Do We Need Infrastructure Spending Like This?

We have all seen plenty of news about crumbling infrastructure, but the worst of the worst is the number of bridges in America that need re-building. Now that is scary! It is important that we get serious about fixing this problem, because the average age of our bridges is approaching the normal design life of 50 years – and many are well older than that. An estimated one-quarter of all bridges are structurally inadequate or deficient in some other important regard. We all remember the collapse of the bridge in Minneapolis a year ago. There are decaying public structures all over, but just for bridges, the cost estimates are all over the map – and $1 trillion doesn’t seem out of the ballpark.

Speaking of ballparks, it was with some surprise that I saw that the New Jersey Nets professional basketball team is hoping to move back to New York. Will they be the New York Nets or the Brooklyn Nets? The reason for the confusion is that the team’s new home is likely to be in Brooklyn.

The owner of the team has just successfully floated a $500 million tax-exempt bond issue to help finance the building of a new stadium for the team. Combined with some $450 million in equity, the cost would be over $50,000 per seat for the 18,000 seat facility. It has also been announced that an 80 percent interest in the team and a 45 percent interest in the venue has been sold to a Russian billionaire.

The IRS has entered the fray too, ordering that the financing “loophole” be plugged. It is not clear that having the city create a “charitable entity” under 501(c)(3) in the IRS tax code to build the arena would be approved. New York City and state officials have applied to the IRS for an exemption. This is just y opinion, but I don’t see that soaking up American capital to construct an arena is as important as building bridges. And, even worse, using the IRS tax code to provide tax benefits to a Russian billionaire flies in the face of being “right.” Why doesn’t he buy a team in Minsk?

This news comes amid a veritable blizzard of news that similarly financed stadiums across the country are in financial trouble. These cities include Cincinnati, Indianapolis, Milwaukee, Columbus, Ohio, and the Phoenix, Arizona area. One would guess that if the financing in all such ventures were examined, even more of them would be added to the list.

This appears to be just one more area in which the public good – rebuilding bridges, for example – gets subverted by some local glamor project like a sports arena. I suppose that getting some bank – Barclay’s Bank in this case – or a beer or soft drink company to put its name on a stadium is easier than getting the same company to pay millions to “sponsor” a bridge over some local river. How much beer would that sell?

Yet as this plays out in my mind, I cannot help think about decline of the ancient Roman Empire. I’m sure you remember the stories from school where the emperors sponsored gladiatorial combat in the Coliseum to keep the “mob” satisfied. That kept their minds off of the reality that the Roman Empire was in a state of long-term decline.

Sic transit gloria mundi.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower
articles, Randy is a mortgage broker who has financed over $1 billion
in properties. He writes about home buying and real estate finance
topics for CreditBloggers.com.

Randy Johnson Randy is a Credit.com contributor and seasoned mortgage expert. He writes about home buying, mortgage laws and real estate finance issues. He has financed over $1 billion in properties, is the author of How to Save Thousands of Dollars on your Home Mortgage and he is a feature columnist for Savvy Borrower.