Squandering wealth

Dayton government’s most wasteful deals

Sitting as an idle eyesore since 2014 and originally destined to be subsidized Sinclair College student housing, City of Dayton bailed-out and owned most of the old Dayton Daily News building until recently handing it over as debt payment to the demolition contractor.

By Mark Luedtke

It’s not taxes that make us poorer. It’s government spending. If the government collected taxes and burned the money, it would result in a general reduction of the money supply, but the supply of available goods would remain unchanged. Prices would fall so we’d have the same standard of living at a lower price.

But when the government spends tax or borrowed money it collects, it reduces the supply of goods available to the people. We have fewer vehicles, less property, clothes, food, and other goods to purchase, so our standard of living drops. The government bids up the prices for those goods as well, further lowering our standard of living.

When it comes to so-called economic development, government deals do more damage than normal spending because they encourage wasteful investment. Not only is the subsidy squandered, but some or all of the private investment that follows is squandered as well.

Economic developers, including Dayton Mayor Nan Whaley, recently admitted as much. The Dayton Daily News reported, “Since 1981, the [federal historic tax credit program] has made about 64 tax credit awards that have helped redevelop functionally obsolete and vacant buildings in Dayton that otherwise had little to no hope of being revived, the city said.”

There’s no profit to be made on these projects, so investing in them destroys wealth. Government intervention keeps wealth-destroying properties from being repurposed or replaced with profitable enterprises at market prices.

The City of Dayton is infamous for squandering tax dollars on deals. Here are a few.

One of the major economic development central plans of the last decade is the redevelopment of the former Dayton Daily News (DDN) site. Bureaucrats recruited a firm which pledged $13.5 million to redevelop the property to house students for subsidized Sinclair Community College.

Bureaucrat Aaron Sorrell claimed, “The market is unquestionably there. The market studies that have been done over the years have shown a huge demand for student housing…This project of 350 beds just scratches the surface of the demand.”

Bankers didn’t agree. They refused to fund the project so bureaucrats spent $1.2 million on the project and arranged zero interest bonds and historic tax credits to fund it only to have it stall.

Last May the DDN reported on the consequences. “The city of Dayton now officially owns most of the former Dayton Daily News site along West Fourth Street,” according to the site. “The deed to the property was transferred this week.”

All that wealth down the drain on what even the DDN calls an eyesore. The bankers, not the bureaucrats, proved right.

I could write, and have written, multiple articles about the wealth squandered on Dayton’s Arcade. It’s a never-ending sinkhole of tax dollars, cronyism, and broken promises.

The latest plan promises $90 million of investment to produce mixed housing and retail in the Arcade. Just like every previous plan. But, as the DDN reports, there’s always a however. “However, the financing package needed to make the arcade viable is still a long way from full assembly,” it noted.

The group won a total of $9 million in state historic tax credits, but according to the DDN the developer’s application noted “Market conditions in Dayton will not support the cost without some outside incentive,” so don’t get too excited.

Two recent DDN articles inadvertently explain the bigger problem. First, a PNC office building downtown recently sold for $1,050,000. Second, “There’s a lot of empty, outdated office space in Dayton, particularly in downtown where the vacancy rate remains one of the highest in the country, according to a national real estate firm,” it wrote.

That informs us of the market price for downtown real estate. There’s a tremendous supply of office space and little demand so the market price of downtown real estate is low. Spending $90 million to redevelop the Arcade cannot be justified when an entire office building a few blocks away just sold for $1 million.

The Levitt Pavilion deal follows a similar pattern. Whaley’s pet project, promoted for political reasons, not economic, came with a $5 million price tag. While this funding is presented as voluntary, that’s only partially true. To stay in Whaley’s good graces, she’s running for governor, the politically connected had to pay. In addition, the city pledged $1 million to the project.

Then the lone project bid came in nearly $3 million over budget. Nobody wanted the deal. Whaley had to twist arms to get the project rebid close to $5 million, but that’s just on paper. The real cost will be higher.

Not only will that wealth be squandered, but the popular Dave Hall Plaza is also being squandered. The property is being turned over to the Dayton-Montgomery County Port Authority.

As with the Arcade, this expense cannot be justified with the RiverScape music venue only several blocks away.

And just this past week, City of Dayton announced they will bail out the Dayton Convention Center’s failure to operate within budget over the past five years to the tune of $1.8 million. But don’t forget, just as the Levitt Pavillion is being touted as the savior of Dave Hall Plaza, the Dayton Convention Center was promised to do the same for the city when it was originally built in the 1970’s.

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Reach DCP freelance writer Mark Luedtke at MarkLuedtke@DaytonCityPaper.com.

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