Say No To “Nice To Have” Spending

December 10, 2012 9:00 am

by Buzz Brockway · 13 comments

Guest Editorial from Mike Dudgeon, State Representative District 25, Forsyth County/Johns Creek

As a state legislator in tough economic times, I get the difficult job of telling people no. When the Department of Natural Resources officers who have seen department cuts of 25% and are overworked and underpaid come to me on the ropes at the House, I say the budget is tight. When the GBI agents who underpaid compared to their peers look me in the eye and tell me they are spending money to train new recruits only to have them leave for higher paying jobs, I say the budget is tight. When teachers tell me that they are furloughed several days a year, have more kids in their classes, and pay much higher insurance rates, I say the budget is tight. When the Governor gets behind proven jail diversion programs that reduce re-arrest rate for non-violent drug offenders and juvenile delinquents, we cannot find the money to do it statewide. Like Godzilla in Tokyo, we have a Medicaid Monster that is eating and shredding the state budget, even without including the siren song expansion offered by Obamacare. In this environment, here now come the Falcons and World Congress Center seeking taxpayer contributions for a retractable roof stadium.

First let me confess I am a huge football fan, growing up in Tuscaloosa in the national championship heydays of the 70’s and Bear Bryant. My middle son has a Matt Ryan Fathead in his room and I have supported the Falcons from the decades of mediocrity to the current glory days of the Smith/Dimitroff/Ryan era. Personally I would love to go to football games under the open roof on a glorious crisp October day in Atlanta.

I also acknowledge some of the “pro” arguments are reasonable. We are in a historically low interest rate cycle and construction costs are still depressed, thus starting soon may save significant project dollars. Having the state of the art stadium of the Southeast certainly would not hurt for luring events to Atlanta. If tax money is to be used, a hotel motel tax is the best choice as a large share is paid by out of state visitors.

All of that being said, a $1 billion stadium with at least $300 million of taxpayer money is not a good idea anytime soon. Taxpayer investments in stadia almost never are repaid, and estimates of their impacts are overblown and ignore alternative uses of entertainment dollars that would stay in the economy. Dr. Benjamin Flowers, a Georgia Tech professor and expert on stadium financing, testified with me in a recent public forum that almost all academic studies bear this out. He also pointed out that the biggest impact of new stadium for a NFL team is to increase the franchise net worth and the revenue dollars per attending person. That is all nice and good but is not the taxpayers business.

Let us not forget also we have a great facility in the Georgia Dome that is only 20 years old. It attracts every level of sporting event, including the SEC Championship game, Chik-fil-A bowl, and Final Four basketball. The only major suitor we seem to be missing is the Super Bowl, and that is hardly a reason to spend such a huge amount of money in brutal budget times. The Georgia Dome is not even paid for yet, and had a $300 million renovation only six years ago. Here is a good analogy for throwing away the Dome and building a new stadium now. Imagine a guy who got laid off from his corporate desk job and is now working part time at Target and is struggling with basic expenses. He decides that is the time to trade in his perfectly running 2006 Acura and buy a new 2013 Mercedes.

Some of the details are important to understand where we go from here. Before I joined the House, the Legislature authorized the Atlanta City Council to use up to $300 million of hotel/motel tax for this project. The World Congress Center Authority currently has a borrowing limit of $200 million and wants to expand it, and there are important issues of whether those bonds would be backed by state taxpayers. There are also related road projects and an almost certain sales tax exemption on construction materials. Even with all of that, the only decision likely to come through the legislature next year is a borrowing limit change because the other items are already in statute. It may end up that the only option next year for those of us concerned about this project will be to insist on no further state taxpayer commitment either with bonds, credits, or budget items. We must wait and see a proposed deal and make a call on those details.

I am passionate about making the “no” argument because I think in many ways it goes to the trust problem between the citizens and all levels of government. It is very difficult to justify to our citizen who is under enormous economic pressure himself that there is no money for his kids teacher, none to widen the nightmare two lane road he commutes on, none to fund a drug court to keep his young adult son out of jail for a first offense, but we can help fund a $1 billion stadium which primarily benefits a very lucrative business. In fact we tell the voter we are so broke he should have voted for a 1% sales tax for roads and his property taxes are probably going up. This kind of contrast makes people perceive that their tax money is not being used wisely and the the system is “rigged.” I don’t need to tell you that perception is reality in politics, and as the majority party in the state we Republicans need to be sensitive to this.

Polls done by Atlanta TV stations show between 65-75% of the public opposed to this plan. We should drop the new stadium and revisit much later down the road. If this happened, the Legislature could enable Atlanta to spend the hotel motel tax on other infrastructure projects that are badly needed or to relieve other taxes. If the project does move forward, at at absolute minimum the state should not back any bonds or offer any tax money or incentives beyond the previously committed hotel tax. Georgia needs to show that we are not Washington DC, and we have the guts to make tough decisions and say no to “nice to have” spending.

atlanta_advocate December 10, 2012 at 9:43 am

“We should drop the new stadium and revisit much later down the road. If this happened, the Legislature could enable Atlanta to spend the hotel motel tax on other infrastructure projects that are badly needed”

Will the legislature dictate which infrastructure projects are badly needed? That is a real issue. Will the city be able to spend this money on what its elected leaders think is best, or what the legislature – which is quite different from whom the city elected – thinks is best? If the answer is the latter, then what makes the Georgia legislature any different – or any better – than the folks in Washington D.C.?

Harry December 10, 2012 at 11:22 am

You’re correct that Atlanta should be able to tax and spend as it pleases, but keep in mind a couple of things:
1) Georgia shouldn’t be required to guarantee payment of obligations undertaken by Atlanta. The Falcons are not guaranteed to fill it.
2) For many reasons, the hotel motel tax will not continue to be a gold mine. The hotels are getting older and less competitive, and will not be replaced. Other cities have presented themselves as alternatives.
3) Some of the decisions that have previously been made by Atlanta are not good precedents for going forward. The new airport international terminal is one example. Talk to anyone who has to arrive or transfer through it. Delta has already shifted quite a bit of international traffic out of Atlanta – ask yourself why.
4) From my perspective as a visitor from the suburbs, there seem far more pressing issues such as street repairs and education.

atlanta_advocate December 10, 2012 at 11:36 am

“4) From my perspective as a visitor from the suburbs, there seem far more pressing issues such as street repairs and education.”

That is exactly what I am talking about. First off, let’s quit pretending as if $15 million a year for 20 years will do squat for education. That is the budget for a single high school. You stated street repairs. Others have stated sewers. Sorry, but street repairs and sewers don’t attract urbanites. They don’t get urbanites to choose one city over another. Public schools don’t either. Things like transportation, nightlife, arts/culture do. Those are the things that causes a person who wants to live in downtown because he likes living in downtown to choose one downtown over another. The educated, high income types that currently live in places like Los Angeles and New York and are increasingly going to Charlotte and Dallas are the ones that Atlanta is after.

And that is why I said “Atlanta’s elected leaders.” Urban types, people who choose to live in cities, have a different mindset from suburbanites. Atlanta can have the best roads and sewers in the country, have the garbage picked on time, and do all the other nuts and bolts of governance on a 5 star level and it won’t cause a single software company to move here. (And it also won’t cause more suburbanites like you to be more likely to move here either, because no matter how well run Atlanta is, the cultural/demographic divide that keeps the suburbs suburban and the urban areas urban will still be in place.) Meanwhile, average roads, sewers, services etc. combined with great public transportation, parks, cultural events, nightlife etc. will attract tons of software companies (and lots of other companies, entrepreneurs and movers and shakers) because that’s what people who like and want to live in cities are into. Not lower taxes. Not government agencies run on corporate type efficiency standards.

And as far as “2) For many reasons, the hotel motel tax will not continue to be a gold mine. The hotels are getting older and less competitive, and will not be replaced. Other cities have presented themselves as alternatives” … why does this apply to the hotels but not the Georgia Dome? See, that is precisely my point. Whether it is this stadium or MARTA or the Beltline, Atlanta has to be able to do things to make it competitive with other cities. Not things designed to make the conservative Republican suburbs say nice things about its Democratic leadership. Having the folks in Cobb and Gwinnett talk about what a great job Atlanta city government is doing – according to standards set by Cobb and Gwinnett – isn’t going to do a thing for the city.

As far as “1) Georgia shouldn’t be required to guarantee payment of obligations undertaken by Atlanta” how’s about making that mutual?

Harry December 10, 2012 at 11:42 am

Show me the money.

atlanta_advocate December 10, 2012 at 11:56 am

Huh? This will be paid by Atlanta tax revenue. The suburbanites won’t have to contribute a single rusty nickel. The T-SPLOST stuff doesn’t apply here. (By the way … how’s Plan B coming along? Just like I thought …)

Bob Loblaw December 10, 2012 at 2:55 pm

But Harry is for local control, too, bear in mind.

This is much ado about $300M that couldn’t even barely plug half the hole in just the Medicaid budget.

This is politics. Right playing to its anti-tax base and making suggestions how another locality should use it’s tax revenue simultaneously.

Local control, peeps. Local control.

PS. If you think the state is genuinely at risk by upping the bonding limit at GWCCA to partially finance this project then you’re either bad at math or willing to spin to the extend that you are borderline misleading.

Harry December 10, 2012 at 3:06 pm

If Atlanta is 4% of the population of Georgia and gets $300 million of guarantees on top of everything else it’s received from the state, then you’re shortchanging the remainder of the state. Otherwise, to be fair to the rest of the state you have to give away $7.5 billion of guarantees to the remainder. That would be like entering into a guarantee of the debts of your family members involving 45% of your annual income. You don’t do that unless they’ve proven worthy.

David Staples December 10, 2012 at 11:57 am

“Not lower taxes.”

So you’re saying Twitter didn’t stay in San Francisco because of certain tax breaks? And that companies don’t take taxation into account when locating? BS. Companies locate where the cost of doing business is cheaper and provides incentive for them. For instance, I took taxes into account when deciding where to locate our horse farm. Property and sales taxes were cheaper in Cobb than Milton, so we bought in Cobb. Why else do you think companies locating here are asking for tax breaks as part of the incentive packages? Want to see more companies move here? Lower / eliminate the corporate income tax in the state for everyone – not just on a company by company basis. That would be a start.

The Last Democrat in Georgia December 10, 2012 at 12:30 pm

“Want to see more companies move here? Lower / eliminate the corporate income tax in the state for everyone – not just on a company by company basis. That would be a start.”

Why not just completely eliminate both the income and sales tax and replace it with one flat corporate tax with no exemptions? Seems that would be better at reducing the government/ bureaucratic paperwork burden on businesses and simplifying the tax code for everyone.

Three Jack December 10, 2012 at 11:27 am

Instead of saying no to a revenue generating venture with many ancillary benefits, how about we start saying no to able-bodied freeloaders mooching off the compassionate goodwill of so many government bureaucrats.

If lawmakers would spend more time looking through current expenditures instead of writing op-eds, maybe you guys would regain credibility as fiscal conservatives. It’s easy to go after the Falcons over a stadium deal, much more difficult to admit we have too many redistribution programs that are in serious need of tough love.

Chris Huttman December 10, 2012 at 4:20 pm

If the GBI thing is true and you’re not doing anything about our state paying to train people who leave to go get a higher salary in other states (that don’t have to pay for training) than maybe you should quit your job and give it to someone who knows more than one word “NO”.

Harry December 10, 2012 at 4:46 pm

How about the teachers Georgia gains from other states because we pay more? Maybe we need to pay teachers less and GBI more? Would you rather have a bunch of free spending liberals holding the power to spend, as in Illinois and California? Get real.

Mike Dudgeon December 12, 2012 at 5:02 pm

I want to correct a factual error in my column. The renovation mentioned was only $57M, not $300M. My bad number came from an old AJC article and Wikipedia . I should have actually realized that as $300M is an enormous number for a renovation.

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