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What happens when taxpayers are forced to subsidize a project that ultimately fails? Well, they receive neither a refund nor an apology. Instead, politicians keep using the fruits of their citizens' labor to fund pet projects. A hotel in Baltimore is yet another example of how governments waste the public's dime, especially when that investment ends up in the trash bin.
A Hotel in Baltimore
Almost 20 years ago, Baltimore committed $300 million to construct a hotel of more than 750 rooms in the heart of downtown – the largest in the area. It was meant to be a major money maker for the city and a revenue generator for the government. Instead, new documents suggest the hotel has been a waste of an investment.
The hotel's occupancy rate declined to 52.3% last year, far below officials' target of 74%. Even as demand slumped, the hotel charged customers an average of $204.
As a result, the city has spent an extra $143 million to keep the hotel's doors open, and much of the original debt remains unpaid. Local leaders are optimistic the project will eventually pay dividends as Baltimore hosts a number of major events and convention bookings. A nearby Sheraton hotel shuttered its doors. Some are skeptical.
Local economist Anirban Basu told the local Fox affiliate that even if the city sells, it would exacerbate financial challenges to taxpayers. "Who's going to buy it and at what price? And the city still owes money on those bonds that it issued," Basu said. “I think right now you've got to tough it out. You've got to expand the value of this hotel. Wait for interest rates to fall. Wait for the hotel market to heat up a bit, and then maybe at some point in the future sell the hotel.”
Meanwhile, taxpayers are stuck with the bill. Will governments ever learn?
Feeling Blue
A deeper dive into the story also suggests the ongoing economic challenges that blue states or cities face. If a hotel in a major urban center cannot thrive, then what can exactly?
Over the last few years, scores of studies and analyses have indicated a plethora of issues in these places. This past spring, the Committee to Unleash Prosperity reported that almost $2 trillion in economic growth fled blue states and traveled to red states over the last decade. That number is larger than the gross domestic product (GDP) of some nations.
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A key factor is the overall cost of living, from taxes to energy. For example, estimates suggest blue states tend to pay about 25 cents per gallon more for gasoline than red states. A recent Council of Economic Advisers report found that blue states have year-over-year higher inflation rates than conservative ones. Liberal-run states generally have higher tax rates than their red counterparts, especially to fund their generous welfare programs. In fact, seven states allocate more than one-third of their budget to welfare.
So, while politicians like to turn to taxpayers to fund their boondoggles, the disrespect for finite money is also driving major revenue generators away.
Where’s the Refund?
How does John Smith get a refund for the money taken out of his paycheck or the tax from his property and used to pay for a hotel? He can’t. And there lies the quintessential problem for taxpayers, something that is unlikely ever to be resolved. The current administration has focused on investigating fraud, waste, and abuse. But will those investigations also delve into the unwanted allocation of John Smith’s tax dollars toward hotels, wind farms, and other endeavors requiring lavish subsidies?
