The lede: "Residents, diners and contractors at The Banks development on Cincinnati’s riverfront soon may pump $91.6 million a year into the local economy, a new report shows."
Story goes on to say, in summary, that when the project is built-out (1,200 more apartments/condos plus a large office building and a hotel) that the annual economic impact of the project will add up to $276 million. All that for a mere $157.8 million in city and county "investments."
This happy news is featured alongside a photo of Cincinnati's mayor playing air guitar with a giant pair of ribbon-cutting scissors. Ugh.
I'm glad to see Cincinnati making use of its prime real estate assets. I've visited the Banks area. Very nice. Very pricey parking. Nice place for dates and entertaining out-of-town guests.
But just because it's a nice-looking project doesn't mean we should, as taxpayers, trade in the green eyeshades for rose-colored glasses.
I saw several unanswered, possibly unasked, questions in this story. I don't know if the missing information comes at the hands of the boosteristic authors of the University of Cincinnati Economics Center's study or the boosteristic coverage from the Enquirer or both. Either way, the only grade this report deserves is "incomplete."
For the sake of discussion, let's agree that the spending and income numbers in the story are accurate. The story still paints an excessively optimistic picture.
Let's start with that lede phrase: "soon may pump $91 million" Soon? When? Story never does tell us the current economic impact of the Banks.
Story also assumes a full build-out by 2020. Which means we won't be seeing the touted $276 million impact kicking in for another eight years. Yet why should anybody trust that assumption on timing? The Banks so far has not met early expectations for completion. Along the way, the developers of the project have changed and the planned content of the project has changed. A lot. Remember Corporex? I think we will see even more changes to the plan in the next eight years.
The Enquirer story states: “It’s a great testament for public-private partnerships,” says Laura Swadel, vice president of Carter (one of the developers in the project). “Clearly, there is an investment on both parties’ side, but the payback is tremendous, and it’s usually very quick.”
Quick? Is 2020 "quick" for a project that's been talked about since 1996? And payback for who? The business interests? Or the taxpayers?
The Banks is a major project that deserves serious news coverage. So where are the voices of reason and common sense? The lack of quotes from skeptical, reality-check sources reduces the Enquirer's article to little more than an unpaid advertisement. So let's try to look a bit deeper at what wasn't said in the story.
How much of that $276 million in project economic impact is actually new to the local economy? Surely there's some way to factor this in.
Yes the buildings are new. So property tax valuation should go up a lot and some large checks should be written every six months, right? Assuming tax giveaways aren't involved, assuming the land is taxable. Is land under the Banks public or private? I don't know.
The business tenants seem to be mostly new, or at least expansions of existing franchises. So their sales taxes would be new, right? But how much of the spending is being taken away from other competing restaurants in downtown, near downtown and across the river? The report seems to assume all the spending at the Banks will be new spending.
What about those "new" residents? Well, at least some are from out-of-town. Right? We don't really know. If the residents are truly new to the region, then their spending is new to the region. But if most of the new residents of the Banks are just people who lived elsewhere in town, then their spending isn't a net gain to the local economy, although it might be a gain to the city of Cincinnati if the local residents moved in from outside the city's borders. Sadly, the story makes no mention of whether or not the UC report attempted to account for these factors. Instead it seems to assume that all the residents' spending should "count."
What about job creation? First of all, a recent State of Downtown report indicates that overall job numbers in the downtown-OTR-Pendleton area is DOWN 2,000 jobs from the year before. Maybe those figures would be even worse without the Banks. So, how many of the people getting jobs at the Banks were actually unemployed at the time of hire? Those jobs would clearly count as a boon to the economy. But many businesses in this tough economy are not replacing workers who leave. So we cannot tell how many of the new jobs at the Banks are really new jobs for the area. How many competing restaurants will lose business or go out of business because crowds shift to the Banks? How many jobs will be lost because of the Banks? Again, no indication of an effort to offset the projected spending with such factors.
What about the public tax benefit? How do we know if this is a good "investment" for the taxpayers? The story states that taxpayers face paying off more than $157 million in public support for this project. Yet the story was very incomplete in terms of stating how much new tax revenue this new development will generate.
First, the story says nothing about the various tax breaks, cheap loans and other forms of subsidy used to attract business to the Banks. Were those dollars factored into the $157 million? How many more subsidies will be needed for that new office building and that new hotel?
The story does state that businesses will be paying sales taxes and Banks workers and residents will be paying income taxes. Yep -- even though a county report indicates that only 9 percent of the construction workers on the Banks actually live in the city. So are those taxes actually net gains to the city and county? If success at the Banks sucks business away from Fountain Square or the nightlife areas in OTR, that's not a gain. And what if those damaged places later need public "reinvestment" to be rescued? And if the Banks hurts businesses on the Kentucky side of the river? Well, that becomes Kentucky's problem. But if that side of the river suffers, so too does our regional economy.
The hope underlying the Banks project is that this will be a ship that helps lifts all other boats. That a vibrant riverfront will attract more people and more business to the region.
“Overall, The Banks has been the economic generator the city envisioned, and it will continue to be,” City Manager Milton Dohoney Jr. told the Enquirer. “Its success is validation that choosing to invest in economic development, particularly during the recession, has positioned this city for even greater growth, put people to work, and is attracting people from all over to spend money here.”
I want Dohoney to be right. But Dohoney is talking early.
Let's talk about tourism dollars from the Banks. If a hip-hop-happening downtown does in fact attract more conventions, out-of-region concert visitors and weekend tourists, great. Such money would be new to the local economy. And the recent State of Downtown report does claim some gains in hotel room nights downtown. We will have to wait for future reports to see how much the Banks really boosts downtown, and in so doing actually boosts the region. Assuming that the growth can be separated from the new casino under construction downtown. (And I can't wait to see how the urbanista spin-meisters will credit the yet-to-be-built streetcar for inspiring casino and Banks-related growth.)
The Banks is by far the biggest spinoff from the stadium projects. And yet, getting to this point cost more public investment and took far longer to get off the ground than expected. And now, even after the budget-busting stadium sales tax debacle, nobody seems to be asking when and how all these subsidies for the Banks will be paid back.
So, sorry Mr. Dohoney. As a taxpayer, I will hold my applause for the Banks -- as nice as it seems to be -- until I see the net gains in city population, the net gains in city income tax revenue, the net gains in county property and sales tax collections. I'm not very impressed by promises about what "soon may" come.