Eagle Airport 3, Are Airport Subsidies a Taxpayer Bargain?

Draft 16 July 2015

Paying airlines relatively small sums to bring more visitors to Eagle County Regional Airport in return for gobs of new business could be a real bargain, if the numbers work out as expected. Very roughly, it could be $70 in added cost per household for $600 – $800 in extra wages and profits sloshing through the County each year1. Wall Street’s hedge funds drool over such returns.

The Eagle Air Alliance runs a program that subsidizes air traffic to Eagle County Airport through a Minimum Revenue Guarantee (MRG) program. It has a long history and seasoned management. They are nursing the idea of expanding the program.

Local governments kick some money into that port. As a whole Eagle County government units already spend $22,000 per Eagle County household annually. That’s life altering money.

The first hurdle for any program is: Do the benefits exceed the costs?

The County’s expensively built but never-used jail space is all cost and no benefit. It flunks. On the other hand, public K-12 education easily passes.

The air travel subsidies, too, appear to waltz right through a cost-benefit test.
A second hurdle is tougher: Is the project cost-efficient? Can it be done better or cheaper by another method or by someone else?

The Postal Service, public schools, and TSA all have critical missions, and each has difficulty with cost-efficiency.

Presumably the Vail Valley Partnership has wide peripheral vision and has determined that the MRGs deliver the most bang for the economic development buck against a universe of alternatives.

There are other considerations that different people will value differently. You’ll have to put your own dollar value on each.

* Government has only the smallest smidgeon of responsibility for results. In other organizations, this would reduce motivation and quality. If a program flops or even if it inflicts harm, no one can reimburse taxpayers – except taxpayers. What sense does that make? So caveat emptor.

* Democracy will certainly be eroded. Citizens will lose control over that money, perhaps for the life of the republic. Unless legally forced to do so, government will not be coming back to taxpayers for any re-authorization or reevaluation.

In the same vein, expect taxpayer-paid officials to promote the program along with vigorous cheerleading from financially interested third parties. Neither will be devoting equal resources to competing views.

* Is this corporate welfare? Well, yes. Yet the money is also economic fertilizer which benefits most county residents financially. Private efforts run into a free rider problem. All visitor businesses benefit directly, but they cannot be forced to pay.

Yet taxpayers have a long and illustrious history of being easy marks for special interests. Would the airline subsidies happen without taxpayer funds? There is no way to know unless all such subsidies are withdrawn.

* As public money is directly used to boost private business, citizens may demand a bigger say in the business affairs. It could embolden activist claims to more control of real estate development. It could lend momentum to political demands for wage increases. Or it could ignite ski instructors to claim the right to sell their own instructing services on the slopes. You see where this could go.

* Federal, state, and local governments spent an astounding $47,000 per household last year, nearly equaling national median household income. Claims that is it all well-spent meet are widely derided across the political spectrum. Adding still more taxes can easily be interpreted as a willful disregard for family finances.

These are tough issues. Perfectly legitimate, too.

There is a compromise position that could sidestep the questions above and result in more credible, healthier local governments, a more productive society, and a more prosperous citizenry.

When Will Rogers wisecracked; “Be thankful you don’t get all the government you pay for”, he was funnin’ with the popular notion that if government was more effective with money it would only do more damage. That may be an exaggeration, but there is a point that at least some public spending subtracts from the common good.

All of those 1,350 Eagle County property owners2 whose real estate was foreclosed upon during the last recession could have used that $22,000 annually which local governments spend on their behalf, to stay in their homes instead.

Most residents would find common ground in the thought that tax money spent catching a murderer is far more valuable than the same amount of money spent running deserted busses up and down the valley.

The answer is to totem-pole local government spending by effectiveness. Programs that fall to the bottom of the totem pole should be dropped and the money spent on projects that rank higher or even be returned to taxpayers. It is sound management.

The best way to generate support for new spending is to prove that current spending is cost effective

1 There are soft spots in most economic projections

2From county data base.

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