Council today formally rejected the latest framework for doing business with LAZ Parking, with no discussion except for one speech by Councilman Ricky Burgess. Selections...
Today, right here, right now, in Pittsburgh, we have Democrats who refuse to fix the City's pension problems because they can't be Mayor and because they envy the man who is Mayor. Democrats who refuse to fix the City pensions problems even though they ALL know that their actions will inflict needless pain and suffering on the City's residents... (ibid)
And...
But today the majority of Pittsburgh’s Democratic City Council will vote for the interest of wealthy business owners and suburban commuters in rejecting the revenue sharing plan rather than supporting the interests of our City’s workforce and our City’s homeowners. What kind of Democrats are we? (ibid)
I agree it's hard to argue that releasing and partially opening to the market our government-run and government-subsidized car parking system -- the brunt of which lies Downtown, in Oakland, and in Shadyside, Squirrel Hill and Eastside -- does not relatively advantage suburban commuters and our more affluent business owners and customers, while relatively disadvantaging less-than-affluent city residents upon whom a larger funding burden and / or austerity measures would more likely fall. Not without making reference to a trickle-down theory of economics.
It wasn't framed in the most constructive or collegial manner, but I guess oh well. Maybe "long-term" constructive was the idea.
Nothing constructive about his remarks at all. Councilmayor Ravenburgess and is unable to even conceive of the idea that the members of council are voting in the interests of the City and of their constituents. Really? The faux-compromise bill got a no-vote because everyone is just jealous? The paranoia on the other side of the 5th floor is so out-of-hand that there's no ability to craft any kind of solid policy that's good for the City and doesn't just try to set council up to look bad.
ReplyDeleteThose lots run at a big profit even now. I wouldn't call "not extracting every dime possible" the same thing as subsidized. And, you don’t need to lease to raise parking rates.
ReplyDeleteEnvy Flukie Lukie????????????
ReplyDeleteThat's really laughable. It's so childish and 5th grade. I fear a temper tantrum will be coming on next for the Jackasses mouthpiece.
I'm going to stand by 'amounts to a subsidy'. It's a legitimately fungible abstract noun, especially since as you state the assets are presently being utilized as a for-profit business (but not for-as much-profit as can be had).
ReplyDeleteIt'll be interesting to see if the Authority raises garage rates and/or if Council raises meter rates Just Because, and by how much. And I'm interested in Dowd's whole "make it more entrepreneurial" thing ... mabye Dowd and Rudiak should petition to switch Authority seats, it's likely they've exhausted their tolerance for each respectively.
MH:
ReplyDeleteAs a matter of sound public policy, whether we are discussing mass transit (which is on the cliff) of the new urban paradigm (walkable communities), government-subsidized parking is counterintuitive and counterproductive to both.
But that's okay, because instead of extracting "every dime possible" out of the parking assets to deal with the pension, we will instead extract "every dime possible" out of the real estate taxbase to deal with the pension at a 2:1 premium?
It defies logic, but then so has most of this issue.
government-subsidized parking is counterintuitive and counterproductive to both.
ReplyDeleteI'm not disputing that, but the parking "subsidy" is a relatively small piece of the subsidy puzzle compared to something like the Parkway North or mandated free parking or whatever they do with 95% of the cement in the world.
If you carry the argument far enough, mass transit is a parking subsidy in that it keep down prices for people who don't use it.
Of course setting parking rates below market rates is a parking subsidy. There is no rule that subsidies have to take the form of an operating loss.
ReplyDeleteAnyway, as someone who would have preferred both the lease AND the Council-Comptroller plan, or pretty much anything blending both, to doing nothing, it is unfortunate that it appears all sides are in full-on fingerpointing mode. Inevitable, perhaps, but unfortunate nonetheless.
Of course anyone who has used the phrase "good guys" to describe themselves has waived the right to make any such objections on their own behalf.
Of course setting parking rates below market rates is a parking subsidy.
ReplyDeleteIt could be a loss-leader, depending on the externalities. I don't think that is true for downtown or Oakland (not that the authority controls most of the garages in Oakland), but it may be so for the shopping areas. There are some big vacant spots in Squirrel Hill and the Waterfront seems to do fine.
I wouldn't use the phrase "loss-leader" outside the context of a single entity selling multiple products.
ReplyDeleteIn any event, of course the general argument for subsidies is that there are net positive externalities, such that total social welfare would be increased if you stimulated additional production and/or consumption of the relevant good or service with your subsidy.
But that wouldn't make it any less of a subsidy--that is just the nature of the argument for subsidies. And in this case, it is very likely that the externalities are net negative, not net positive, and thus that it is a big mistake to offer a subsidy.
In short, "subsidy" is a technical, descriptive term, and it clearly fits this situation. Understanding that should allow us to move on to discussing whether this particular subsidy is a good idea or not (I say not).
No wonkabe discussion under this post please. This thread is for stating who we like more and who we like least in the clearest possible terms. Anons 1:16 and 1:45 have the right idea; BrianTH, you had it around 2:07.
ReplyDeleteStarting in the new year I hope to spend a month at least on hairstyles.
Yeah, I was curious about the framing of loss leader. Personally, its the environmental impacts of below-market priced parking, (the fact that is leads to people "cruising" to find a parking space, thus increasing traffic congestion and Co2 emissions) that are most troubling. See link, UCLA Prof. Donald Shoup's perspective on parking subsidies (not explicitly an argument for privatization, just for increased rates): http://www.emagazine.com/view/?2418.
ReplyDeleteBut today the majority of Pittsburgh’s Democratic City Council will vote for the interest of wealthy business owners and suburban commuters in rejecting the revenue sharing plan rather than supporting the interests of our City’s workforce and our City’s homeowners.
ReplyDeleteUuuh, I think the City's workforce and homeowners *should* bear the brunt of any Pension shortfall or any ramifications thereof. The workers and residents have voted in mass numbers for the architects and perpetuators of the Pension issue since when? The beginning of time?
Too bad the City hasn't had someone step up to the Unions and say "enough is enough". You *will* take a haircut on your Pensions, just like those of us in the private sector have.
Never will happen, though. I'll stop here in the sake of maintaining civility because my blood boils when I see what is happening and what will happen due to inflated and egregious Pension liabilities.
my blood boils when I see what is happening
ReplyDeleteYou'll get an embolism. If it hits your frontal lobe, you won't be able to work (unless you've got a cousin on the Turnpike or Public Works) and Obamacare will have to hire an illegal immigrant to take care of you.
But, there is a reason I worry enough about assumed rate of return on the pension fund. These things tend to be ratchets, so when returns go up, pensions do. And, just like a ratchet, nothing catches when you go the other way. You have to keep the pessimism in the models to avoid insolvency.
Burgess is an asshat
ReplyDeleteHey Conservative Mountaineer - it is AGAINST STATE LAW for the City to do those things you suggest.
ReplyDeleteIt is state law that Police officers and Firefighters retire at age 50. Not Council. Not Ravenstahl. Not Murphy. Not Verbanic.
State law
Conservative Mountaineer is impervious to nagging little details like laws and facts (I'm guessing prolonged talk radio is responsible for this interesting immunity).
ReplyDeleteThere is also the issue of time and migration. Say a bunch of service-recipients agree to pay a bunch of service-providers in the form of delayed compensation. But by the time the bill comes due, most of those service-recipients and service-providers have moved to another jurisdiction (the suburbs, Florida, the great beyond, or whatever). Is it really fair that people who were neither service-recipients not service-providers will have to pay these bills?
I'm not saying there is an easy solution to this issue. But the talk radio types have an odd way of thinking of fairness in terms of pieces of land, as opposed to in terms of actual people.
It is pretty exasperating to hear Burgess talk about the need for the Democrats to embrace their poor and working-class base, when his entire aim is to turn over a public asset to private profit interests.
ReplyDeleteI certainly hope that everyone opposing parking lot privatization will also oppose Corbett's plan to privatize the liquor stores. The liquor stores actually make money for the state, in addition to the fact that the workers at the stores have decent benefits. But rather than prevailing on the state to improve service at the stores (if we want more Sunday sales, why not offer the workers a weekend premium, for instance?), they are going to turn the whole thing over to Wal-Mart or some other series of buyers. The result will be stores with crappy minimum-wage jobs, more liquor stores peddling booze in poor communities, and a one-time injection of revenue for the state that will be more than offset by the long-term loss of state store revenue.
Felix:
ReplyDeleteWhether we want this or not, the State is going to turn over the liquor stores to the retail industry.
No one has proposed selling the parking assets to anyone, only leasing the management and operations of the assets, while the City still maintains ownership.
How foolish to claim that Burgess's "entire aim is to turn over a public asset to private profit interests".
ReplyDeleteOnce you spew that sort of baldfaced lie, it's difficult to read the rest of your post, that's for sure.
The liquor regulation in PA is beyond absurd. Three separate monopolies sell alcohol for carry out (wine/liquor, beer that is a little bit too expensive, beer that is way too expensive). It is a nonsensical combination of Protestants, unions, and political corruption that serves no decent person.
ReplyDeleteAnybody of age should be able to carry home a reasonably priced twelve pack or bottle of wine from the same store where they get the groceries for that night's meal. If you have to pay two mark-ups on the beer or blow a robot to get the wine, it doesn't count.
The thoroughly anonymous commenter at 12:11 says that it is "foolish" to claim that Burgess and the mayor are trying to turn over a public asset to private profit interests. But the private interests are willing to pay for their lease, and they wouldn't be willing to pay if they didn't think they could make a nice profit from it. Make no mistake, the mayor's proposal gives up at least a portion of a steady long-term revenue stream to private interests in exchange for up-front money.
ReplyDeleteThe difficulty here is the city's need to come up with a large pile of up-front money to cover a pension gap. I get that that's a problem, and that local elected politicians have limited options. But it is galling that we are going to have a nationwide war on public sector pensions over the course of the next couple of years, initiated in the interest of wealthy muni bond holders, even as US corporations are hoarding $2 trillion in cash and the rich just got a mammoth tax break. 60 Minutes let Chris Christie blather on at length the other night, saying that public sector workers don't deserve a pension when everyone else is losing theirs; this is not even a half-truth. Everyone deserves a pension; the Republicans believe that no one apart from a few super-rich deserve it.
To those supporting the mayor's/Burgess's position: Isn't it a little telling that the "compromise" deal just rejected by Council was at least a little better for the city than the mayor's original, precisely because the mayor's opponents took the position they did?
Felix, a few things. You said it was the "sole aim" to hand the assets over to privateers. If there is a "sole aim", it is to SOLVE the pension fund crisis. It is not priority 1 for Ravenstahl and Burgess to make money for JP Morgan. Priority 1 is to fix the pension fund.
ReplyDeleteAs for making money - the LAZ deal gives up future revenue in exchange for up-front capital that is badly needed right now. In order to make more money (which the City will share in), LAZ offers money for infrastructure improvements - those aren't coming ever directly from city coffers...the Good Guys would be talking about more bond-floating if they addressed that need at all.
Yes, LAZ is looking to make money - so they want to fix garages, help with the Residential Parking Program (again - badly needed), improve management (DESPERATELY needed), summon new advertising revenue streams via modern branding agreements (I don't need to see contruction pics blown up to huge size at the Grant St. Transportation Center, if an ad will help fix the pension fund, so be it) - yes, they need to invest in the PPA in order to make money via a lease. No matter how you slice it, those improvements are needed, and the current management situation at PPA is NOT maximizing revenue or operating efficiently.
As for LAZ sweetening the deal after coming to council...fabulous! As a matter of fact, the first version of Ravenstahl's plan has been improved upon at least three times, based first on community meetings, second on Council's objections, and now by LAZ to try and beat the ticker. Since I'm not in kindergarten, I will applaud these compromise steps, no matter who has prompted them.
Speaking of compromise steps - I'm still waiting to see ANY of those from the Good Guys. From what I am seeing, they are still in neener-neener mode and sneering at folks who are offering principled and well-founded objections, with Peduto claiming those folks are too dumb to understand.
@Anon 10:19..
ReplyDeleteShow me the State law that requires Police and Fire to retire at age 50.
I'll wait.
CM:
ReplyDeleteNot requires -- permits.
And it must be in state law since the legislature just had to amend it to require that State Police can't retire until 55.
That took about two seconds. You can find statute from this.
ReplyDeletehttp://caselaw.findlaw.com/pa-commonwealth-court/1464255.html
Or, See here.
ReplyDelete"Hey guys - thanks for taking your life in your hands every day and all, but some knee-jerk jackass in the suburbs who fashions himself as a 'mountainman' wants you to take a pension haircut so that his parking rates can stay at Ronnie Raygun-era levels."
ReplyDeleteYep. Right on that.
§ 23564. Amount of pension; leaving service before retirement age; dismissal or termination of employment after 25 years service; total disability; medical examination; payments to beneficiary or estate; additional annuity
ReplyDelete(a) During the lifetime of the person, he or she shall be entitled to receive a pension from the fund set aside for the purpose, in the amount hereinafter provided. The pension shall be paid in monthly payments. If any pension be granted to a person who has not been a contributor to the pension fund as herein provided, during a period of twenty years, such person shall be required to pay unto the board of pensions monthly an amount equal to such amount as he or she would have been required to contribute had he or she contributed during such period as required by this act, until such time as his or her contribution shall have extended during a period of twenty years. Should any person be dismissed, for reasons other than misconduct, after having served as an employe for fifteen years or more but less than twenty years, or should any person leave his position in order to accept appointment to a board of viewers or election or appointment to any elective office in or for the Commonwealth of Pennsylvania, after having served as an employe for a period of at least two-thirds of twenty years, but less than twenty years. Such employe shall have the right to elect to keep in the fund all contributions heretofore made to the fund, or if same has been withdrawn to repay the same back into the fund, and to continue making monthly payments to such fund in an amount equal to the amount last due and paid monthly while an employe. When such payments continue until the former employe has contributed to the fund for a total of at least twenty years, or until reaching the age of retirement, whichever is the longer, such person shall be entitled to receive a pension proportional to the pension which would have been received had the employe completed twenty years of service prior to dismissal, such proportion to be computed on the ratio which the employes' actual time of service in months bears to twenty years. Should any person so employed, after twenty years of service, be dismissed, voluntarily retire, or be in any manner deprived of his or her position or employment before attaining the age fixed for retirement by this act, upon continuing a monthly payment to the fund equal to the last amount due and paid monthly while in active service, the person shall be entitled to the pension above mentioned, notwithstanding he or she has not attained the age for retirement at the time of his or her separation from the service of such city; but the pension shall not commence until he or she has attained such age. Any employe, who has heretofore or shall hereafter be dismissed, voluntarily retire or be in any manner deprived of his or her position or employment, and who has been in the service of the city for a period of twenty-five (25) years or more, and who has made payments into the pension fund for a period of twenty (20) years or more, and who has reached the age of fifty (50) years shall, upon application to the board of pensions, receive the pension or compensation fixed by this act, during the remainder of his or her life. Any former employe of the department of health of such a city, who has been deprived of his or her position or employment as a result of the consolidation of the department of health of the city with the department of health of a county of the second class, and who had been in the service of the city for a period of twenty (20) years or more prior to January 1, 1957, and who has continued to make payments in a pension fund established by a city of the second class for twenty-five (25) years or more, and who has reached the age of fifty (50) years, shall, upon application to the board of pensions, receive the pension or compensation fixed by this act during the remainder of his or her life.
It seems to me that before we can address whether the City or state selling or leasing some particular asset is a good or bad thing, we need to assess whether or not the City or state SHOULD own and operate the asset in question in the first place.
ReplyDeletePersonally, I don't think the City should own or operate any public parking garages or lots. I do think the City should own and operate its streets, but I don't think the City needs to own and operate the parking meters. And I don't think the state should own and operate liquor stores.
If you want to disagree, fine, but you need good reasons to think otherwise. Good reasons could include that government ownership and operation would be necessary, or at least notably more efficient, when it comes to providing the relevant good or service. Or you might want to subsidy the relevant activity, and government ownership might be the most efficient way to do this (note that usually isn't true unless it is a natural-monopoly situation--otherwise it usually makes more sense to subsidize the consumers and let producers compete for the subsidy).
In contrast, it isn't a good reason that the assets generate revenue. If a government just wants revenue, it should place the relevant investment into some sort of sovereign wealth fund, which in turn should invest in a diverse portfolio of assets, preferably assets located outside the jurisdiction of the government in question. Alternatively, it might cancel some pre-existing liabilities. But a concentrated investment in local businesses is generally not a good idea from a purely financial perspective, meaning assuming you don't have some other good reason for wanting to make that investment.
Yeah but government DOES own them Brian -- and I think that's part of the underlying psychology of "keep public assets public". WE run them. WE staff them. That's OUR friends in there. Why should WE have to give that up?
ReplyDeleteTalking about "public" assets, I think of public libraries, public parks, public benches -- places where Joe Q. Public actually can go, for free, and use pretty much however they want, whenever they want within reason. THAT'S a public asset worthy of defending. Try wandering into a government-run parking garage and playing Frisbee, or have a picnic and make-out at a parking meter. These are government-owned assets but let's not go nuts and equate them with other "public assets".
And who the hell let the opposition hammer so definitively home that lease rates were more expensive that Council-Controller "Public Plan" rates? It's the government that now is fixing to raise rates higher than the lease permitted, if/when they have to. Gah! P3 hired a spokesperson, right? Are all the good ones taken up by Marcellus Shale?
WE run them. WE staff them. That's OUR friends in there. Why should WE have to give that up?
ReplyDeleteBecause our friends can't maintain a parking garage. I'd agree with a sale of the garages, if they went on the property tax rolls.
And the pension fund was moved to state control.
ReplyDeleteOh sure, I recognize that some people have a vested interest in the status quo, and status quo bias in general is a powerful force. But if you are going to come here and argue about it, you should at least try to have something non-tautological to say.
ReplyDeleteIncidentally, sometimes putting a price on scarce public assets to help allocate their use efficiently can make some sense, at least in theory. But increasingly I am starting to think the confusion caused by doing is a very significant cost worthy of consideration.
@MinuteMan.. I don't want, as a State taxpayer, to have to pay ANY portion of a Pension plan that has been delierately underfunded and (most likely) mismanaged just to ensure Pension plan participants continue to feed at the public trough because they're too damn selfish to realize the 'gravy train' is stuck at the station. No one put a gun to their head and said "You MUST take this stressful and dangerous job."
ReplyDeleteBy the way, I fee the same about ANY public-sector employee Pension arrangement.
NONE of these Pension plans can be justified in a business sense nor can they be supported long-term by taxpayers.. unless you want to try and confiscate everyone's earnings.
You cannot, in any way, shape or form tell me that the Pension obligations can be met without serious concessions. There is simply not enough tax base to pay.
Funny thing is.. everyone is all happy that this 'deal' will get the Pension fund to 50%. Whoopie-doo. What about the other 50%? What happens if some of the 'investments' now being valued are, in fact, be found to be real dogs and illiquid once the State takes over and that the 50% level still is not reached? (I'll bet a few $$ on that.)
Oh, nice personal attack, btw. When you can't argue your case go ahead and launch a personal attack. Typical Liberal approach.
You're kind of a whiny little bitch.
ReplyDeleteUnnecessary roughness. MH. Five yards. Still 4th down.
ReplyDeleteSorry. How about:
ReplyDeleteCM's insistence that everybody else needs to wise-up to meet his high standards of brilliance and his inability to utter something non-absolute are deeply annoying. The capper is complaining about "liberals" and "public trough" just two years after Paulson took my tax money and shuffled it off to people who got more in bonuses for losing $700 billion than I have for working my whole life.
BrianTH writes:
ReplyDelete"But if you are going to come here and argue about it, you should at least try to have something non-tautological to say."
Fair enough, but I don't think I'm the one with the unexamined assumptions here. Why is it that the default status of any enterprise should be private, unless certain circumstances prove the worth of making it or keeping it public? I could just as easily approach it with the reverse assumption, and in fact I will: Why should we all have to pay a premium in the form of increased profits for private interests, when we can instead choose to operate a service -- any service -- for public benefit?
Alcohol is a damaging drug, far more so than some substances that are currently illegal. Why shouldn't the state reap some benefit from its sale, if only to help the state mitigate the social costs of alcohol consumption? Frankly, I would rather have the state reap that benefit than private interests, and I would rather that alcohol purchases subsidize decent jobs with pensions, rather than Wal-Mart style retail jobs at poverty wages.
I find it illuminating that those supportive of the parking lease are taking it as a given that private interests are going to charge more for parking. So much for private-sector efficiency and superior service. And far be it from me to cry for the suburbanites who end up with higher parking costs, but if they're going to get gouged, the money might as well go to help the city and not to augment the coffers of JP Morgan Chase and its business partners.
if only to help the state mitigate the social costs of alcohol consumption?
ReplyDeleteEverybody ignores the social costs of not consuming alcohol. Anyway, the excess profits of the beer distributors are straight-forward monopoly rents to private interests. It isn't defensible on any social or economy ground unless you think keeping beer expensive is a good thing regardless of who gets the money. The beer distributors aren't the state stores, but it does show that the point of the system isn't to work on the social costs of drinking.
I find it illuminating that those supportive of the parking lease are taking it as a given that private interests are going to charge more for parking.
That's not really taken as a given so much as really obvious. Parking garages downtown operate at packed full. Private garages charge quite a bit more. And efficiency, for firms, means extracting the most revenue from the lease investment. As for superior service, that isn't exactly a high bar if you could maintaining the garages as part of the service.
Why is it that the default status of any enterprise should be private, unless certain circumstances prove the worth of making it or keeping it public?
ReplyDeleteI don't know if I would call it a default status so much as just having a basic idea of what it generally makes sense for private entities to do and what it generally makes sense for governments to do.
If it is possible to have a competitive marketplace for a good or service and you don't mind consumers paying market prices, generally it is going to be more efficient to let that competition happen through private companies. That doesn't necessarily rule out government-owned firms competing, but they tend to crowd out private companies, and if they don't, they may be exposing public funds to a lot of unnecessary risk.
On the other hand, there are many goods and services that simply can't be provided in that way, or it is inefficient to try, and others where you wouldn't want consumers paying market prices anyway (maybe for issues of fairness and justice, or because of externalities, or so on).
Again, in my view this is more of a neutral sorting of tasks than a default rule. In other words, both sides are subject to conditions and neither is really an automatic default.
Why should we all have to pay a premium in the form of increased profits for private interests, when we can instead choose to operate a service -- any service -- for public benefit?
So I think we need to take a step back and think a bit about what profits are. In a competitive industry, at least, profits are just the risk-adjusted cost of capital. In that sense, you really shouldn't be more upset about paying for a firm's profits than you are upset about paying for their labor, raw materials, or so on--it is all just a necessary cost of providing you with the relevant good or service.
And public entities have a cost of capital too. Sometimes it can be a bit lower than the private cost of capital, but that is in part because public entities typically aren't putting their capital at risk in the same way as private firms. If they did, there is no real reason to expect their cost of capital to be different.
And in any event, if you do want your public authority investing some capital at risk, as I noted above, a concentrated investment in local small businesses is the wrong way to go about that.
Why shouldn't the state reap some benefit from its sale, if only to help the state mitigate the social costs of alcohol consumption?
ReplyDeleteThat is what taxes are for. And in fact just taxing liquor sales, as opposed to putting the state in the business of making liquor sales, much more directly and clearly achieves your desired ends (it decreases liquor sales and helps pay for the social costs). For example . . .
and I would rather that alcohol purchases subsidize decent jobs with pensions
Note here the implicit contradiction. You view liquor sales as an evil for society. But you also view liquor sales as an exploitable source of public employment opportunities. This is inevitably going to lead to confused and inefficient public policies.
I find it illuminating that those supportive of the parking lease are taking it as a given that private interests are going to charge more for parking. So much for private-sector efficiency and superior service.
There is no contradiction because the most efficient result for both parkers and society at large is not necessarily achieved by lower fees. To summarize some of the major points, artificially low prices for parking encourage inefficient allocation of scarce parking, promote congestion on local streets, undermine alternative modes of transportation, and lead to underinvestment in maintaining and upgrading parking assets.
[i]And far be it from me to cry for the suburbanites who end up with higher parking costs, but if they're going to get gouged, the money might as well go to help the city and not to augment the coffers of JP Morgan Chase and its business partners.[/i]
But of course those entities would be paying the City. The question then becomes whether the City is getting a fair price, and not only did the City construct a process designed to achieve that end, but it also got an independent valuation which confirmed they were getting a good deal.
Stripped of the anti-investment-bank rhetoric (which, strangely, seems to disappear when the alternative involves a bond issue, which would also go through investment banks), as well as the rhetoric of describing market prices for parking as "gouging" (which, again, seems to disappear when it is someone else charging a higher price), this is basically a claim to the effect that sellers of assets are always making a mistake because the buyer expects to benefit from the purchase.
That kind of zero-sum logic about financial transactions makes no sense, and in truth it is perfectly possible for both buyers and sellers to come out ahead in such transactions. And there is every reason to believe this is such a case.
Finally, as I have pointed out before, this is pretty obviously a case of pure status quo bias.
ReplyDeleteSuppose I proposed the following plan to address the City's financial issues:
(1) Issue a bunch of new bonds;
(2) Use the proceeds to buy a bunch of used car dealerships in the area;
(3) Have political appointees run the car dealerships and sell the cars at below-market prices;
(4) Use the proceeds to pay off the bonds, and use whatever is left to address other needs in the City.
I don't think it would be too hard for people to figure out why this plan was a terrible, terrible idea. And yet this presents essentially the same question, except we already own the assets in question and the issue is whether we should sell them for a fair price and use the proceeds to cancel debt and other liabilities.
In other words, the only meaningful difference is which side of the proposition is the status quo. And yet for some people, that seems to make all the difference.
(1) Issue a bunch of new bonds
ReplyDelete(2) Use the proceeds to fix houses the City already owns and then sell them
(3) Hire someone to run this new program
(4) Use the proceeds to payoff the bonds, and use whatever is left to address the other needs in the City
Sounds like a fantastic idea!
Because investing in beat-up houses has made so many people so much money.
ReplyDeleteIf I understand the analogy, the City would be trying to rent the houses, not sell them.
ReplyDeleteAnyway, that sounds like a horrible, horrible idea (that the City should take on a bunch of new debt in order to try to make money investing in local real estate). Of course you can make a case for the City acquiring certain properties on various other policy grounds, but as a money-making venture? Yikes.