To hell with Mario
Everyone knows -- or at least pretends to know -- that "economic development" subsidies for corporations and developers are rarely of any real benefit to society. But when it comes to a specific case, no one ever wants to do anything about it. Elected leaders in particular suddenly lose whatever fight they had in them; they start repeating the developer's every ridiculously-inflated claim about "jobs," minimal ecological impact, and community benefits. No one wants to vote against this development for fear that everyone else will vote against the next one, this time in the politician's own district; and no matter how indifferent or even opposed many local voters are to such a development, the politician always believes that the fake "grassroots" group of local rent-seeking elites is speaking for the whole people when they scream that the development is absolutely necessary for the neighborhood and that government funding or tax breaks for it are essential.
That's why it's all the more encouraging when they do insist on a higher standard. What wouldn't you give for a tough-minded state auditor general who insisted that a company promise to do something substantial for the community before granting them a lucrative license?
Consider Pennsylvania Auditor General Jack Wagner. Pennsylvania recently legalized slot-machine gambling, and is in the process of granting a limited number of licenses for slots parlors around the state. One of these is reserved for Pittsburgh. Over half of the gross revenue from these slots parlors will go to taxes. But Wagner won't stop there. He's insisting that the company that bids on the Pittsburgh slots license should promise to do more for the community . . . by, er, building a new arena for the Pittsburgh Penguins.
Yes, you did read that right. Pittsburgh may be functionally bankrupt; it may have experienced the steepest population decline of any of the 25 largest metropolitan areas in the country over the last five years; and it may have a rising poverty rate with scandalously wide racial disparities on every conceivable economic and health measure available. But when it comes time for our civic and state leaders to insist on more from developers, they know what the priority is: Slots for Mario!
The official enthusiasm over this proposal is unlikely to rub off on the common people, who are dedicated sports fans but who voted 2-to-1 against public funding for two new stadiums for the Pirates and -- yes -- even the Steelers just under a decade ago. When democracy got in the way, our "leaders" came up with "Plan B," using primarily state money to build the stadiums and additions to the convention center in Pittsburgh, while also building two new stadiums in Philadelphia; they meanwhile raided funds from the Regional Asset District that were supposed to be used for other purposes. City and county finances being what they are now, there was never any question of using tax money for the Penguins too, despite Mario Lemieux's shrill and incessant blackmail-bleats to the effect that he is about to decamp for Kansas City.
But it has become such a matter of course that rapaciously greedy for-profit outfits of dubious civic benefit will receive public funding that it is considered a novelty when a new arena is to be built entirely with "private" funds. Which is why the joint proposal by the Penguins, Isle of Capri Casinos, and Nationwide Realty looks so good in the eyes of politicians. They argue that in addition to the tax revenue that will come from any slots license, it is good that the casino operator is offering to invest in something of public benefit when that money would have otherwise gone to profits.
But this begs the question, and it is the central question: If private funding for an arena is a point in this proposal's favor, why not private funding for something else?
A slots license is lucrative. Otherwise, why would Isle of Capri be offering $293 million in funding for the arena? By its own admission, Isle of Capri is a company of "substantial indebtedness" (some $1.2 billion in long-term debt, in fact, while the company has not quite $1.8 billion in total assets) and Wall Street analysts don't see it as an especially healthy enterprise, especially given the recent hurricane damage to its central operations in Mississippi. An expansion plan that requires that that much revenue be foregone for the sake of placating state and local politicians by building an arena does not look all that promising -- unless Isle of Capri is planning on making a hell of a lot of money.
I am by no means suggesting that the other proposals for the slots license are any better. But what developers are willing to dangle in front of us is telling. Gambling is one of the most regressive taxes imaginable, and it is hardly irrelevant that if this proposal succeeds, the casino will be placed in the lower Hill District, within walking distance of as bleak a concentration of urban poverty as exists anywhere in the country. It is no small concern that gambling addiction will be added to already-rampant social ills in that neighborhood. Don't kid yourself that slots will merely replace the illegal numbers games; they will likely augment them. For its part of the deal, Nationwide Realty is promising mixed-use retail and housing, but we're hearing nothing about whether that housing will be affordable or how poor neighborhoods in particular will otherwise benefit. The Lower Hill could be gentrified, and while I am not one to run screaming from that word in the manner of those who romanticize concentrated poverty as a colorful part of the urban landscape to be lovingly cherished, I also think that there is little value in simply moving poverty around. When the Lower Hill was destroyed the first time (to build the current Civic Arena in the 1950s!), it was among the first instances of "Negro removal" in the country, creating the mini-diaspora of local blacks who soon populated Homewood and other East End neighborhoods in larger numbers. Something tells me that if new housing comes to the Lower Hill again, it won't be of the kind that most people in the Upper Hill can afford.
So why not insist on something more? At a minimum, shouldn't the housing developments be affordable? Or better yet, shouldn't we insist that instead of spending nearly $300 million on an arena, the developer who gets the slots license should devote that money to a special fund to cover people without health insurance in Pittsburgh? Or that the developer should devote more money than will otherwise be received in taxes, so that the City of Pittsburgh can afford to reopen all the youth rec centers and pools it closed a few years ago because of budget constraints?
I'm tempted to ask the question, "Where's the imagination?" -- but it just doesn't feel right. This shouldn't require any special imagination; it's downright "commonsensical." It is our so-called leaders who must require a lot of imagination to believe that their current way of doing things is worthwhile for much of anyone in this city other than the developers (and consequently campaign contributors) they hang out with every day.
Comments
john, i wish you would write more pa and local analysis like this.
:-)
Posted by: rachelcanning | December 28, 2005 11:37 AM
well done mr lacny. submit that to the editorial page of the PG mayhaps
Posted by: chris george | December 28, 2005 11:50 AM
Nice piece. Lou Ransom, the editor of the New Pittsburgh Courier, seems to agree with you.
Posted by: Dave Rosenblatt | December 28, 2005 12:39 PM
This is absolutely absurd. You expect a private slots developer to solve all of the city's problems like providing health care for residents of Pittsburgh? Mario is going to build a new multipurpose arena that will bring millions of dollars a year into the city, at no cost to taxpayers. Yup, I guess he's the Antichrist.
Posted by: scott | December 31, 2005 01:49 PM
Scott -- There are several facets to my point:
(1) Someone is going to get this license, obviously, but the state Gaming Board decides who.
(2) The state Auditor General has come out and said that anyone who proposes to build a new arena should get preference from the state in getting the license.
(3) Since we have public officials openly saying that whoever gets the license should be expected to build an arena, there is no reason that public officials could not have insisted on something better and more important for the city. Some $293 million will go to this arena. In the 2004-05 state budget cycle, the endowment fund for adultBasic health insurance for the entire state was taken to balance the state budget; at the time it had $330 million. Imagine what $293 million in Pittsburgh alone could do, if our elected officials insisted on that instead of a new arena for the Penguins as a condition for getting the slots license.
You raise good questions about the real efficacy of slots as a source of revenue, but that wasn't my central point. Those are questions worth asking though. Why do we turn to gambling and cigarette taxes as a way to raise revenue, when they're extremely regressive taxes on the poor? Why don't we have the political will to raise taxes on those who can actually afford it?
On Mario Lemieux, by the way -- no, he's not the "Antichrist," but he is an asshole. He's been whining for years in an attempt to get more public money, and would have taken it no matter if it came directly from the mouths of babes. Here, he's getting ostensibly "private" money which will in fact be the result of a public decision over who gets the slots license. This is bad public policy, and yes, he is complicit.
Posted by: John Lacny | January 2, 2006 11:58 AM
Who are you and why should anyone care about your opinion?
Posted by: Pete | January 5, 2006 07:02 AM
John, Don't you think that you're being a little near sighted at what this arena could bring to the city? Having the arena will generate millions in itself just by bringing people into the city for events. Without the arena, the city could die even faster than it is. There is more to the picture than just the slot money. I don't live in the city but I come to a lot of hockey games and concerts and while in the city I usually eat there and do a little shopping. I know many others that do the same thing. Without the arena I really have no reason to come to Pittsburgh and I know many others that have the same situation. I'm not just going to go into the city to play slots! If people don't come to the city and bring in outside money the city will surely regress even further. You question how little imagination officials are putting into this but are you not doing the same thing by condeming the arena and telling Mario to go to hell? Couldn't there be some middle ground where they fund an arena and give a little back to the city? Why does it have to be one or the other? Please John, have a little imagination yourself.
Posted by: ben | January 5, 2006 08:37 AM
John:
Have you been to Mellon Arena in the last 10 years? The place is an absolute dump and, in my opinion, is an embarrassment to the city. Independent of how it is funded, a new facility is needed in Pittsburgh. In my opinion, the concept of slots profits to fund a new arena is about as imaginitive as it gets. It does not repeat the Plan B wrongs of the past, and it allows us to keep a major professional franchise in the city, which generates anywhere from $45-105MM per year for the city, depending on whose estimates you believe.
Posted by: Ryan | January 5, 2006 09:45 AM
You left off one small detail in your biased proclamation: "It also expects to commit at least another $1 million a year in slots revenues for community givebacks, ...". That's $1mil per year, continuing forward that Isle of Capri will give to the city for other developments (not to mention all the tax dollars coming in from all the development). You claim all they are doing is giving an arena to the Pens (which in itself is an absurd claim when it clearly will benfit the city as a whole) and will reap their own enormous profits while giving nothing more to the bankrupt city. Something tells me the city would love to have an extra $1mil per year coming in off the slots investment.
Posted by: L. Erdner | January 5, 2006 10:05 AM
To Hell with YOU!!!!!!!!!!
Posted by: john z | January 5, 2006 10:19 AM
Mario will sell the team if they do not have anywhere to play and not go to KC with the team. He took the team on because he did not recieve his salary from the team. I guess you have first hand knowledge the Mario is an 'asshole.' Have you meet him first hand and you were not treated well?
Posted by: Andrew Gabany | January 5, 2006 10:36 AM
Let me get this straight...you want a private business to not only pay 1/2 of the profits recieved back to the state in the form of taxes, you want them to ALSO set up welfare and health programs with the remaining profit, or better yet, to reopen all the recreation facilities that the city "had" to close because of budget constraints...Isn't that something the CITY should be doing?
This town ran itself into the ground with inflated budgets for services that seem to increase as the population decreased. You don't think this could be from our wonderful politicians promising lucritive contracts in exchange for votes do you???
BTW, you left out the part where that jerk Mario gives the arena to the city after it is constructed...that bastard...why can't he think of the CHILDREN!!!
I hope you lobby so hard for Lemieux not to get the licesne and Rendell decides to give it to Forest City Group, who decide to give ABSOLUTELY NOTHING back to the city. Then maybe you can assist the Lower Hill residents to bus it on over to the new casino in far away Station Square. At least it won't be in walking distance.
Posted by: Pops16 | January 5, 2006 10:43 AM
Hey "John" you're
KooCoo, CooKoo, KooCoo, CooKoo
Ohh and you're also a jackass.
Posted by: Skippy Reed | January 5, 2006 11:34 AM
John: The have trough urinals in the current arena, which is an indictment of that antiquated site in and of itself.
Notwithstanding that point, your short-sighted and blinder-driven focus is typical of the region and correlates with the region's continuing demise. You're simply wrong on so many levels, but I have no doubt that your narrow-mindedness cannot be touched with a contrary opinion.
Posted by: Tocchet | January 5, 2006 12:05 PM
"Why do we turn to gambling and cigarette taxes as a way to raise revenue, when they're extremely regressive taxes on the poor? Why don't we have the political will to raise taxes on those who can actually afford it?"
So we should tax behavior we want to encourage, and not behavior (Drinking, gambling, and smoking) which costs taxpayers millions of dollars a year in taxes in the very health care industries you admit are already overburdend?
Please John, think back to your economics 101 class.
EPP
Posted by: EPP | January 5, 2006 12:14 PM
Sir:
You are right. Let's forget about a new arena. Actually, allowing the Pens to leave town is a great idea. Once they are gone, and we still have an aged antiquated arena, there will be nothing left to do downtown, and then all of the young folks will leave. Downtown after 5pm will be absolutely empty. Then, we can just use the slots money to put up nice big metal gates around the city, close them down after the last person leaves at 5pm, and since nobody will be left down there, we can turn off all of the lights. We also will not need to have any police down there, since it's completely empty. That will save a LOT of money, and will permit the city to put a new swimming pool on each block! Yeah, that will be great! It will really help the city to reinvent itself and thrive. Maybe we can become known as the City Of Future Olympic Swimmers! Of course, since nobody will be living here by then that is younger than 65, it will have to be the Senior Olympics.
Posted by: rick | January 5, 2006 01:43 PM
John say this really loud with me "Nineteen Eightyyyyy, Nineteen Eightyyy"!
Posted by: Stu Barnes | January 5, 2006 04:19 PM
Some of the comments here raise legitimate issues, while I think others miss the point of what I said or argue with positions I do not hold. These issues are complicated enough -- and important enough to be worth a considered response -- that I have created a new post to respond to them. Have a look at it.
Posted by: John Lacny | January 7, 2006 10:17 AM