Our local governments are giving your money away – Part 1
Our local government officials has become obsessed with idea of a downtown Frederick hotel. They want it so bad they are scheming to pay for over half of the hotel complex. That would be $45 million of the estimated $89 million total cost.
The hotel complex consists of (1.) land, (2.) a hotel, (3.) an attached conference center and (4.) a parking garage and a lot or lots. Our local governments will pay for everything except #2, the hotel building.
In 1776, Adam Smith, in his The Wealth of Nations, warned of the dangers of a statesman who had the folly to believe he knew enough to direct private people in their business. However, Smith wrote that there exists the need for public institutions and public works which, “though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual, or small number of individuals; and which it, therefore, cannot be expected that any individual, or small number of individuals, should erect or maintain.”
In economics, a public good is a good that is non-rivalrous and non-excludable. Non-rivalry means that use of the good by one individual doesn’t reduce the availability of the good for use by others; and non-excludability means that no one can be effectively excluded from using the good.
So, is a downtown Frederick hotel/conference center a public works or good that is highly advantageous to our society yet of such a nature that no private individuals could profitably erect or maintain it? Absolutely not. Almost all hotels on the planet are privately funded. Therefore, there is nothing about a hotel that meets Adam Smith’s description of a public work warranting government funding.
A public work is something that does not discriminate between its citizens. Water and sewer plants serve all. A bridge carries all. A hotel? A hotel serves paying customers for special purposes not common to the general population, and it will only enrich the owner of the hotel.
Is the conference center “infrastructure,” or a public works? Of course it isn’t either. Only paying customers can use it. And by the way, the only food allowed to be consumed in the center will be that provided by the hotel. A government granted monopoly.
But, of course, the parking lots and garages are public goods or works you may argue. First, not if they are for hotel customers only. Also even if open for free to the public, they aren’t needed unless the hotel is built. Did the county finance the latest Wal-Mart’s parking lot? The latest Burger King lot? Grocery store? Craft shop? Businesses are expected to build their own parking lots.
But what about the existing downtown parking garages? Answer this, what store was parking garage #2 built for? I don’t know the history of parking garage #2, but I’m pretty sure it was built to address an overall parking dilemma. One could not point at one business and say that car parking there supports that specific business. It wasn’t built to make one new business viable.
The proposed garage will be built to serve the need of one private business. Therefore, the proposed parking facilities are not “infrastructure.” Parking is an essential part of every hotel. Our elected officials who support the government purchase of the hotel parking lot by declaring the lots as “infrastructure” have either been fooled, or they are liars who think we are fools.
The funding schemes to give $45 million of taxpayer money to the hotel owner are complex, creative and subject to corruption. The financing/debt schemes, usually limited to only blighted areas are controversial.
[Editor’s Note: Mr. Kellar will expound on those financing details in Part II tomorrow.]