In 2005, public financing became a federal crime when New York City left a bill unpaid. By the end of 2007, New York City was a poster child for public-private partnership mismanagement. A debt crisis in 2006 led to layoffs at the city comptroller’s office and major cuts to dozens of programs for low-income residents and individuals with disabilities. The following year, a number of New York City voters went to the polls and overwhelmingly voted for term limits. Now, the country’s largest city is facing the same kind of financial woes.
At the risk of joining the ranks of the Occupy movement, I want to make sure one group isn’t being unfairly blamed for it: the taxpayers.
That’s because, with the help of the Great Recession, taxpayer debt levels are now at unprecedented levels.
In California, it’s the highest in the nation. Illinois is in the top 20. Even the District of Columbia is on the public borrowing leaderboard. And in urban communities across the country, tax increases have skyrocketed.
I’m not alone in this thinking. The Partnership for Cities and Mayor Michael Bloomberg of New York City concluded that “city budgets are in dire straits and requiring special attention from the nation’s mayors.”
Almost all new billion-dollar, billion-dollar arena projects in America are facing financial burdens that the public does not support. Examples include Denver’s proposed $475 million arena. This public money is desperately needed to pay for unfunded construction expenses, unfunded facility improvements and unfunded property tax subsidies. Denver taxpayers are also paying the construction debt for the proposed arena. And as with other projects around the country, Denver is creating few jobs for the construction workers.
Several years ago, Haverhill, Massachusetts, officials had to raid the city budget to fund a $97 million arena. However, by doing so, officials left the community with a condition: They must provide up to $110 million in operating costs over the course of 30 years or else the city will be required to return the construction money for the arena.
Dowling College expected to replace facility with $150m, taxpayer-funded arena
Boston-area school Dowling College may be even worse than Denver, a recent report published by the Beacon Hill Institute revealed. Despite initial interest, business leaders and local politicians did not want to invest millions of dollars in a new arena and a new stadium, the report said. So instead, the school is hoping to use $150 million from taxpayers. That’s about $30 million a year or about 1 percent of state revenues.
A more permanent solution to these problems may be found in the 1995 debt agreement between the developers of the Miller Lite Platinum Tower and Lakewood. In that deal, the tower developers agreed to pay off all of the district’s debt by 2030 with more than $100 million a year in property tax revenues. Instead, they defaulted and, earlier this year, the property tax collector filed a motion seeking to recover the $107 million the city owes in unpaid property taxes. The Denver-based “Save Our Partners” will take their case to court and hope to have some of the property taxes turned over to Denver.
Unfortunately, the state doesn’t seem to understand the need for a crackdown on the risky behavior of publicly subsidized projects and has been lax in prosecuting developers who overstate the amount of public-funded infrastructure improvements they plan to build.
Officials seem to have concluded that this is a problem of “what’s best for the developer,” not “what’s best for the public.”
State Attorney General Brian E. Frosh (D) should launch an investigation and find out why some financial professional firms are ignoring the federal law requiring developers to not rely on any new debt that is not necessary to build the project.
As seen in Denver, many public development projects are being funded with long-term debt that never produces any significant property tax revenue. And some developers seem to be cashing in on the public by using special tax exemptions to pad their books.