Fighting Over Sports Subsidies

Spring Training is a big deal here in the valley. The Cactus League has played here for decades and it's seen as a boon to tourist industry. Most of the teams play in public facilities built (at taxpayer expense) specifically for them. Of course tax revenue must be raised to pay for them. The latest is what to do for the Chicago Cubs.

A bill to help keep the Chicago Cubs' spring-training operations in Mesa ran into strong headwinds Friday even before it was introduced in the Arizona Legislature.

Derrick Hall, president of the Arizona Diamondbacks, told The Arizona Republic that Cactus League teams are united in opposing the legislation, which would raise car-rental taxes and impose a surcharge on spring-training tickets to help pay for a new Cubs stadium and practice facility in Mesa.

A surcharge on tickets is just an excise tax on tickets to spring training games.

It's also interesting to look at the numbers.

The bill seeks to raise $59 million over 20 years to pay off bonds that would be issued by the Arizona Sports and Tourism Authority to build the Cubs complex.

The sports authority was created in 2000, when voters approved Proposition 302 to raise money for an Arizona Cardinals stadium and for Cactus League facilities, with West Valley cities getting the bulk of the funding so far. The sports authority levies a 1 percent bed tax and a 17.75 percent car-rental tax.

With the authority's initial funds now tapped, Mesa and the Cactus League say they need the legislation to keep the Cubs from bolting to Florida. The authority's $59 million would cover 70 percent of the public cost for the new facilities, which has been capped at $84 million. Mesa would contribute the remaining $25 million, Mesa Mayor Scott Smith said.

Investment by private parties, including the Cubs, would push the total cost of the baseball complex to about $119 million.

So taxpayers put up $59 million, Mesa taxpayers another $25 million and private parties put up $35 million.

Just as a point of reference, the Cubs 2009 player payroll (for active players) was $134 million. The local Arizona Diamondbacks were about half that - $73 million.

Offshoring the Stock Market

Offshoring the Stock Exchange

In today's wired world, financial markets are easy to move about. If costs are lower elsewhere, companies and consumers will leave higher priced venues for a better deal. Some agressive marketing also helps.

A small Canadian stock exchange that promises companies lower fees and fewer financial reporting requirements is courting Arizona businesses in search of capital...

The exchange charges companies less money to be listed and provides a more "streamlined" process for reporting financial results and other information to investors and brokers than large exchanges such as the New York Stock Exchange and Nasdaq, President Robert Cook said.

Will anyone lament the loss of jobs this causes on Wall Street?

Buying "Green" Jobs

As an economist, I'm always interested in the prices of various things. The latest is what it costs to buy a "green" job.

Suntech Power Holdings Co. plans to open a solar-panel manufacturing plant in Goodyear later this year and initially hire about 75 people. In order to persuade them to do that, they will receive subsidies from all level of government. The feds will put in $2.1 million, the state $1 to $1.5 million and Goodyear will add $500,000. In all $3.6 to $4.1 million.

Our government just paid between $46,667 and $54,667 for each of those jobs.

Seen Elsewhere

Mark Perry at Carpe Diem notes that restaurant owners are optimists.

Donald Marron explains where fourth quarter GDP growth came from (inventories.)

He also has an excellent post on the employment situation. Note that it is less about people getting laid off and more about the lack of job creation.

Making FDR's Mistake II

Uncertainty reduces investment which reduces job growth.

I've been wondering if we'll get a double dip recession or merely a slow recovery. My concern about a double dip is that business investment spending has tanked and it could send us back into a recession. I think that the reason investment has tanked is because of uncertainty. This time it's not uncertainty about consumer spending, but uncertainty about the structure of the economy and the rules we'll have to live under.

Writing in the Wall Street Journal, Gary Becker, Steve Davis and Kevin Murphy see the uncertainty as leading to a slow recovery.

In terms of discouraging a rapid recovery, other government proposals created greater uncertainty and risk for businesses and investors. These include plans to increase greatly marginal tax rates for higher incomes. In addition, discussions at the Copenhagen conference and by the president to impose high taxes on carbon dioxide emissions must surely discourage investments in refineries, power plants, factories and other businesses that are big emitters of greenhouse gases.

Congressional "reforms" of the American health delivery system have gone through dozens of versions. The separate bills passed by the House and Senate worry small businesses, in particular. They fear their labor costs will increase because of mandates to spend much more on health insurance for their employees. The resulting reluctance of small businesses to invest, expand and hire harms households as well, because it slows the creation of new jobs and the growth of labor incomes.

I am a bit less optimistic. I think we went through this process once before with another president and it wasn't pretty. Amity Shlaes wrote a book about it.

HT: Greg Mankiw

Local Conditions

Golf is big business in Arizona and it's been hit pretty hard by the recession.

As the commercial-real-estate crisis worsens in Arizona, many golf-course owners find themselves deep in the rough and struggling to stay in the game.

About a dozen golf courses in the state have gone through foreclosure or bankruptcy since commercial properties started facing serious financial problems in 2008, according to Mesa-based real-estate-analysis firm Ion Data, and many others have been listed for sale.

Hotels are also hurting although one area in the valley is looking up.

Hotel business in every part of the Valley plummeted with the economic downturn in 2009, except one: the West Valley.

The region was the only metro area in the Valley to have a month of positive growth in hotel occupancy compared with the previous year, Smith Travel Research reports.

Finally, a metalworking business changes its focus to survive the commercial building downturn.

When All Things Metal LLC director of operations Timothy Rock and owner Greg MacLiver opened a residential division in 2009, it was a last-ditch effort to save the 7-year-old business.

The Phoenix company had focused exclusively on commercial projects. But when the construction industry tanked, a lot of jobs got canceled as funding for projects evaporated. Rock said notices went to employees, warning that the staff of 49 would likely be reduced to four by July.

"We knew the commercial work wasn't going to carry us through," Rock said. "It was either do this or die."

Supply and Demand

Succinct

HT: CotC on Twitter

Computer Glitch Takes Down SRP Customers

I wasn't aware of it but SRP offers their electric customers the option of a prepaid plan. It is called M-Power and uses a plug in display module in the home and cards that can be reloaded with credit at card kiosks (ATM like systems) throughout the area. You will never get an electric bill again. The display unit also tells you how much credit is left on your card so that you can monitor and adjust your energy usage.

Sounds great. SRP has about 93,000 customers on the plan, about 10% of their base.

Then the software glitch showed up which apparently took down their network of card kiosks. It started on Saturday and is an ongoing problem.

SRP is encouraging people enrolled in its pre-paid M-Power program to contact its customer service number for a special code to restore their power, after a computer glitch Saturday morning caused a system wide outage for many users around the Valley.

A final note on customer service. When you screw up and hurt your customer, compensate them somehow. Don't add insult to injury by saying:

Once the number is entered power will be restored until the problem can be fixed. The electricity will not be free, however, as the normal usage rates will apply.

Also note that the SRP web site makes no mention of the problem or resolution. Bad PR, really bad PR. But somehow typical of a monopoly.

Housing Numbers a Year Later

A year ago I ran the numbers on housing with an update last June. It's time to have another look.

The basic premise is that housing only really gets consumed when someone uses it as a home. Sales to investors only shift who owns the supply. Hence, the things to look at are housing completions (additions to the supply) and the change in the number of households (additions to the demand.)

My first crack at the numbers indicated that we had an excess supply of about 1.5 million housing unit at the beginning of 2008. Last June, it looked like we still had about 1 million too many at the beginning of 2009. Housing completions have been running at an annual rate of about 800K this year which is about half the normal annual rate. If household formation continues at the normal rate, we should absorb another 800K of the excess inventory in 2009 and the rest in the spring of 2010.

Given the recession, I suspect that new household formations may be down. If that is the case, it will take a bit longer to run through the inventory overhang.

From this, I infer a number of things. Sales data, foreclosures, and re-financing activities aren't going to tell us much about the real state of the housing market until we burn through the rest of the inventory. Prices should start going up once the inventory is gone. Looks like the next 6 months is the time to buy low - depending on location of course. Financing isn't going to drive this - forming households faster than we complete new homes will.