Tuesday, October 31, 2006

Defining A 'Tourist'

The Gazette is pleased with the contribution of the tourism industry to Iowa's economy. In fact, it's handed it one of its coveted "Homer" awards. Editorial, "Homers: Come See Us," The Gazette, October 30, 2006. The award reads, in its entirety:

"COME SEE US: Tourism in Iowa continues to grow steadily, with almost 30 million people visiting state tourism destinations last year. The $258 million the industry generated for state and local governments in 2005 was up 3.2 percent from the year before, and overall Iowa tourism revenues were up 7 percent. Travel and tourism combined generated $5.4 billion in Iowa in 2005, according to the Iowa Tourism Office."

Here are the questions those numbers raise in my mind:

1. Was that really "30 million people" or an unknown number of people who made 30 million visits? There's a big difference.

How does the Iowa Tourism Office define "tourism" and "tourists"? How many of those people (or those visits) were from out-of-state and how many from Iowa? I have nothing against Iowans getting to know their state's attractions. But it's not what I think of as "tourism" -- in the economic sense that states with beaches or mountains bring tourist dollars into the state that, but for those attractions would not be there. When Iowans spend their discretionary vacation dollars in Iowa it avoids the dollar drain of their spending them out-of-state. But it's not bringing anything into the state that wasn't here already (and wouldn't have been spent here on something else anyway).

3. How does it define "travel" (as in "travel and tourism combined generated $5.4 billion")? Does that include every city bus fare we pay, and every gallon of gas we buy?

I have nothing against the "tourism industry." And when it comes to Iowa's economic development every little bit helps. But, as I've written elsewhere, I think it's a mistake to think that tourism will ever bring to Iowa the dollars that we can better generate by playing to our strengths. See Nicholas Johnson, "Iowa: A Great Place to Live But I Wouldn't Want to Visit There," October 15, 2006.
Technorati tags: , , , , .

Riverside's Tax to Nowhere

The last time the residents of Riverside went into the voting booth a gambling casino started taking over the town.

This time they will be voting on a hotel/motel tax.

This is one of those stories that is so delicious one has to assume that one simply doesn't understand the facts. But that's never prevented my writing before, and it's not about to now.

There are 107 Iowa towns, and 12 counties that have hotel/motel taxes. They range from 1% to 7%.

So what's so unusual about a hotel/motel tax in Riverside?

Riverside has one hotel. It's owned by the gambling casino. And, get this, as a part of the "negotiations" with the city, the casino was able to have included in its sweet deal the provision that it would never have to pay a hotel/motel tax.

There are no other hotels.

So why are they even voting? Because Mayor Bill Poch says, "I feel there is a very substantial possibility that we will have another hotel in the future."

The gambling casino initially agreed to pay the city $1.7 million a year.

So now what happens? Apparently the ballot proposition is written to provide that the casino will collect the hotel/motel tax. But watch very carefully what then happens to the money. It is collected by the casino, paid to the city, which forwards it on to the state, which returns it to the city -- which then credits it to the casino.

Why would anyone want to do this? From the sketchy reports I've heard the gambling casino's hotel is not doing all that well. Why would you think you could improve occupancy rates by increasing the room charges by 7 percent?

So, seven percent out from the casino, and seven percent in. I guess it's the only sure bet you can make in Riverside, Iowa.

Read more at: Rachel Gallegos, "Riverside voters to decide on hotel/motel tax," Iowa City Press-Citizen, October 30, 2006.

Technorati tags: , , , , , , , , .

Monday, October 30, 2006

Rain Forest: Monday October 30 Update

Fortunately, we've just had a time change; "fall back" and all that.

Otherwise this "Monday Update" would have been uploaded on Tuesday. As it is, it's just 11 p.m. Monday night.

The big news this past week was the elevation of the rain forest issues into the Iowa governor's race. With so many of Iowa's politicians fearful of saying out loud that "the emperor has no clothes," either supporting the rain forest -- as if it was a real project with a prospect of being built when they knew, or ought to have known, that it wasn't true -- or staying quiet, Chet Culver is entitled to some credit for saying publicly what most Iowans assumed was obvious.

For the facts, the commentary from State29 and myself, take a look at:

[Every Monday since December 2005 there has been a weekly upload to the pre-existing Iowa rain forest Web site I maintain. In all, printed out the entire site would run over 100 single spaced pages; there are, in addition, links to the full text of hundreds of newspaper stories and reports. It is very probably the most complete resource on the topic anywhere on the Web.

It is found at: http://www.nicholasjohnson.org/politics/IaChild.

Over the past few months the scope of the Web site has expanded from the rain forest project to include material related to the broader range of attractions and economic development generally (including gambling casinos) in which the proposed rain forest exists and by which it must be evaluated.

If you are interested in following this subject, you might also want to check in from time to time with the Iowa Pork Forest blog for comments that are often humorous and entertaining as well as insightful.]

Technorati tags: , , , , , , , , , , , , , , , .

Friday, October 27, 2006

State 29 on Death (of the Rain Forest) and Taxes

State29, which has been a leader on the "Iowa Pork Forest" analysis from the beginning, has more "must reads" posted on the subject of what is now Pella Project Politics. State29, "The Final Nail In The Rainforest Coffin," October 26, 2006, State29, "Still No Des Moines Register Article On Culver's Dissing Of The Rainforest," October 26, 2006, State29, "Chet Culver Against Earthpork Rainforest," October 25, 2006.

And State29 has also offered some helpful commentary about Nicholas Johnson, "It's Not About 'Taxes,'" October 24, 2006, in State29, "Business Climate," October 26, 2006. State29's piece suggests that it would have been appropriate for me to have included some commentary about the need for consolidation of Iowa's governmental units (i.e., 99 counties and over 300 school districts), and provides an analysis of the Enron retirement plan that argues it wasn't so bad after all. (It was an example I'd used in the section, "3. Program evaluation," to make the point that programs in the private sector, as well as government programs, can do with some evaluation -- although, with the Enron example, intended more as a commentary about management's criminal behavior than the details of the 401(k) plan itself.)

So thanks to State29 for taking the time to read the essay and comment on it.

Thursday, October 26, 2006

The Politics of Gambling

Before clerking for Justice Hugo L. Black, I spent a year with Judge John R. Brown and what was then the U.S. Court of Appeals, 5th Circuit. Among the criminal cases appealed to our court, there were quite a few involving what was then called "the numbers racket."

The FCC forbid broadcasters to hint at winning numbers in radio and TV programs.

What was then a serious federal crime is now approved by the state. Winning numbers are a regular feature in the evening news. We call it the Iowa Lottery.

The casinos that were then located in Las Vegas are now located throughout Iowa, making it possible for Iowans' money to flow out of the state with the ease of water from corn fields flowing through under-surface tiling systems.

Politicians who would have been charged with mafia ties were they found to be the recipients of gambling industry money, now go after it openly, report it publicly, and no one seems to care.

The contrast was pointed up for me with a couple of news stories: Associated Press, "Spat on TouchPlay, Gambling Heats Up in Gov's Race," KWWL-TV7, October 24, 2006, and Dorothy de Souza Guedes, "C. R. woman pleads guilty in gambling case," The Gazette, October 24, 2006.

The first dealt with the mud balls Culver and Nussle are throwing back and forth at each other. Nussle charges Culver received a $25,000 loan from TouchPlay interests and has a "secret plan" to either reinstall the TouchPlay machines or pay the industry big bucks for outlawing them. Lt. Governor Sally Pederson responded, on Culver's behalf, that Nussle has received $250,000 in campaign contributions from the gambling industry and that his finance chairman personally owns two casinos himself.

Meanwhile, in our government's effort to reassure us that we are being kept safe from the terrorism and evils of illegal gambling, The Gazette's story reports that, "Paula K. Kelley, 37, of Cedar Rapids, pleaded guilty Monday to aiding and abetting an illegal gambling business, admitting that she rented space and put phone service in her name for a sports betting and parlay card bookmaking group."

Thank goodness that operation's been shut down. We wouldn't want our kids living in a state where gambling was going on now, would we -- especially if it's a gambling operation that's not making campaign contributions to our upstanding political candidates.

Technorati tags: , , , , , , , , .

Tuesday, October 24, 2006

It's Not About "Taxes"

Talk about "taxes" is a diversion, especialy during election season. It shifts the focus from the substantive issues, and the process that would be necessary to make real progress with a state's economy.

What prompts this blog entry?

The Gazette
's editorial about taxes. Editorial, "Failing on Perception and Reality," The Gazette, October 24, 2006.

[The thrust of it is that Iowa needs a "business friendly" environment to enjoy economic development, and that means a tax and administrative system that is competitive with other states. The Gazette finds Iowa's sales, unemployment and property taxes relatively acceptable -- ranking the state 19th, 27th and 33rd respectively. But it's concerned about the corporate and individual income tax rates that place us 46th and 45th -- even though that's misleading because it fails to take account of Iowa's somewhat unusual practice that permits taxpayers to deduct what they've paid in federal taxes from the income on which they pay state income tax.]

1. There's no such thing as "taxes." Each of us buys, and benefits from, an array of goods and services. Some come from the supermarket, department store, or drug store. Some come from our auto mechanic, insurance sales person, or hair stylist. And some come from government. We buy from government our roads and bridges, public schools, libraries and parks, fire and police protection, judicial system and jails, and
the safety of our food and drugs. To speak of "cutting (or increasing) taxes" makes no more sense than cutting or increasing "cash," "checking accounts," or "credit cards." Taxes are just another form of currency we use to buy stuff.

2. "It's the programs, stupid!"
Before one can rationally talk about "taxes" there needs to be a discussion of the programs we buy with that form of currency. Like the politician who wants to "cut taxes" but refuses to talk about defense spending and social security, and the other programs that make up the bulk of government expenditures, anyone who talks about "taxes" without talking programs is just blowing smoke -- and may be deliberately trying to impede your vision.

3. Program evaluation. All programs need evaluation, private as well as public. The pension program provided Enron's employees didn't work out so well. Ford just lost $5.8 billion dollars. Major airlines are in bankruptcy. There are "recalls" on everything from automobiles to laptop computer batteries. Our private pharmaeutical and health care delivery systems cost more, and produce lower nationwide statistical results, than those of almost any other major industrialized nation. Face it, the private sector could do with a little program evaluation as well.

Similarly, government programs need evaluation, too. How can that be done? There are many systems. Here's one.

"Zero-based budgeting" is a system of evaluating public programs individually as if they didn't already exist, rather than focusing on "taxes" and increasing, or decreasing, the expenditures across the board on all programs by a fixed percentage.

One way of approaching this process would be to imagine a triage based on payback.

(a) Assume the hypothetical example (I'll leave the actual numbers of this assumption for others to debate) that money spent on pre-natal care for pregnant women, plus health care and nutrition for their new-born children until, say, age 6 or 8, will pay back in future savings something like 10 times what we spend in those early years. Or perhaps there would be similar numbers on the benefits of preschool education programs. Or, say there's data to support the assertion that the failure to maintain buildings in state parks results in future replacement costs five times what the maintenance would have cost.

(b) Assume there are other public programs that pay back roughly what we put into them.

And (c) additional programs that cost more than they produce, or save.

Rationally, then, one might want to expand a program that pays back multiples of what's spent on it, and make the cuts in those that don't.

I'm not suggesting this is the best, let alone only, way to go about rational creation and management of a government's budget. What I am trying to merely illustrate is that rational, program-focused (rather than "taxes-focused") processes are available.

4. Negative taxes and corporate welfare. I have written at great length elsewhere about programs that give over tax money to (or reduce the tax obligations of) for-profit private businesses. This is not the place to continue that debate. For now, it's enough to make the point that honesty, not to mention basic mathematics, requires that an examination of the extent to which a state is "business friendly" involves a calculation not alone of the taxes that private businesses do and do not pay, it also requires a calculation of the amount of taxes that others pay that are then handed over to those businesses in one form or another of direct corporate welfare.

Also relevant is the tax money that supports public programs that provide a quality workforce, infrastructure, legal system, and so forth, that benefit business indirectly -- and which studies show is often more effective in attracting business to a state than one-time cash handouts.

5. Governments as profit-maximizing enterprises. Taxes can distort governmental decision-making. Would Iowa localities, and the state legislature, have approved gambling casinos and various lotteries (once a federal and state crime) if it were not for tax and other payments from the gambling industry to various units of government? I think not.

One of the many externalities of systems of taxation is their ability to alter the behavior of individuals, businesses -- and governments. To the extent a city's government is driven by policies that will maximize its property tax revenues, and those taxes are greater for commercial than residential property, the city will pursue policies that encourage manufacturing plants and discourage affordable housing. In short, governments will choose policies and actions that maximize their revenue -- no matter how it may distort what would have been best in "the public interest" -- in a manner similar to for-profit corporations.

6. Tax simplification. Taxation is not my area of expertise. But it does seem to me more complicated than it needs to be. And I don't just mean the complex ins and outs of the Internal Revenue Code. I mean the multiple systems of taxation: state and federal income tax, local property tax, sales tax, FICA (Social Security) tax, gasoline tax, and so forth that make it virtually impossible for citizens -- and their public officials -- to see the big picture.

There are valid reasons for some of these multiple systems beyond simply collecting more money and hiding the ball from the taxpayer. A legislature may raise its cigarette tax in an effort to discourage young people from taking up smoking. The gasoline tax may be a fair way of allocating the cost of road building and repair among those who drive in a rough proportion to their use of the roads.

And I can appreciate that there is a political advantage to hiding the ball. Many people would be appalled if they knew the total of all their taxes combined. But they might be equally appalled to know the total amount they spend on fancy coffees, cigarettes, beer and slot machines. The point is that "you get what you measure," that it's impossible to make intelligent decisions -- whether personal or public policy -- without accurate and adequate data.

However politically impossible it might be to do, wouldn't it be at least interesting to know what the consequences would be if the federal and state income taxes were the sole source of government revenue? No property or sales taxes. Fewer distorted, tax-driven, decisions by individuals, businesses and governments. A transparent, data-driven public discussion of public programs that could be easily grasped, and participated in, by all. (And, not incidentally, no more pennies on the counter for sales tax. No more driving the elderly out of their lifetime homes -- because the homes' value has increased 30 times what the house cost, and they can't afford to pay the property taxes.)

Meanwhile, think twice about ever voting for a politician who makes diversionary talk about "taxes" a centerpiece of his or her campaign.

Technorati tags: , , , , .

Monday, October 23, 2006

Seattle's Optiva

Seattle has gone and done the UICCU -- now "Optiva" -- one better. It spent more for its new nutty slogan, and has received more ridicule than "Optiva," as difficult as that may be to believe. Associated Press, "Seattle Residents Critical of 'Metronatural' Slogan," The Gazette, October 22, 2006.

I had earlier, in blogging about the UICCU's name change to "Optiva,"
Nicholas Johnson, "Optiva," October 13, 2006, noted the extent to which this name changing business is sort of a disease with institutional administrators who have run out of other things to do with their time. So when Seattle came along and offered yet one more example I thought it deserved comment.

But J.D. Mendenhall ("JD's Blog Bites") beat me to it and has said about all that needs to be said on the subject,
J.D. Mendenhall, "The Name Game 2. Worse Than Optiva," October 22, 2006, so I can just refer (and link) you there.

In brief, Seattle, offering the tourist both great natural scenes and activities and also an urban setting, and having decided that over 9 million tourists a year are not enough, concluded it needed a new slogan for its marketing. What better than "Metronatural," right? Wrong.

As the Associated Press story reports:

‘‘How do you use that in a sentence?’’ [Pike Place Market vendor Kenny] Telesco asked. ‘‘‘Welcome to Metronatural.’ . . . It’s an airport where you can buy organic bananas.’’

Others suggested ‘‘metronatural’’ evoked an urban nudist camp and speculated about whether it would last longer than ‘‘SayWA,’’ which the state dropped recently because it failed to catch on.

‘‘Metronatural’’ is the result of a 16-month, $200,000 effort by Seattle’s Convention and Visitors Bureau. The bureau plans to spend $300,000 marketing the slogan, which will largely be targeted at generating business for the Washington Convention and Trade Center.

Note that Seattle actually got "Metronatural" for $50,000 less than what UICCU paid for "Optiva." Moreover, a Google search on the term, which mostly comes up with sites ridiculing it, suggests there is a lot less chance of its being a trademark violation than "Optiva."

Of course, once the $300,000 marketing campaign is over the total will be twice what UICCU paid. Ah, but we don't yet have an estimate on the budget for marketing "optiva," do we. Oh, well. Watch this space -- and JD's -- for the ultimate costs.

Name changes:

1. Are very costly.

2. Serve little purpose.

3. Often produce more ridicule than return, and are therefore self-defeating.

4. Don't fool anyone.

If a new name was necessary (because of University of Iowa objections), couldn't something more appropriate (and probably free) been possible? Of course. If your imagination needs a kick-start just see, J.D. Mendenhall, "35 Better Names for UICCU Than Optiva," September 24, 2006.
Technorati tags: , , , , .

Rain Forest: Monday October 23 Update

The Rain Forest Web Site weekly Monday update was uploaded about 2:20 p.m. today, October 23: http://www.nicholasjohnson.org/politics/IaChild.

The primary issue for the rain forest, now to be located in Pella, remains as it has been for the last 10 years: Where's the money coming from? Last week there was word a meeting was to be held October 16. This week there was no news regarding that meeting -- if, indeed, it was even held.

Meanwhile, there have been a lot of lessons for Pella from the events surrounding Cedar Rapids' Science Station, reported at some length in The Gazette and on this blog (and linked from the rain forest Web site), as well as some more writing about corporate welfare in general and TIFs in particular.

[Every Monday since December 2005 there has been a weekly upload to the pre-existing Iowa rain forest Web site I maintain. In all, printed out the entire site would run over 100 single spaced pages; there are, in addition, links to the full text of hundreds of newspaper stories and reports. It is very probably the most complete resource on the topic anywhere on the Web.

It is found at: http://www.nicholasjohnson.org/politics/IaChild.

Over the past few months the scope of the Web site has expanded from the rain forest project to include material related to the broader range of attractions and economic development generally (including gambling casinos) in which the proposed rain forest exists and by which it must be evaluated.

If you are interested in following this subject, you might also want to check in from time to time with the Iowa Pork Forest blog for comments that are often humorous and entertaining as well as insightful.]

Technorati tags: , , , , , , , , , , , , , , , .

Science Station Lessons for Pella - Part V

In my "'Hat's Off' to Gazette's Janet Rorholm," October 20, 2006, I noted that "There may very well be more stories and Gazette editorials to come on this subject." And indeed there have been. Rather than put up additional blog entries about each, there are some combined comments here.

Why Blog About the Science Station?

The reasons for blogging about the Science Station are multi-fold.

(a) Of course, I care about that particular edu-tainment venue and its future.

(b) But the reason for the headlines on these blog entries ("Lessons for Pella") is that my interests in attractions generally, and economic development in general, began as a result of my interest in understanding and analyzing the Iowa rain forest project. On the Web site I maintain about the rain forest -- where I represent that I am "neither booster nor basher" -- I have attempted to learn, and report, about "what works" with attractions, and the rational process that needs to be brought to bear in the midst of community cheerleading and boosterism. At the present time, as the rain forest promoters' search for a location finally reached the end of the road in Pella, Iowa, it is the citizens of that community who must confront, and work their way through, the myriad of issues and challenges involved in this proposed, unfunded, $150 to $200 million project. In my effort to offer them a hand with this task, it seemed to me there were lessons in Cedar Rapids' experience with the Science Station that might be usefully added to the dozens of others on my rain forest Web site.

(c) Finally, there are lessons from the Science Station of use to non-profits generally.

Science Station Board & Lessons for Boards in General

Janet Rorholm's "Board to Regroup at Science Station; Envisioning a Fresh Start, Leader Asks Members to Resign," October 21, 2006, prompted my rather lengthy essay about boards generally, including discussion under headings 1. Board members' functions and responsibilities, 2. Number of board members, 3. Public confidence in the board, and 4. Non-profit businesses. Nicholas Johnson, "Science Station Lessons for Pella - Part IV," Octobeer 21, 2006. Shortly thereafter State 29 had weighed in with the insightful humor and substantive research we've come to expect: State29, "How Many Board Members Does It Take to Screw Up a Non-Profit," October 21, 2006. That blog entry includes lists of individuals often found on boards, along with some uncomplementary assertions about them and suggestions for board composition.

The next day The Gazette did indeed offer the editorial I predicted on October 20. As it happened, it involved the same subject as my October 21 lengthy essay about boards in general, and made points totally consistent with its themes. It is very much worth reading by anyone who serves on a board (for-profit or non-profit), or who is trying to revamp a pre-existing board. Editorial, "Serious Responsibilities," The Gazette, October 22, 2006.

Governmental Financial Support of Non-Profits

This morning The Gazette offers yet another page one story regarding the Science Station, Janet Rorholm, "C.R., Linn Say Science Station Asks Too Much; Non-Profit Must Erase $1.3 Million in Debt," The Gazette, October 23, 2006, p. 1A.

Bottom line: the Cedar Rapids City Council, and the Linn County Board of Supervisors, are holding out no hope that either governmental unit is prepared to resolve the Science Station's financial problems.

There are a great many factors at play here beyond the public policy (or ideological) issue of taxpayer financing of non-profits. (a) Having asked for, and received, the resignations of the present 22 board members, and with the principal employees either arrested for embezzling or soon leaving for other reasons, "the Science Station" at this point is nothing but the president of the former board. To whom, and for what, would the money be given? (b) The financial problem is not a temporary downturn in the revenue stream, it is a $1.3 million debt. (c) There's a really short fuse between now and the closing on November 15. (d) The financial problems are largely of the prior board's making: lack of a rational business plan, lack of a management information reporting system that would catch embezzling before it exceeded $300,000, taking on the risky debt that is now bringing down the organization. This somewhat dampens one's enthusiasm for bailing them out. (e) Government money could, perhaps, be pledged as the last money added to the pot, but without substantial private contributions, or a realistic business plan to keep the place running, it may not be appropriate for governmental units to be putting in the first dollars.

So this is Cedar Rapids' problem, and Cedar Rapids will come up with the solution -- even if it is just to close the doors. I don't presume to know all that one would need to know to advise the wisest course of action.

However . . .

This morning's story contains the following:

[Cedar Rapids City Manager Jim] Prosser also said philanthropy is not typically the role of cities. ‘‘We simply aren’t in a position to be a banker of last resort,’’ Prosser said.

Council member Chuck Swore believes the issue will come up for discussion by the council. The focus may be on what role government should take in a bailout and in ongoing support of the Science Station and other cultural attractions.

This is a little disingenuous.

1. Because I am, in general, opposed to TIFs and other corporate welfare schemes it would be consistent for me to be opposed to public support of non-profits as well -- though I am not. But it does seem to be a bit inconsistent for governments that are quite willing to give away the taxpayers' money to for-profit enterprises that ought to be able to support themselves in "the marketplace," and then refuse to do so for the non-profit enterprises that are not able to support themselves.

2. Not only are public bodies able "to be a banker of last resort" they are often the banker of first resort. Public schools, parks and libraries are entirely supported by governmental units. It's not just a matter of "bailout and ongoing support." The City of Cedar Rapids, if it chose, could properly decide that the importance of science and "technology" in the community's future growth is such that the entire capital and operating costs of the Science Station will be paid by property taxpayers; admission would be free. I'm not suggesting that is what Cedar Rapids should do. There are probably many reasons why it shouldn't in this instance. All I'm saying is that it is not a theoretical, legal or ideological impossibility.

3. I think Council Member Chuck Swore has it right that the issue needs to be confronted by the relevant governmental units as an overall policy regarding educational, cultural and edu-tainment venues generally -- triggered by the Science Station issues, but not limited to their resolution. As it happens, one of The Gazette's "Homers" this morning notes that the Cedar Rapids City Council has already changed the allocations from the City's $2 million hotel-motel tax in ways that will be helpful to the community's arts and culture. Editorial, "Homers and Gomers," The Gazette, October 23, 2006.

4. The Gazette's "Homers and Gomers" feature this morning (October 23) refers to a "non-profit resource center [that helps] non-profit groups become better trained, better organized, more sustainable operations." It notes that it is "still in its infancy [and therefore] not in a position to . . . correct problems of individual organizations." Editorial, "Homers and Gomers," The Gazette, October 23, 2006. I'm not familiar with the "resource center" to which the Gomer refers, but I do know of the "Larned A. Waterman Iowa Nonprofit Resource Center" at the University of Iowa. Such resources are a major partner with the rethinking about board governance that The Gazette (and I) have been writing about, and something the Pella leaders may want to explore and utilize.
Technorati tags: , , , , .

Sunday, October 22, 2006

More on Corporate Welfare from "Hat's Off" Winner

Two months ago the "FromDC2Iowa Journalism Review" presented one of its first "Hat's Off" Awards to a couple of Des Moines Register reporters for a series about TIFs in the Sunday, Augus 13 Register. Nicholas Johnson, "Hat's Off to Lee Rod and Donnelle Eller," August 14, 2006.

Today (October 22) one of those reporters, Donnelle Eller, has done it again with Donnelle Eller, "Efforts to attract jobs can pop under pressure; Towns provide incentives, businesses break the deal," Des Moines Register, October 22, 2006.

It contains a number of specific case studies of failures in the effort to prop up free private enterprise with taxpayer funding.

1. Business is risky, even when it's wholly in the hands of entrepreneurs, investors, venture capitalists and loan officers.

2. There is no evidence that public officials -- with no financial stake in the enterprises -- are any better at calling winners and losers than those who do have a stake in the outcome.

3. There are some examples of dramatic taxpayer losses from investments in for-profit ventures -- even instances in which the recipients deliberately ripped off the public.

4. At best -- even if not literal violations of the constitutional protections called "equal protection" and "due process" -- giving substantial "corporate welfare" to some firms and not to others, which must compete with them wihout assistance, is by any measure an "anti-competitive" involvement in "the market" by government.

Technorati tags: , , , , .

Saturday, October 21, 2006

Science Station Lessons for Pella - Part IV

Today's (October 21) Gazette, for the fourth day in a row, has a page-one update by Janet Rorholm on the Science Station story, Janet Rorholm, "Board to regroup at Science Station; Envisioning a fresh start, leader asks members to resign," The Gazette, October 21, 2006, p. A1.

[For yesterday's story, and links to prior news reports and blog commentary from October 18, 19 and 20, see Nicholas Johnson, "More More Science Station Lessons for Pella," October 20, 2006.]

The primary news in today's story is that the Science Station board members met, and at the request of board president Dan Thies, have each submitted their resignations.

Coupled with Ms. Rorholm's report -- "former office manager, Nancy Listman, was arrested . . .. The Science Station’s marketing and development director, Kevin Eisenmann, is leaving next week. Executive Director Joe Hastings is resigning Oct. 31." -- President Thies really is in a position to offer the Cedar Rapids community a clean slate on which to write the future of this edu-tainment venue.

Of course, I share the hopes of those who are seeking a solution by which the Science Station can be salvaged in a financially realistic way. But my primary interest in these stories is not so much for what may ultimately happen to the Cedar Rapids' Science Station as for what its experience offers others. Those lessons (as I perceive them) have been spelled out in the prior blog entries, referenced above, and those from today's story, below:

1. Board members' functions and responsibilities. There is an enormous body of literature regardiing boards. (I have created a Web site with links to some of the writing of John Carver, and the experience of the Iowa City Community School District Board's application of his approach. Nicholas Johnson, "Board Governance: Theory and Practice.") I won't endeavor to review it all here. Suffice it to say that
Board positions should not be viewed as merely prestigeous sinecures; they should represen a commitment of time and talent (and often money), and the acceptance of serious responsibilities.

A fully functioning board
requires at least some reading, reflection and prior thought, both by individual board members and by the board as a whole, regarding their purpose and tasks. Whatever model is followed, there needs to be board consensus on precisely what functions and processes are for the board, and which for the CEO -- and the accepted ways by which the two will relate. The board should be setting the organization's mission, measurable goals and mileposts, and designing the management information reporting system by which it will track the operation in general and the progress toward those goals in particular. This should not be left, by default, for the CEO to have to do and the board to merely rubber stamp. By the same token, the CEO should then be left alone to do his or her job without the board (and especially individual members of the board) "micromanaging" the details of administration.

2. Number of board members. Rorholm reports that President Thies wants to reduce the number of board members from 22 to something closer to 10, with an "advisory board" to provide additional input. That would seem to be a wise move. If anything, even 10 is at the upper reaches of a workable board. The more board members the less responsibility each feels. Rorholm noted that -- even given this crucial time in the life of the Science Station -- a number of the board members did not bother to attend yesterday's meeting.

3. Public confidence in the board. Rorholm quotes Thies: "people that I respect say, ‘You
need to build a strong board.’’’ She continues, "It’s natural that people who give money to an organization be comfortable and respect those with fiduciary responsibilities, Thies said." He's right. It is apparently a common human quality to prefer others like ourselves -- whether for social relationships, professional associations, or on the boards of organizations to which we contribute. If someone comes out of a business or financial background of some wealth -- as the major donors to anything tend to -- they will be more likely to feel comfortable giving money to organizations run by those from their range of acquaintance, individuals whose business sense they trust. Of course, it's not just representation from business. Confidence in a board requires that it also includes -- or at least has access to -- the range of expertise most relevant to the operation involved.

4. Non-profit businesses. Those who create, run, or otherwise support non-profits of various kinds are usually motivated in large measure by mission; it is enough that the organization or operation in question is "a good thing." In fact, aside from the matter of "profit" (which often is a distinction of little more than technical significance) the skills necessary to the running of non-profits are identical to those of for-profit corporations: "human relations" (personnel), marketing and advertising, customer relations, government relations, accounting and finance, information technology, management information reporting systems, and so forth.

Don't be bored with your rain forest board, Pella. Your future may depend on it.

Technorati tags: , , , , , , , , , , , , , , , .

Friday, October 20, 2006

"Hat's Off" to Gazette's Janet Rorholm

The Gazette's Janet Rorholm has now (October 20) done a series of three page-one stories about the financial problems confronting Cedar Rapids' Science Station. For her three stories and my three blog entries about them, see links from Nicholas Johnson, "More More Science Station Lessons for Pella," October 20, 2006.

There may very well be more stories and Gazette editorials to come on this subject. But the "FromDC2Iowa Journalism Review" thought the first three enough to warrant the coveted "Hat's Off" award.

These stories represented "reporting, not repeating." They were not a rewrite of a news release, or statements at a news conference. They were not an effort to promote a commercial venture, or push an ideological point of view.

Rorholm has dug in and reported the history and facts about the financial condition of this important Cedar Rapids edu-tainment venue, and in a way that communicates important lessons for any community considering its edu-tainment attractions -- as I've blogged about in my "Lessons for Pella" series referred to above.

Moreover, she's captured the evolving story of a community and its leaders as they struggle to figure out what happened, and why, what edu-tainment venues they want and need, and how they can best go about designing the business plans, and adequate operating funds, to insure their financial success.

It's an important series of stories for every community in America.

Congratulations -- and thanks -- Janet Rorholm.

Technorati tags: , , , , , , , , , , , , , , , .

More More Science Station Lessons for Pella

For the third day in a row, The Gazette's Janet Rorholm has provided a quality and helpful bit of page one journalism regarding the financing of edu-tainment venues generally, and the Cedar Rapids' Science Station in particular. Janet Rorholm, "Chilling Effect; Non-Profits in C.R. Area Fear Science Station's Money Woes Could Hurt Their Fundraising," The Gazette, October 20, 2006, p. 1A.

[For October 19 see
, Nicholas Johnson, "More Science Station Lessons for Pella," October 19, 2006, and Janet Rorholm, "A Plea for Help; Support Urged to Keep Debt-Ridden C.R. Science Station Open," The Gazette, October 19, 2006, p. 1A.

[For October 18 see, Nicholas Johnson, "Science Station Lessons for Pella," October 18, 2006, with its links to
Janet Rorholm, Debt Dooms C.R. Science Station; Center, IMAX Theater to Close Nov. 15 Unless 'Sizable' Bailout Spares Them," October 18, 2006, p. A1, and State29, "IMAX Theater in Cedar Rapids Creates a Lot of IDEBT," October 18. 2006.]

From today's (October 20) story I've selected the following quotes for commentary:

1. "Anytime there is an incident or an event like this . . . it’s going to have an effect on the non-profit sector,’’ said Dan Baldwin, president of the Greater Cedar Rapids Community Foundation.

Baldwin makes a point that is often, understandably, overlooked by those caught up in the heat of controversy regarding their own financial shortfalls. When any single non-profit appears to be poorly managed -- confronting closure because of having taken on an unrealistic debt load or, as in this case, having failed to notice what is alleged to have been a substantial embezzelment by one of its employees -- it reflects not only on that single institution, but on non-profits generally.

2. (a) "There is no value for someone to open up a checkbook and cover past sins if its operations can’t be sustained,’’ he [Tom Hauer, president of The History Center’s board] said.

(b) Lee Clancey, president of the Cedar Rapids Area Chamber of Commerce, said the community needs to place more emphasis on operations when attractions like the IMAX theater are built. ‘‘We have built these wonderful cultural institutions, but we have not built into them a method to help sustain them operationally,’’ she said. Most of the fundraising for such attractions is for bricks and mortar, she said. But nearly none of it is given to create an endowment that could help pay for ongoing operations, such as supplies or utilities . . .."

Business plans. I've braced Hauer's and Clancey's comments together because they both deal, in part, with the necessity of what we call "business plans."

I would say that business plans are merely a sub-set of what we call "common sense," but for the fact that good business plans are not that common.

They are common sense in the way that gathering data and best practices, evaluating options and possible future scenarios (including "exit strategies"), establishing numerical mileposts of progress -- in short, "thought" and "planning" -- are pretty basic essentials for any undertaking, whether marriage, starting a war, planning a career path, saving for college, trying to lose weight, or writing a will.

In most cases, it's not that the people who don't do this are irresponsible or ignorant. It's often simply that they've been hired to do something else: to run an institution, or program, that is already in place. (The story is told of Barry Goldwater in the 1964 presidential election when he was approached by a questioning reporter moments before Goldwater was to begin speaking at a rally. "What do you think about . . ." the reporter began. Goldwater interrupted him: "Don't ask me what I think. I don't have time to think. I'm talking.")

I used to say that if any given factory had not been visited by an efficiency expert within the last five years or so that any bright sixth grader could walk through it, observe the processes, and make recommendations that would save at least 10% to 30% of the costs of operation.

Why? Because, as the old line has it, "When you're up to your a** in alligators it's hard to keep your focus on the fact your original mission was to drain the swamp." It's not that the assembly line workers wouldn't have been observant and smart enough to come up with comparable suggestions to those of the 12-year-old -- in fact, they are often the best source of such ideas -- it's that they, and their supervisors, were never given the time, nor asked, to think about it.

Realistic business plans -- precisely defined purposes and measurable goals, data- and experience-based projections of revenue streams, anticipation of possible set-backs -- are hard work. They take time, lots of time, research, thought and analysis, often when promoters feel they have little time available -- coupled with the greatest excitement and desire to get started.

Moreover, there's a kind of macho notion that planning is for sissies. "No risk, no glory." "The school of hard knocks." Rudyard Kipling's poem "If" contains the lines,

"If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss
. . .
Yours is the Earth and everything that's in it,
And--which is more--you'll be a Man, my son!"

So far as I know no one has ever written a poem, or a feature film script, about someone who successfully spent the extra time planning because he or she wished to avoid the loss that requires one to "start again at your beginnings."

Factor in lack of experience, laziness (or the demands of other obligations), disinclination to do research, the realization (with pulic projects) that "it's not my money," and numerous other human qualities, and the remarkable thing is not that a third of all businesses fail within the first few years, it is that so many succeed.

Since we're looking for lessons from the Cedar Rapids' experience that might be useful to the folks in Pella, many of the fundamental problems with the rain forest project have involved the absence of some of what would be business plan basics. There is now something called a business plan for the rain forest, but it still has some major omissions. See, Nicholas Johnson, "Earthpark Business Plan: A Review," August 12, 2006.

Operating costs. As I've occasionally pointed out, the focus on the rain forest promoters' inability to raise a dime in ten years is a bit of a diversion. Sure, that's a deal breaker. If they can't raise the $150-$225 million to get started one doesn't even reach the question of their ability to create a revenue stream adequate to keep the thing going. But what has always seemed more significant to me than the rain forest's construction costs are its operating costs.

As I've quoted Lee Clancey from this morning's Gazette story:

‘We have built these wonderful cultural institutions, but we have not built into them a method to help sustain them operationally,’’ she said. Most of the fundraising for such attractions is for bricks and mortar, she said. But nearly none of it is given to create an endowment that could help pay for ongoing operations, such as supplies or utilities . . .."

's a common problem with boosterism -- whether Cedar Rapids' edu-tainment venues or the rain forest project. A generous art collector may be willing to give his or her collection of very valuable works, and even give the cash to build the new wing on the art museum to display it, but is not interested in creating the endowment fund, the income from which can provide operating costs for the foreseeable future. An expansive and expensive English castle and estate may pass to a young couple who quickly discover they can't afford to accept it because of the maintenance costs.

This is one of the most significant elements of any business plan: What are realistic estimates of the revenue streams and operating costs? What sources of funding will be available to make up the difference -- or what costs will be cut -- if that revenue proves to be inadequate from time to time?

Pella, are you listening?

Technorati tags: , , , , , , , , , , , , , , , .

Thursday, October 19, 2006

More Science Station Lessons for Pella

The Gazette had another page one headline about Cedar Rapids' failing Science Station this morning (October 19). Janet Rorholm, "A Plea for Help; Support Urged to Keep Debt-Ridden C.R. Science Station Open," The Gazette, October 19, 2006, p. 1A.

(For yesterday's story see Nicholas Johnson, "Science Station Lessons for Pella," October 18, 2006, with its links to
Janet Rorholm, Debt Dooms C.R. Science Station; Center, IMAX Theater to Close Nov. 15 Unless 'Sizable' Bailout Spares Them," October 18, 2006, p. A1, and State29, "IMAX Theater in Cedar Rapids Creates a Lot of IDEBT," October 18. 2006.)

From it, I would simply highlight the following quotes:

"Attendance has declined steadily since the IMAX theater opened in 2001.

"The Science Station has run at an operational loss for two years, losing $350,000 in fiscal 2004-05 and $150,000 in fiscal 2005-06, which ended Sept. 30.

"Because of failed pledges and inadequate fundraising, the Science Station had to take out a loan, which it has not been able to repay, placing it at risk of foreclosure.

"Hastings said optimistically high attendance projections for the theater were part of the problem."

It's just a reaffirmation of the points from yesterday we hope the good folks of Pella note and take into consideration in their plans for the Pella rain forest:

(1) "Optimistically high attendance projections" are the rule rather than the exception from the enthusiastic cheerleaders and promoters of new community projects.

(2) Whatever the realistic, actual, attendance numbers may be the odds are very good that they will "decline steadily" after the attraction opens.

(3) It's tough to keep any edu-tainment attraction from running "at an operational loss." If a significant fraction of those who wax eloquent regarding the joys and importance of symphonies, ballet, art museums, science centers (and rain forests!) would actually attend them once in awhile their attendance figures (and revenue) would more than eliminate these "operational losses."

(4) Many attractions experience having to "
take out a loan, which it has not been able to repay, placing it at risk of foreclosure." Think about it, Pella. Closing the Science Station is one thing. Other uses can be found for the building. But what do you do with a rotting rain forest, and a drained aquarium filled with dead fish, inside a 200-foot structure? As with Iraq, so with a rain forest -- whether real or fake -- before you enter into it you best have "an exit strategy." What's yours?

Technorati tags: , , , , , , , , , , , , , , , .

Wednesday, October 18, 2006

Call the Cops: $3.755 Million Robbery in Progress

Mason Williams (composer "Classical Gas," Emmy-winning writer for the "Smothers Brothers Comedy Hour") once wrote, "I'd call the cops, but they're already here."

The City Council of Iowa City is "the cops," and they're at it again, with another "inside job" that should net nearly $4 million.

Notorious bank robber, Willie Sutton, when asked why he robbed banks, said, "Because that's where the money is."

But as someone pointed out years ago, robbing them isn't the most lucrative -- or safest -- way to get their money. At that time, the average bank robber walked away with $10,000, the average embezzeling bank employee $100,000, and the average computer hacker made away with $1,000,000. (Interestingly, there is an inverse relatonship between the amount taken and risk of significant punishment.)

Presumably inflation has long since raised those numbers.

But Woody Guthrie's lyrics are, if anything, even more applicable today than when he wrote them: "Some men rob you with a six-gun, some with a fountain pen."

So what am I talking about? I'm talking about today's (October 18) news of a massive fountain pen heist. I'm talking about the folks we've elected to represent our best interests having decided for us that we'd just jump at the chance to transfer $3.755 million of our money to the profits of some California outfit called National Genecular Institute, Inc.

It takes the form of $1.2 million of Iowa City taxpayers' property taxes, $800,000 of Coralville taxpayers' property taxes, $655,000 in a straight out cash grant from Iowa income taxpayers (by way of the "Iowa Department of Economic Development and Reverse Robin Hood"), plus an additional $1.1 million in "job training assistance."

In addition, the role of the University of Iowa in all of this is not totally clear. The new Coralville facility (to be a 73,000 square-foot building) will be shared between NGI and the UI -- 41,000 sqare feet for NGI and 32,000 square feet for the UI. And the chief scientist and director of research for NGI (Tannin Fuja) is also an adjunct professor at the UI. Understandably, he says he looks forward to "what we consider a very synergistic relationship here." Couldn't we all do with a bit of "synergy" like that?

It's one thing to rob the bank and share the money with the poor and middle class. What the Iowa City City Council members prefer to do is to rob the poor and middle class and give the money to the bank -- in this case a "biobank."

See Hieu Pham, "Council OKs TIF to Build Biobank," Iowa City Press-Citizen, October 18, 2006, p. 1A.

Technorati tags: , , , .

Science Station Lessons for Pella

The Gazette's lead headline tells the story, "Debt Dooms C.R. Science Station." But there are other lessons for those pushing Iowa attractions generally -- and the Pella rain forest in particular -- from the tale told in this morning's (October 18) story. Janet Rorholm, Debt Dooms C.R. Science Station; Center, IMAX Theater to Close Nov. 15 Unless 'Sizable' Bailout Spares Them," October 18, 2006, p. A1.

[Late afternoon edition/addition: As is often the case, when State29 takes on an issue like this it ends up being much more entertaining and insightful than what I've got. So don't miss State29, "IMAX Theater in Cedar Rapids Creates a Lot of IDEBT," October 18. 2006.]

1. First, thanks to those who've tried to make a go of this edu-tainment venue -- a list that includes a sizable number of dedicated Cedar Rapids' businesses and citizens. All recognize the potential contribution of a "science station" to a state, and country, that needs to increase its citizens' understanding of science -- not only as a significant part of anyone's general education in a high tech world, but also if we, and our children, are ever going to be able to participate in today's global economy.

Having said that, what lessons can we learn about attractions generally -- applicable to the Pella rain forest in particular?

2. Be realistic in projecting attendance, and the revenue it will provide. The rain forest's promoters seriously suggest it will attract 1.3 million or more visits. But most
of Iowa's edu-tainment venues have attendance in the 30,000-80,000 range. And the Science Station didn't pull that. Attendance for fiscal 2003 was 20,336.

3. Take into account that attendance drops over time. You can open anything new, from a resort to a restaurant, and expect a crowd the first months, or even year. (As they use to say in L.A. in the evenings, when powerful spotlights were scanning the sky to attract customers to an opening, "Somebody must have opened a can of beans.") Holding those attendance numbers in future years, let alone increasing them, is a monumental challenge. It will be true for the Pella rain forest if it is ever built. It was true for the Science Station. Its 2003 attendance wasn't the worst of it. Attendance declined every year thereafter, from 20,000 to 19,000 in 2004, to 17,000 in 2005 and 2006.

4. "Debt Dooms." The Gazette's headline got it right, "debt dooms" edu-tainment attractions. Of all the statements to come from the Pella rain forest promoters -- and that's quite a collection from which to pick -- perhaps the most troubling have been David Oman's mention from time to time over the disappointing past few months that the project could always be funded with debt if more support isn't forthcoming. Debt is one of the single most commonly shared qualities of attractions that start with the enthusiasm of cheerleaders and end with the padlocking of the front door.

Moreover, as the Science Station is discovering, once debt does become the challenge, it is extraordinarily difficult to get contributions from generous donors to "pay for a dead horse" -- that is, to pay off past-due debt and other bills. Folks would much rather give money for a new wing on the building, or a new exhibit.

5. Entertainment. So much for the "edu," what about the "tainment"? It's no secret that we're more attracted to entertainment (e.g., Hawkeye football games, rock concerts, Riverside gambling casino, Adventureland) than we are to educational venues (e.g., UI academic lectures, Iowa Hall, Old Capitol, President Hoover presidential library). The rain forest promoters have talked of an IMAX, or comparable, theater inside their structure. Bringing an entertainment feature inside an edu-tainment venue can be (but is not always) a good move.

The Science Station added an IMAX, and while the numbers it drew were not enough they were a substantial increase over the Science Station standing alone -- roughly 110,000 in Fiscal Year 2003. [The combined, Science Station plus IMAX, attendance for the four years was 130,897, 114,425, 87,943 and 85,574. Numbers for the IMAX alone require subtracting the Science Station attendance from these figures.] Note that, again, there was the predictable decline in attendance (of 42,000) after the first year, even for the "entertainment" IMAX: from 110,000 in year one, to 68,000 in year four.

Pella, I hope you're watching -- and learning -- from the Science Station.

Technorati tags: , , , , , , , , , , , , , , , .

Monday, October 16, 2006

Rain Forest: Monday October 16 Update

The Rain Forest Web Site weekly Monday update was uploaded about 7:20 a.m. today, October 16: http://www.nicholasjohnson.org/politics/IaChild.

As always, the only meaningful news would be an announcement that someone has given the project's promoters a $200 million check. But, as you'll see in this week's update, The Pella Chronicle is reporting that "
Earthpark officials will meet Oct. 16 to discuss financial arrangements." The 16th? That's today!

So, hey, this could be the big day. (Yeah, right.)

And you won't want to miss the face-off between Ted Townsend and me over whether Pella really is "more special than Eden" -- and some observations about tourist attractions in general and whether Pella -- however much we may love the little town -- is really ready for prime time, and can compete with America's top tourist destinations.


[Every Monday since December 2005 there has been a weekly upload to the pre-existing Iowa rain forest Web site I maintain. In all, printed out the entire site would run over 100 single spaced pages; there are, in addition, links to the full text of hundreds of newspaper stories and reports. It is very probably the most complete resource on the topic anywhere on the Web.

It is found at: http://www.nicholasjohnson.org/politics/IaChild.

Over the past few months the scope of the Web site has expanded from the rain forest project to include material related to the broader range of attractions and economic development generally (including gambling casinos) in which the proposed rain forest exists and by which it must be evaluated.

If you are interested in following this subject, you might also want to check in from time to time with the Iowa Pork Forest blog for comments that are often humorous and entertaining as well as insightful.]

Technorati tags: , , , , , , , , , , , , , , , .

Sunday, October 15, 2006

Iowa: A Great Place to Live But I Wouldn't Want to Visit There

In this past week's Pella Chronicle Ted Townsend is quoted as saying, "I could not be more pleased in Pella, it is more special than Eden." Mike Sullivan, "Earthpark Committee Chooses Pella," The Pella Chronicle, October 9, 2006.

In tomorrow's (October 16)
Iowa rain forest Web page update there are links to information about Eden, including, Nicholas Johnson, "Is This Eden? No It's Iowa," September 2, 2006. Pella is many things, but it's tough to make the case that it is "more special than Eden." Eden is in England, not too far from London, and is a tourist destination for the millions who live there. Eden has oceans in both directions (including surfing), centuries-old castles, and many gardens besides the Eden Project.

But there are other problems with Pella. They are addressed, in part, in Nicholas Johnson, "Time to Learn From What Works," Iowa City Press-Citizen, January 20, 2006. Among the factors associated with financially successful attractions, I wrote there, is "Logical location. Aquariums do best near oceans; Colonial Williamsburg in Williamsburg, Va. The Living History Farms, or Dubuque's Mississippi museum on the banks of that great river, gain significance from their location in Iowa. A rain forest does not."

Another factor is sometimes called "synergy" -- putting an attraction in a location where other attractions, and local qualities and facilities, will tend to attract potential visitors to each other.

About two-thirds of the way down the rain forest Web page is the following:

"There is discussion elsewhere on this page of 'what works' with attractions generally -- including as examples Dubuque's National Mississippi River Museum and Aquarium, Williamsburg, and the Atlanta aquarium, among others. Another to add to that list is Branson, Missouri. It is a classic example of the advanages of 'synergy' -- with some 100 live shows, a range of hotels and restaurants, and now a new $450 million mall, entertainment and convention center. If the rain forest would work economically anywhere (and it might not), Branson is an example of where it might fit, in an environment in which it becomes one more attraction in a sea of attractions -- unlike virtually any venue in Iowa. Most Iowa attractions have annual attendance in the 30,000-200,000 range. Branson is predicting 7.6 million for 2006."

The Gazette had a feature story today (October 15) regarding another location that happens to have a rain forest of its own (as do a number of American cities). The synergy it offers its rain forest stands in stark contrast to anything that Pella can offer Earthpark. The town is Galveston, Texas. Cindy Cullen Chapman, "Southern charm Galveston is a mix of classic sights, contemporary attractions," The Gazette, October 15 2006. (The following facts are drawn from that article.)

Galveston is not a big metroplex. At 57,000 population it's actually smaller than Iowa City. So what does it have in addition to its rain forest?

Of course, it has hotels, restaurants, sourvenir shops and bars. But it's on the Gulf, which means it has docks with tour boats (for dolphin sitings),
and well-maintained public beaches with free parking. It has numerous parks (Stewart Beach, Galveston Island State Park, Big Reef Nature Park, Gulfside Seawolf Park). There are ships to tour, including the 1877 Tall Ship ELISSA, a WWII submarine and destroyer escort.

The downtown area (
"Historic Strand Seaport") has Victorian buildings, brick streets, horse drawn carriages, trolley cars, 19 antique shops and 20 art galleries.

And of course there are the museums: Galveston Railroad Museum is the largest railroad museum in the southwest;
Texas Seaport Museum; Moody Mansion; 1859 Ashton Villa & Heritage Visitors Center; and the Galveston County Historical Museum.

Among the more contemporary attractions are the Pier 21 Theatre, a 242-acre theme park/educational facility and waterpark, movie theater complex and a bungee jumping facility.

The Galveston Island Municipal Golf Course, one of the top five municipal courses in Texas, is surrounded by the Sydnor Bayou. Magic Carpet Golf offers two 18-hole courses.

And then there's Moody Gardens, the Rainforest Pyramid (Galveston's Earthpark), a 1.5 million-gallon aquarium pyramid, 25 acres of indoor and outdoor gardens, freshwater lagoons, Wasserfest (a waterpark designed for year-round use), and Surfenburg (which has 16 water attractions, uphill water coasters, a lagoon, three beaches, body slides, surf and raft rides).

Do Iowa in general, and Pella in particular, have features and venues that could help attract visitors to an Iowa rain forest -- if it could ever raise enough money to be constructed? Of course. But Pella is not "more special than Eden." Nor can it compete with Galveston -- or dozens of other tourist locations around this country. Nor can its aquarium compete with the nation's leading aquariums.

The rain forest promoters have started reducing the size of their project -- below, I believe, what it would need to be (i.e., "the world's largest") to have a prayer of financial survival in the middle of Iowa. For example, they have now reduced the size of their aquarium to a mere 600,000 gallons. By contrast, one of the nation's newest aquariums, in Atlanta, is 8,000,000 gallons.

There are many things we can do to boost Iowa's economy. But it may be a mistake to talk -- and spend -- as if tourism in general, and the rain forest in particular, are among those we should give high priority.

Thursday, October 12, 2006

"Hat's Off" to the Press-Citizen

Both the Press-Citizen and The Gazette editorialized this morning (October 12) regarding the recent task force proposals about UI undergraduates' binge drinking. Editorial, "It's Time for a Referendum on the 21-Only Issue," Iowa City Press-Citizen, October 12, 2006; Editorial, "Bleak Prospects for I.C. Drinking Change," The Gazette, October 12, 2006.

Both took positions consistent with my blog entry yesterday, that the problems, and recommendations, have been around for decades and that nothing gets accomplished, not for a lack of solutions, but for a lack of will on the part of the Iowa City City Council, seemingly beholden to the local owners of the 42 bars competing for student drunks.
Nicholas Johnson, "I'll Drink to That," October 10, 2006.

But the reason the Press-Citizen gets a "Hat's Off" Award from the FromDC2Iowa Journalism Review, is because it went beyond the carping that I, and The Gazette, offered.

The Press-Citizen's editorial actually offers a solid proposal to get us off the dime: hold a referendum on 21-year-old bar entry requrements. Either it passes or it doesn't. In eiher case it takes the issue from the City Council and hands it off to the citizenry. If the voters of Iowa City aren't smart enough to do something about it then at least we can put the issue aside and point to the vote as an example of Churchill's observation that "democracy is the worst form of government on earth -- except for all the others."

Congratulations, Press-Citizen.

Technorati tags: , , , , .

Riverside Gambling Casino's Future

Tuesday (October 10) was the Press-Citizen's turn at making sense out of the Riverside gambling casino's financial report for September. Wednesday (October 11) it was The Gazette's turn. Today (October 12) I want to take another look at those numbers.

See, Nicholas Johnson, "Gambling: Do The Math," October 10, 2006;
the Iowa Racing and Gaming Commission, "Track Gaming Revenue Report" and "Riverboat Revenue Report," September 2006; Rachel Gallegos, "Casino Meeting Its Financial Goals; Made $7.6 Million Revenue in 31 Days," Iowa City Press-Citizen, October 10, 2006; and Gregg Hennigan, "Gambling: House Doesn't Always Win; Gambling Revenue Off at Casinos Near Riverside," The Gazette, October 11, 2006; Nicholas Johnson, "Gambling: Checking the Math," October 11, 2006.

Yesterday's blog entry focused on the impact of gambling on Iowa's economy, the impact of the Riverside gambling casino on the attendance and revenue of its neighboring, competing, casinos, and the conflicts of interest at play in the formulation of public policy regarding the expansion of gambling in Iowa.

Today I want to look at the projections of attendance and revenue for the Riverside gambling casino.

As the headline suggests, and the story continued, the Press-Citizen had a very upbeat take on those numbers:
Rachel Gallegos, "Casino Meeting Its Financial Goals; Made $7.6 Million Revenue in 31 Days," Iowa City Press-Citizen, October 10, 2006.

Gregg Hennigan's story quoted Riverside gambling casino CEO Dan Kehl as equally pleased with the numbers:

Kehl said he was happy with Riverside Casino & Golf Resort’s first full month of business. Before it opened, casino officials projected 1.6 million visitors and $83 million in gaming revenue in its first year. To meet those goals, it must average more than $6.9 million in gaming revenue and 133,333 visitors per month.

"Kehl said he was not concerned about the casino attracting fewer than 123,000 people in its opening month because it earned $7.4 million. Each casino visitor lost an average of $61 per visit, compared with an average of $55 for the 16 casinos reporting to the gaming commission.

"'The revenue numbers are the driving factor,' he said. 'Those are the ones that pay the rent.'"

Kehl is right, of course. The gambling industry is more focused on numbers than professional baseball. If Kehl is typical, and there's no reason to think he's not, he knows how much he's making per square foot, per visit, per table, per slot machine, and so forth. And clearly the business of removing money from gamblers is more about the amount of money they leave behind than the number who come to visit you.

But as Bradley Franzwa points out in a comment he posted to yesterday's entry [
Nicholas Johnson, "Gambling: Checking the Math," October 11, 2006] Kehl, and the Press-Citizen, may be just a bit overly optimistic.

(Full disclosure: "I don't have a dog in this fight." Whether Kehl prospers, or not, will have no direct effect on me financially, profesionally, politically, socially, or otherwise personally. I would prefer that Iowa not have the problems accompanying a gambling economy, but I only pay for those problems in taxes and other ways like every other Iowan. To the best of my knowledge I have never met Kehl, and I certainly have no reason to wish him ill. I have often gone to casinos (including the Riverside gambling casino once), but have always been too cheap to ever leave a dime of my own in one.)

First, the numbers. Annual visits of 1.6 million require 133,333 a month. September produced 123,000. That would mean 1,476,000 a year -- not too far off the mark. But the first, opening, three-day (Labor Day) weekend brought 50,000 visits. Subtract 3 days from 30, and 50,000 visits from 123,000, and you have 73,000 visits over 27 days, 2704 per day; which, times 365 days, is 987,000 a year -- 62% of that 1.6 million, and much further off the mark.

And wait, it gets worse.

As Bradley Franzwa notes, this was their opening month. Most venues -- entertainment, museums, restaurants, even rain forests (!) -- attract a crowd of the curious during their opening night, first month, and first year. (For example, if the Riverside gambling casino could have kept up that 50,000-visits-in-three-days opening pace they would have, not 1.6 million, but over 6 million visits a year.)

Moreover, this September was unusual for other reasons. It had five rather than four weekends. It had three Hawkeye home football games. The latter is particularly relevant given the partnership between the UI football program and the Riverside gambling casino. (See, Nicholas Johnson, "UI Football Promoting Gambling?" September 16, 2006, and William Petroski, "E. Iowa Casino to Lure U of I Fans; It Will Offer Post-Game Parties, Stadium Shuttles," Des Moines Register, August 29, 2006.) On top of that, they later had an opening entertainment headliner-superstar, Jay Leno, on one of those football Saturdays. He not only brought in a crowd that day, but gave the place a luster for a few days before and after (that will rapidly fade unless the casino is willing and able to bring in comparable stars on a fairly regular basis.)

In short, the survival of entertainment venues depends, not on how they open, but on what they do thereafter to keep from closing. Thus, without more (and there will be more once the golf course opens) one would expect the Riverside gambling casino's attendance numbers to have a significant drop in the months and years to come.

Nor should attendance figures be the only concern for investors. It's not obvious that the $61 loss per visit (well above the state's $55 average) will continue. It's counter intuitive that one of Iowa's casinos would successfully take 20% more from each gambler's visit than the average at the other casinos. Why would that be true -- over time?

The $61 is undoubtedly a "mean" average rather than a "median" or "mode" average. Here's an example. Suppose there are 10 visits from 10 gamblers; 9 of the 10 only play slot machines and lose between $25 and $35 each before quitting, averaging (the "mean") a $30 loss each. The tenth, a high roller, loses $340 at poker. The 9 x $30 ($270) plus the $340 totals $610; thus, the "average loss" (mean) of the 10 is $61 each -- although most gamblers (mode) and the gambler in the middle of the pack (median) lost around $30 each.

Were there more heavy bettors during the opening month? Gamblers who check out all the new casinos, but soon thereafter settle back into their favorite places -- not unlike those who try out virtually all new restaurants in their home town? Some who bet over their heads and have either learned, or find themselves sufficiently strapped financially, that they're not coming back?

I take the Press-Citizen's report that "The resort still is working on increasing its hotel occupancy numbers, Kehl said" to mean that, as one would expect, there are not a lot of hotel guests. Since most of the facility's revenue stream was projected to come from gambling (and most of that from slot machines), the lack of hotel revenue is not all that serious, but it's still not good news. As even the Riverside gambling casino predicted before it opened, most of its business comes from within an hour or so drive from Riverside. So there are not a lot of gamblers who need, or want, to stay overnight. And at least at the present time, aside from the gambling casino there's not a lot of reason to stay overnight in Riverside, Iowa.

Whether it turns into a genuine "resort" destination after the golf course is playable remains to be seen. The serious golfers I've talked to aren't that excited about playing the course, and none of them would be interested in staying over night.

So we need to watch the attendance numbers, the monthly net, and the average loss per visit figures, and how all of them are affected by the golf course next summer.

We'll know more a month from now, and even more in a year. Meanwhile, it appears that the Riverside gambling casino's financial success is not as much of a slam dunk as the Press-Citizen's headline suggested.

Technorati tags: , , , , , , .