end of the regionalism that Proposition 400 promised….

Paul Hodgins, capital-programming manager for Valley Metro, which operates the transit system,said every region took a 25 percent cut in transit dollars.

Here is what is going on, though the article only sort of alludes tangentially to this way down in the last 2 paragraphs.  Half of the transit dollars in the sales tax increase went to rail, and half to buses.  The rail money is almost all for debt service on capital spending which has already occurred.  This money has to be spent or the local authorities will default on their bonds.  The other half was for bus operations.

Now, there is a 25% cut in the sales tax dollars from this sales tax increase.  The half that went to rail can’t be touched.  So the 25% cut results in a 0% cut in rail and a 50% cut in buses.  Further, since bus service carries a lot more passenger trips per dollar spent than rail, this 25% cut will end up affecting well over 50% of the total ridership that benefited from the sales tax funds.

It is clear from the article that folks probably understand this, but no one from the AZ Republic to the transit agencies are yet ready to admit it.  Expect the proposed solution to be in the form of more taxes rather than a rethinking of transit strategy.  Rail is an albatross, and I wonder how often it has to drive failures like this before people start recognizing it as such.

This is pretty funny — a comedian challenges folks in downtown Phoenix and demand they prove they are not illegal Canadian immigrants.

Via TJIC, Copblock releases links to police officers accused of committing crimes.  The list for just one week is ridiculously long, and surely would be longer if not for the law of Omerta among police that cause only a small percentage of their crimes to see the light of day.  Congratulations to Phoenix area police (including Mesa and Maricopa County) for making the list seven times.

- Phoenix AZ cop who was charged with murder, planted drugs on mentally challenged homeless lady

- Phoenix AZ cop given 2nd degree murder charge after shooting unarmed man to death

- Mesa AZ cop grabs 2 women by the neck and slams their heads together

- Maricopa County AZ sheriff sued for intentionally locking disabled woman in jail cell w/several men for 6 hours

- 6 Mesa AZ cops sued for tasing, kicking and beating man

- Maricopa County AZ sheriff ordered to fix unconstitutional conditions at jails in ACLU suit by 9th circuit court

- Phoenix AZ cop arrested on DV-related aggravated assault after witness called cops

Solid work for one week.

I had this sent to me by several readers.

In that 2005 incident, Chrisman and his partner arrested a homeless woman on an outstanding warrant. According to the internal affairs investigation, Chrisman and his partner planted drug paraphernalia on the woman — because they wanted to play a joke on the woman, who is mentally challenged.

Take a look at the video — Chrisman puts a brilo pad and pipe in his partner’s left hand. His female partner then pretends to pull the pipe out of the woman’s dress.

Chrisman said he knew the suspect, and just wanted to get a rise out of her. He was suspended for one day and put on the Brady List — his partner was also suspended for one day and put on the Brady List.

The woman wasn’t charged with anything related to the planted evidence.

Video at the link.

It is hard to find the humor in planting evidence on a mentally-challenged homeless woman, though my guess is this became a joke only after the video appeared.

No matter what the officer’s explanation, the disturbing fact is that Phoenix police officers seem to carry on their person, as part of their equipment, throw-down drug paraphernalia.   Why is no one asking why Chrisman had the crack pipe in the first place, or how his team was so well trained that they could wordlessly set up the plant.  This whole episode smacks of something well-practiced.

My column in Forbes is up for the week, and discusses the failure of light rail.  In particular, it focuses on Phoenix light rail, which has been hailed by the intelligentsia as a stirring success.  Which it is … if you are willing to completely ignore its costs.  Saying that Phoenix light rail represents an example to be emulated is roughly equivalent to saying that an Aston Martin makes a sensible middle class family car.

One reason Phoenix is a particularly bad candidate for a light rail line is that our population is so dispersed, and there are not any obvious commuting routes.  Our downtown is a destination for very few, but even here the commutes, as shown on this distribution map, are from all over, hardly very good fodder for rail (the downtown is near the “phoenix” label).  More importantly, people work all over, so taking a suburban zip code, look at where people are commuting to from suburban 85032.   Again, all over.  Notice how few are going downtown (where the light rail line is — downtown is toward the south about where the “phoenix” map label is).  In other words, people in Phoenix are driving from all over to all over.

Update: Now here is my idea of rail running in the streets, via Shorpy

Maybe its because I live in Phoenix, but the local food movement has always seemed silly to me.  To somehow argue that food grown in our 6 inches of annual rainfall is better for the environment than trucking product in from more suitable growing regions has always struck me as crazy.  Russ Roberts links several good articles on the local food movement, one of which included this nice snarky observation:

The result has been all kinds of absurdities. For instance, it is sinful in New York City to buy a tomato grown in a California field because of the energy spent to truck it across the country; it is virtuous to buy one grown in a lavishly heated greenhouse in, say, the Hudson Valley.

I have absolutely no confidence that we will get 25% more work from our city employees on Mon-Thur to make up for a Friday day off.

Thursday could become the new Friday for thousands of Phoenix city employees in an effort to save money and keep workers happy.

Phoenix officials are considering mandatory Fridays off for administrative employees but would exempt those who support functions that can’t be shut down such as water-plant employees, aviation workers and public-safety staff.

If approved, Phoenix would become the largest municipality in the state and the country on a mandatory four-day schedule, where employees typically work 10-hour days with Fridays off.

I am not sure we currently get 8 hours of work from many of them, and having been programmed for years or decades to an 8 hour day, I don’t see them changing their behavior.  My alternate plan would be to cut everyone back to 32 hours a week, cut their pay by 20%, AND save energy on Friday.  By “alternate” I mean alternate to my base case of sending them all home permanently and waiting to see how long it takes for anyone to notice.

Rather than starting a new blog,  I think I warned you that I would be doing model railroad layout updates here as a reference for fellow hobbyists.  You are welcome to blow right on past if the hobby is too geeky for your taste.

I have completed Version 1.0 of the track plan for an 18″ by 9-foot shelf-style switching layout in N-scale.  I used the 3rd PlanIt CAD program to do the design.  Click to enlarge:

The layout has a number of features I wanted

• Staging area (not shown, around a corner to the left)
• Interchange with 2 other railroads
• Small yard
• Lots of industry space
• Space for urban scenery

The layout is an imaginary short line switching urban tracks in the Phoenix area, interchanging with both the Union Pacific and BNSF, set in modern day or perhaps backdated to pre-merger ATSF.  I have spent several weeks photographic rail lines and industries in the area and have a good idea of the look and feel I want.  I am going to build it in two modules which split just right of the diagonal interchange line.

Because I am a masochist, I am using code 40 hand-laid track with hand made turnouts using Fast Tracks fixtures.   While newer code 55 rail is a big improvement over older rail, it is still out of scale.  I may make the diagonal main line crossing at the junction code 55 just to emphasize the difference between main and branch line — also because I don’t really like building crossovers by hand and Atlas has a nice code 55 45-degree crossover I can use.

I am not going to run the largest modern diesels or any long passenger equipment so I am going to try to get away with #5 turnouts, except on crossovers where I will use #8 if I can make them fit.  I am still debating some issues like turnout control, so I will leave that for later chapters.   Minimum radius can be big – 18″ or more, except on the interchange track because it has to tuck behind the backdrop.

You will see I have already planned some mirrors into the design.  That was something that always got visitor’s attention on my old layout — tracks or roads appearing to go on forever.  This time I will use it for the interchange track as well as the yard (a la John Allen).  I am also going to try to double the apparent length of my grain elevator with one.  As always, the hard part is hiding the edges.  The interchange track will be easy, and a highway overpass will likely work on the yard, but I have not yet figured out how to disguise the mirror at the elevator.

This weekend I hope to actually build the base of the modules, using 1-inch extruded foam insulation board glued to 1/4″ Lauan plywood.  Stay tuned, I hope to have it all in pictures.

Unless you are from Mars, you probably know LeBron James is a free agent, being courted by a number of teams, ultimately deciding on Miami over his home town and former team in Cleveland.

This has been an odd auction for his services, because except for some tax issues (which certainly may have been a factor in going to Florida), price controls in the league effectively cap how much James can be paid.  And given his talent, it was clear that every team would be willing to pay him the max.  This has led to offers based mostly on non-monetary factors, with Cleveland mainly taking the Glenn Close approach from Fatal Attraction, basically saying it would have to commit suicide if LeBron breaks up with the city.

Many have commented on how much Cleveland, economically, had riding on James and that it may well get the biggest economic benefit, bigger certainly than Miami which has fairly indifferent and easily distracted fans, of any of the teams in the auction.  But with price controls, Cleveland lost because it was not able to bid for LeBron’s services what he was really worth  (in fact, it was pretty clear that all the teams involved expected to have a huge consumer surplus from LeBron’s acquisition, since his value to any team seems to be higher than the salary cap).

By the way, speaking of surplus or lack thereof, my belief is that New York has continued its tradition of offering long-term lucrative deals to disappointing players.  Having watched Amare Stoudemire for seven years, I can say that he is fully poised to be the next Stephon Marbery for the Knicks.  He can be brilliant, and he is very talented, but he has focus issues that are not going to be enhanced in New York and at times was thrown off-kilter by the media pressure in Phoenix where the press is a cupcake compared to New York.  He is not even much of an upgrade from David Lee, but he gets paid a lot more guaranteed money.