Winners and Losers

Every now and again I think about odd issues that develop unexpected results. For example, why do professional football organizations seek public funding for a stadium suited to their needs? Football is big business and money floods their coffers. A stadium these days costs upwards of $1 billion. Why should the public foot this bill for an organization that makes a lot of money?  Their paid personnel each make millions each year. Not everyone, but certainly a large portion of the payroll. If that much compensation is affordable, why not space costs in which they play?

The argument usually goes like this: a municipality invests in its image to gain the amenities that attract other industries willing to invest in their local economy. A stadium is a draw to a ‘winning’ sports franchise. The stadium can be used for many other purposes, especially as venue for other high price events. The cost of the stadium is thus spread over the earning power of many events in a year. Besides, stadiums are financed by a municipality using municipal revenue bonds. Big money investors seek such bonds for tax free income on their investment portfolio.

On the way up the economic development ladder, urban areas can easily pay for their stadium. However, the downward spiral is a quick death path. Facilities can be left high and dry with few users at falling rental rates. The bonds can become worthless paper. After all, who wants an empty stadium with a sports franchise moving to another, brighter region?

The winner in this scenario are sport franchises. The losers are municipal taxpayers.

Another example: big money energy corporations. These people control the supply of their type of energy – electricity, natural gas, oil and its byproducts including gasoline – by exploration and drilling for future energy supplies. Proven reserves can be held in reserve and prop up prices for their product. It is done all the time. Energy producers have played this game for over one hundred years. At first favorable tax treatment was embedded in the notion of depletion allowances on the product extracted from the earth. In early days congress allowed a 20% depletion allowance for tax deductions. The theory was that an energy reserve would dry up in 5 or so years, thus the 20% allowance. Yet actual depletion rates were far less, say 8 to 20 years. The oil industry hid many billions of profit dollars from the rest of us. In short they were subsidized by the very people paying the bill in the first place!

That extortion was eliminated many years ago, but the stink remains. Other tax breaks replaced the depletion allowance and energy giants have reaped untold riches from special treatment by congress, the same people charged with protecting us from such shenanigans. The winners and losers in this game are obvious.

But there is another chapter to the energy industry. As electric vehicles and decentralized power grids develop, the oil industry continues to seek protection for its high pricing designs, and the eventual worthless assets in proven oil reserves. Alternative energy sources become hampered, not protected. A burgeoning electric vehicle market proves a point – access and cost for plug-in recharging stations are very high, thus discouraging their development. The winner here is the oil industry once again. The loser is not just the alternative energy industry, but we the taxpayer and users of new product development.

Another example? Climate change and the enormous cost to live with the catastrophic results. Properties in harm’s way (coastal regions) continue to sell at high prices while the public deals with the cost of disaster recovery and insurance rates. All the while this nonsense continues, doing little to nothing about climate change means all of us are losers when our planet becomes unable to support human life.

The stakes are incalculable. Why don’t we tackle this problem? Because individuals and their special interests are still working out how they can take advantage of it for the short term.

Sad. Very sad. All the while congress does little to address the situation because they are owned by very corporations who benefit from this travesty.

Always ask who wins or who lose in a public issue!

October 29, 2021