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DATE News (chronologically)
08/30/11
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Baltimore needs Grand Prix to be a hit UPDATE Looking where they put the pit road for the Baltimore street circuit, there are no grandstands, just one at the far end.  This is the location that many fans like to sit.  This is quite unfortunate really, but still the track is a good one.  They better have an abundance of large TV screens for the fans to see the pitstops.

08/29/11
Let me start by saying I'm rooting hard for the Baltimore Grand Prix.

I hope this weekend's big IndyCar race through the downtown streets is a huge success that drowns out all the whiners. I hope the city makes money and the bars and restaurants make money and we don't see any cars crash and go spinning into the Inner Harbor, which tends to upset the tourists climbing onto their water taxis.

I hope race organizers get the 120,000 or so spectators they're hoping for and Baltimore becomes known for throwing a great road race, instead of for how many bodies they find on our streets.

But, boy, has this race been slammed by bad publicity so far.

First, you had folks who live and work downtown complaining about the street repairs and traffic congestion caused by race preparations.

Then you had people freaking out about all the trees (136) that were removed downtown to improve sightlines for race watchers.

(Look, I'm a tree-hugger myself. But how do you tell someone who paid good money for a race ticket: "Just peer between the branches of that dogwood over there and you'll be fine"?)

Then The Baltimore Sun published this big story about race founder Steven Wehner, with all sorts of inconvenient and unsavory details about his business struggles and prior addictions to cocaine and crack.

Then news broke that Wehner had filed a lawsuit alleging that the current race organizers had defaulted on payments to him.

And now Danica Patrick, a huge IndyCar star and a one-woman marketing machine in the world of motor sports, has announced that she'll race full-time in NASCAR next year.

Is that perfect timing or what?

I bet Jay Davidson, the CEO and president of the Baltimore Grand Prix, went nuts when he heard that one.

At a news conference called to announce her decision a few days ago, Patrick said: "Moving to NASCAR is where my heart is and where I really feel my future is, and not about the money."

Translation: It's about the money. Oh, you betcha.

But at least Patrick isn't blowing off the Baltimore Grand Prix, which would've really dealt a body blow to the race.

No, she'll be showing up here for one of her last IndyCar races, and I'm looking forward to seeing her, since she's about the only driver I can recognize without a program.

Dario Franchitti, Will Power, Scott Dixon, Ryan Hunter-Reay — they might be big-name drivers on the open-wheel-racing circuit.

But they haven't appeared in a popular GoDaddy.com commercial wearing a sleek black racing outfit, full makeup and high heels. And I hope they never do, quite frankly.

Marco Andretti, he's got the famous name and the racing genes, courtesy of his father, Michael, and his legendary grandfather, Mario. But I wouldn't know Marco Andretti from Adam.

(Uh-oh, I just discovered — this is absolutely true, you can look it up — that GoDaddy has signed Marco Andretti to be another of its spokespersons. No word yet on what kind of attire he'll wear in the commercials. We can only hope it's not … no, let's not even go there.)

Anyway, with or without an appearance by Patrick, I'm looking forward to the big race this weekend.

I'm looking forward to seeing high-performance racecars screaming around the city streets at 180 mph, especially since I'm usually doing a robust 5 mph when stuck in traffic on those same streets, like Pratt and Conway.

I drove part of the course the other day — this wasn't even rush hour — and got up to a whopping 15 mph on Russell Street, at which point I felt like strapping on a racing helmet, we were going so fast.

Have you been downtown lately? With the grandstands lining the streets and race walls and safety fencing in place, it looks like a foreign city. Monaco on the Patapsco, maybe.

But the truth is, I hope the Baltimore Grand Prix does really well this weekend.

I know the race is a big gamble for a town like Baltimore, which is sometimes leery of big ideas and big projects — especially something as exotic as a road race plunked down in the middle of an urban setting.

And I know IndyCar races failed famously in places like Detroit and Washington and San Jose, Calif.

But I want it to be a big hit here.

This city needs a big hit. Needs it in a big way, too. Baltimore Sun

How Property Taxes and the 'Curley Effect' Are Killing Baltimore

As affluent residents leave town, the political playing field tips further and further in favor of pro-tax Democrats.

By STEVE H. HANKE & STEPHEN J.K. WALTERS, THE WALL STREET JOURNAL - AUGUST 26, 2011

This coming Labor Day weekend, traffic in downtown Baltimore will move at more than 100 miles per hour—or not at all: The city's main streets will be closed so that IndyCar racers can compete in the inaugural Baltimore Grand Prix. Much more than prize money is at stake.

Nine days later, on Sept. 13, voters will pick a mayor, and incumbent Stephanie Rawlings-Blake is betting that the auto race will draw thousands of free-spending tourists and stimulate the local economy, thereby demonstrating her vision and competence. In fact, it will be an economic dud, a money-loser even for its promoters, and a logistical nightmare for residents.

The race exemplifies the city's development strategy: Subsidize big downtown projects with other people's money—in this case, over $6 million in federal stimulus funds for the two-mile race course—and proclaim an urban renaissance.

Away from the waterfront, this strategy's failure is apparent. The city has lost 30,000 residents and 53,000 jobs since 2000, marking the sixth consecutive decade of population and employment exodus. About 47,000 abandoned houses crumble while residents suffer a homicide rate higher than any large city except Detroit. The poverty rate is 50% above the national average.

Much of this decline is a result of the city's exorbitant property-tax rates, which are twice as high as any other jurisdiction in Maryland and Washington, D.C. The encouraging news is that all four major mayoral candidates are promising property-tax relief.

Baltimore Mayor Stephanie Rawlings-Blake announces the Baltimore Grand Prix
Ms. Rawlings-Blake promises an inconsequential cut to 2.068% from 2.268%, spread over nine years. It would be "paid for," she says, with revenue from a casino that doesn't exist. Her reluctance to consider stronger medicine reflects not only poor economics but something more sinister.

To attract what little investment Baltimore has in recent decades, public officials awarded subsidies to big developers to offset the difference between the city's confiscatory tax rate and that of nearby counties. But developers have to "pay to play," which assures a reliable flow of campaign contributions to sitting officials—and invites corruption. Indeed, Ms. Rawlings-Blake took office only 18 months ago, after the previous mayor resigned as part of a plea bargain to resolve a scandal involving her allegedly accepting gifts from a developer seeking subsidies.

Now Ms. Rawlings-Blake's challengers are asking: If tax breaks for the connected are a good idea, why not give them to everyone? State Sen. Catherine Pugh promises to halve the city's tax rate in her first term or not run for a second. Otis Rolley, a former director of city planning, offers a similar 50% cut for the first $200,000 of assessed value and higher rates for more expensive properties (or vacant ones). And Jody Landers, a former city councilman, promises a cut of 30% to 35% phased in over four to six years.

But tax revolts are hard to win at the local level. The problem is what Harvard economists Edward Glaeser and Andrei Shleifer have called the "Curley effect." In Boston during the first half of the 20th century, Mayor James Michael Curley built a political machine by strategically shaping the electorate—taxing well-heeled "Brahmins" heavily and redistributing the proceeds to poor Irish immigrants. This not only bought Irish votes but chased the old Yankees out to the suburbs, further tilting the political playing field in Curley's favor.

In modern Baltimore, the machine has exploited class divisions, not ethnic ones. Officials raised property taxes 21 times between 1950 and 1985, channeling the proceeds to favored voting blocs and causing many homeowners and entrepreneurs—disproportionately Republicans—to flee. It was brilliant politics, as Democrats now enjoy an eight-to-one voter registration advantage and no Republican has been elected mayor in 48 years.

But Baltimore's high property taxes have repelled investment in physical capital for decades. As that capital decayed and became scarce, labor became less productive and less prosperous. In 1950, the city's median family income was 7% above the national average. Today it is 22% below it. And it won't be easy to undo this damage as long as City Hall remains in the hands of politicos who are committed to a fatally flawed business plan.

Other noteworthy victims of the "Curley effect" have been rescued via statewide referenda. Boston, for example, was in worse shape than Baltimore back in 1980: Its population had fallen more in the preceding three decades (30% as opposed to 17%), its per capita income was 2% lower, and its crime rate was 42% higher. Then, in 1980, Massachusetts voters adopted Proposition 2½, forcing Boston to cut property taxes by an estimated 75% within two years and capping future annual increases at 2.5%.

It was the kind of reform Boston needed but wouldn't have chosen itself (akin to California's earlier Prop 13, which revived cities like San Francisco and Oakland). Businesses and residents flocked back to Beantown. Its population rose 10% between 1980 and today, while its per capita income is now 43% higher and its crime rate 25% lower than Baltimore's.

The spillover benefits of capital-friendliness—enhanced public safety, school quality, and economic and social mobility—are much-ignored but crucial elements of tax reform. As the renowned urbanologist Jane Jacobs once said, "cities don't [just] lure the middle class. They create it."

Baltimore stopped creating its own middle class decades ago, but it has a chance now to reverse decades of disinvestment, depopulation and decay. All voters have to do is invite capitalists back to town for more than just a weekend car race.

Mr. Hanke is a professor of applied economics at the Johns Hopkins University. Mr. Walters is a fellow at the university's Institute for Applied Economics, Global Health, and the Study of Business Enterprise.

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