Friday, August 17, 2007

Cable, Coralville, Coal and Consultants

August 17, 2007, 8:15, 10:40 a.m.; 9:20 p.m.

Stories Worth a Read, a Comment -- And Keeping an Eye On

All's Fair in Athletics and Cable Television

Negotiations continue between the "Big Ten Network" (BTN) and Mediacom. Andy Hamilton, "BTN Increases Pressure on Mediacom for Deal; UI Officials Urge Hawk Fans to Push for Network," Iowa City Press-Citizen, August 17, 2007, p. A1.

At the outset, recognize that "there's no such thing as a 'free cable channel.'" When cable program suppliers raise their prices to cable distribution companies, or when a new channel is added the cable company must pay for, that additional cost is going to find its way into every cable subscriber's monthly bill -- unless it's a "pay channel" for which the cable company recoups its cost by charging those cable subscribers who choose to pay extra for it each month.

Also recognize -- as if it could have escaped anyone's attention -- that collegiate athletics are now a classic example of the corporatization of the academy. They are in the profit maximizing business as much as any Fortune 500 corporation. They're paying coaches multi-million-dollar salaries, undertaking $100 million refurbishing projects with their venues, selling off both skyboxes and advertising on scoreboards to the highest corporate bidders, and entering into partnerships with organized gambling. So that's the context in which this BTN was created and is engaging in negotiations with the cable industry -- over our money. They will continue to stick it to their fans with everything from compulsory "contributions" to their program as a requirement before one is entitled to buy tickets, to overpriced hot dogs as well as ticket prices, to raising our cable bills -- up to the point that their overreaching so irritates fans that it produces a decline in the athletics programs' revenue.

From my perspective the controversial choice -- make every cable subscriber pay for a channel many don't want (BTN) so those who do can have it for "free" (i.e., at a disproportionately small increased cost for expanded basic paid by all cable subscribers) ,or make those who want it pay the entire cost as a "pay channel" (like HBO) -- is but a sub-set of much larger issues.

If I had my way, cable would operate as a common carrier. That would still allow the cable company owners to continue to attain riches beyond their wildest dreams of avarice -- by sucking money out of both ends of the straw: charging both those who want the cable company to distribute their programming and those who wish to receive it. (Once you get a cable system built the money just keeps on rolling in every month and the primary capital investment is for the wheelbarrows to carry it all to the bank.)

Like the AT&T of old, cable companies would be required to run a cable past everyone's home, and to expand their cable carrying capacity as necessary so as to be able to handle the programming of every program suppliers who was willing to pay their carriage fees.

The cable customers would then pay on the basis of individual channels chosen. The cost per channel would vary, depending on the number of subscribers and what the cable company and program supplier wanted to charge -- in short, it would be set by the market (presumably to optimize profit, taking into account alternative sources of supply). (And I'm assuming, for purposes of this discussion, that the average, total monthly cost per subscriber would be the same, or less, than it is now; in other words, that the companies' total costs and profits would remain the same.)

This system would eliminate the self-dealing (cable companies that own cable programming suppliers tend to favor them) and censorship. It would create more opportunities and make for a more competitive economic marketplace for those in the program production business. It would create a much wider range of choice, a much more diverse "marketplace of ideas," for the audience. And it would also more fairly allocate costs with benefits and individuals' choice.

Sorry for the long introduction, but it helps put the BTN in perspective.

I short, in my ideal world there would be no need for negotiations. BTN, as a matter of legal right, could have its programming distributed by Mediacom. It would be available for anyone who wanted to pay the fixed price for it. But no one who did not think it worth the price would be required to subscribe.

An analogy? Go to Time, Inc.'s, magazine Web site. It provides links to 18 of Time's magazines. Requiring you to pay for the BTN -- which is what putting it on "expanded basic" does -- would be like Time saying in order to get Time, the news magazine, you have to subscribe to (and pay for) all 18.

Another? Imagine going to one of those cineplexes with 12 theaters and having to pay a flat fee based on the assumption you're going to watch all 12 movies when you only wanted to watch (and pay for) one.

Bottom line -- since we're not going to be re-organizing the cable industry and its regulation anytime soon? I think BTN should be a pay channel.

What is it About the UI and "24th"?

The reactions of colleges and universities to the U.S. News & World Report annual ranking of all of them would be amusing if it weren't so serious.

Anyhow, in this morning's story (the rankings are online this morning and will be in the magazine Monday) we discover that the university Sally Mason recently left is tied for 24th (among public universities), the university to which Mike Hogan will soon be departing is tied for 24th, and the university to which President Mason came is also tied for 24th.

Iowa often works from a benchmark of 25th (among the 50 states) -- e.g., we want to bring our teachers' salaries up to "average." I'm reminded of the lyrics:

Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you.
"Stuck in the Middle With You."

Brian Morelli, "UI Moves Up One Spot in Annual Rankings,"
Iowa City Press-Citizen, August 17, 2007, p. A1.

Desperately Trying to Put a Good Face on TIFs

One of Coralville's more prominent TIFs, the Coralville City Council-Marriott Hotel is celebrating its first birthday. It was cause enough for the Press-Citizen to devote an editorial and page-three story to the accomplishment. Editorial, "So Far, City's Gamble Seems to be Paying Off," Iowa City Press-Citizen, August 17, 2007, p. A11; Kathryn Fiegen, "Coralville Marriott Celebrates 1 Year; Hotel Looks to Its Future Growth," Iowa City Press-Citizen, August 17, 2007, p. A3.

In fairness, the editorial did acknowledge some of the downside of this venture:

Many local residents had -- and continue to have -- some ideological and pragmatic concerns about the venture. Some local hoteliers, arguing that city governments never should be involved in economic development projects that compete with other businesses already in the marketplace, brought a suit against the city to block the construction. . . . Others saw -- and continue to see -- the project as another example of Coralville officials overusing Tax Increment Financing districts as a means to boost economic development.

It's true that the hotel is not expected to hit full stride -- more than 70 percent occupancy and nearly $17 million in annual sales -- until 2010. And the project itself won't be paid off until sometime in the next 20 to 35 years.
Before this section of this blog entry was even written and uploaded there was a comment taking issue with what the author presumed I was going to write if ever I got around to it. Talk about prescience; he was right.

Here's the comment:
Ben Richards said...

I will defend the use of TIF. In many cases, TIF goes to build a specific piece of infrastructure such as a road with storm sewer. It does not "take away" funding from other entities because the tax base in question was not there to begin with. Not only that, cities are able to access the tax base right away for their debt service levy, which means lowering the cost of police and fire vehicles and any other projects using that levy. TIF was also used to revitalize the Sycamore Mall area. It is an indespensible tool for cities in economic development.

I see a lot of ignorance over what TIF is and the economic development scene in general.

8/17/2007 09:01:00 AM
Well, I've often acknowledged my own ignorance when it comes to TIFs. All I've had to draw and rely upon are common sense, intuition -- and the analysis by economists who do understand TIFs and other forms of corporate welfare. Because I've already written here at such length about TIFs, I'll just provide links to some of what has gone before, rather than just repeat it. I doubt that it will persuade Ben Richards and other advocates (and beneficiaries) of TIFs, but for any who are curious it will tell you probably more than you care to know about the basis for my own positions on the practice.

Nicholas Johnson, "TIF-ing My Toolshed," September 2, 2006.

Nicholas Johnson, "Supervisor Sullivan Says TIF, TIF, Tsk, Tsk," September 16, 2006.

Nicholas Johnson, "Press-Citizen Says 'Tough TIF,'"
September 22, 2006.

Nicholas Johnson, "Why Do They Hate America?"
October 2, 2006.

Nicholas Johnson, "Understanding TIFs (Revised 10/06/06)," October 5, 2006.

Nicholas Johnson, "Call the Cops: $3.755 Million Robbery in Progress,"
October 18, 2006.

Nicholas Johnson, "More on Corporate Welfare from 'Hat's Off' Winner," October 22, 2006.

Nicholas Johnson, "It's Not About 'Taxes,'" October 24, 2006.

Nicholas Johnson, "Riverside's Deeper Gambling Debt," November 11, 2006.

Nicholas Johnson, "UI Held Hostage Day 490 - Search & Taxes," May 26, 2007.

Nicholas Johnson, "The Terrible TIFs,"
July 26, 2007.


- Continuing Saga of CEO Responsibility: Coal Mines, Shuttle Flights and Retirement Homes

- Johnson County's "Affordable Housing": Consultant Proposes 450-Bed Jail

. . . more to come

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2 comments:

Ben Richards said...

I will defend the use of TIF. In many cases, TIF goes to build a specific piece of infrastructure such as a road with storm sewer. It does not "take away" funding from other entities because the tax base in question was not there to begin with. Not only that, cities are able to access the tax base right away for their debt service levy, which means lowering the cost of police and fire vehicles and any other projects using that levy. TIF was also used to revitalize the Sycamore Mall area. It is an indespensible tool for cities in economic development.

I see a lot of ignorance over what TIF is and the economic development scene in general.

John Neff said...

The ugly truth is that nobody can give a reliable estimate of the Johnson County Jail population in 2020 and 2030. What can be done is to look at the history of jail population growth and make assumptions about future growth. The simplest assumption is the jail population will continue to grow at the same average rate.

In 1983 the average daily population (ADP) of the jail was 29.4 inmates and at an average growth rate of 6% per year the predicted ADP in 2006 was 112.3 and the actual ADP was 111.6 but almost all of the intervening years had ADPs above the predicted value. What this means is jail population did not grow at a uniform rate at the beginning is grew at a rate large than 6% and the end at a rate lower than 6%. Between 1997 and the first quarter of 2007 the average annual growth rate was about 5%.

If you use a average growth rate of 6% the predicted jail population in 2020 is 252 and in 2030 it is 452 essentially the numbers supplied by the Durant representative. For a 5% average growth rate the predicted populations are 221 in 2002 and 360 in 2030.

I was not at the meeting so I did not hear the presentation by Mr. Lewis the Durant represetative but evidently he was saying that when you design a jail you have to specify the maximum size so there service areas are large enough to handle the maximum capacity when the jail is expanded. My interpretation is that 450 is his preliminary estimate of the maximum size. My first question is how does the initial cost depend on the specified maximum size and my second question is what will it cost us if we cannot expand the jail because we choose a maximum size that was too small?