Isaac Laquedem

A new twist on the Nigerian bank fortune scam

I received this e-mail today, with the alluring title "IRS Survey : $80.00 to your account - Just for your time!" :

Congratulations!

Dear Customer,

You've been selected to take part in our quick and easy 8 questions survey
In return we will credit $80.00 to your account - Just for your time!

Please spare two minutes of your time and take part in our online survey
so we can improve our services.
Don't miss this chance to change something.

To continue click on the link below:

http://www.irs.gov/login.asp=survey

© Copyright © 2007 Internal Revenue Service U.S.A

VMJXXNKCYDQOSVWGQCRNFDCHZGVCPXIZPDJTIJ

The link itself didn't, of course, go to the IRS, which would much rather collect money from me than pay it to me, but to a site identified in the source code as "http://www.tehran.agri-jahad.ir:84/redirect_Survey.htm".  Undoubtedly the promise of an easy $80 is less attractive than the millions of oil money redirected to a bank account in Ghana, but people are perhaps more inclined to take the bait if it appears to come from the good old USA.

The hotel is half full, or maybe half empty, depending on whether you're an optimist or a pessimist

One puzzling thing about the economic study that the Portland Development Commission is using to justify spending $150 million on subsidizing a new hotel next to the convention center is that it says that the new hotel would, by 2013, generate 104,000 net new room nights per year in the Portland area.  This is predicated on a headquarters hotel of 600 rooms.  Not all of the new room nights would be at the headquarters hotel, but let's assume that all of them are.  (This is the best economic case for the hotel, because it assumes that the hotel captures every single room-night from the conventions that otherwise would pass over Portland.)

If so, then the hotel would be less than half full on average throughout a year.  (Take 104,000 room-nights, divide by 600 rooms, and you get how many nights each room would be occupied.  It works out to be 173 nights per year, or about 47%.)

No hotel runs at 100% occupancy, nor could it -- the wear and tear on the property is too great, and there's no time to remodel rooms.  Most hoteliers are content at 70% occupancy and delighted at 80% occupancy.  Downtown Portland business hotels are running at about 75% now.  A hotel that can't achieve 50% occupancy usually becomes a candidate for restructuring or bankruptcy.

So unless I'm missing something in the numbers, or unless there's going to be an ongoing public subsidy to the convention center hotel to keep it afloat, PDC is canvassing for dollars to build a losing business.

How to finance the Convention Center hotel

Mrs. Laquedem asked me about the construction at the Meier & Frank building in central Portland.  "It's going to be a store on the lower floors and a hotel on the upper floors," I told her.  "Where is all this money coming from for building hotels?" she asked as we walked toward the Vintage Plaza and the Lucia.

The money is coming from private investors, mainly, though the Portland Development Commission provided a loan of $14 million to assist Sage Hospitality convert the upper floors of Meier & Frank into 330 hotel rooms.  (That's about $42,000 per room, or "per key" as the trade slangily puts it, and it's a loan, not a grant.)  The hotel also received $72 million of federal tax credits.

That brought to mind the question of building a convention center hotel, which no one in the industry is willing to do without a large subsidy from PDC, Metro, or another generous government agency.  Phil Stanford suggests that $150 million of public (our) money would do the trick.  An economic study commissioned by PDC says that a 600-room convention center hotel would generate $2 billion in net present value of delegate and visitor spending over the next 20 years.

If this is true (and I'm dubious that it is) then we could easily finance a convention center hotel the same way that the city helped Hilton Hotels build its original downtown tower 40 years ago.  A corporation called Metropolitan Hotels was formed to sell bonds at a low interest rate of 4%.  Civic boosters bought them.  The money was made available to Hilton to help build the tower.  Eventually Hilton repaid the bonds. 

If a 600-room convention center hotel would truly generate $2 billion of wealth for specific industries, then those industries ought to be willing to buy (say) $200 million of low-interest bonds to finance the project.  And if they aren't willing to subscribe to $200 million of bonds then they don't believe that they will benefit by the new hotel, and public money shouldn't be used to subsidize it.

Leona Helmsley (1920-2007) writes to Isaac

I never had the pleasure of meeting Leona Helmsley or the more dubious pleasure of working for her, but I did once stay at one of her hotels.  Isaac's patronage went not to the Helmsley Palace or another of her trophy properties, but the modest Harley Hotel in Fort Wayne, Indiana.  This particular Harley Hotel was one of a 14-unit chain owned and operated by Mrs. Helmsley and her husband Harry Helmsley (hence the name "Harley," formed from HARry and LEona, with a Y thrown in to make it pronounceable), and was more of a highway motel than a downtown hostelry.

I was in Fort Wayne in 1978 to attend a convention and seminar.  The clock radio in my room didn't work, and when I checked out I mentioned it on a comment card.  Within a week I received two letters from the Harley Hotel chain.  The first was from the hotel manager, who told me that he appreciated my letting the hotel know about the broken clock radio. The second was from Mrs. Helmsley, who wrote that she had spoken to the manager and the clock radio had been replaced with a new one.  No doubt her letter to me was composed by someone on her staff who paid taxes, but it nevertheless impressed me that she responded to the writer of an innocuous comment card at a minor midwest motel.

School finance: a buck for the kids

Oregon's series of tax limit measures restrict the government, with some exceptions, from levying property taxes that are higher than $5 for schools, or $10 for all other government functions, in each case per $1000 of assessed value of the property.  The assessed value of property may be raised by no more than 3% per year.  Certain levies that the voters specially approve are exempt.

The $5/$1000 limit dates back to the enactment of Measure 5 in 1990 and Measure 50 a few years later.  Property values have risen in many parts of the state, but the 3% limit on increases in assessed value means that those increases in value haven't resulted in more money for the schools.  The problem is the worst in high-growth districts (think Beaverton, Gresham, and Hillsboro locally, and the schools in Ashland, Medford, and Bend).  Eugene tried to do an end run around the limit by enacting a city levy (not a schools levy), saying that it came under the $10 limit for non-school governments, and then sending 93% of the money to the local school district, but the courts rightly shot that scheme down.

It's time to update the limit.  Let's raise it from $5 to $6.  The effect on a house assessed at $300,000 (which is likely worth $500,000) is $200/year.  The effect on the homeowner is rather less because property taxes are deductible from income on our federal and state returns.  The campaign slogan -- "Give a buck for the kids" -- states the cost and the benefit.

The corollary, which I admit I haven't yet worked out how to turn into legislation, is how to ensure that the money goes to hire more teachers and reduce the student-teacher ratio in our most crowded schools.  My sense is that the voters are willing to pay a little more for better service, but they (we) won't believe a district's promises unless they're backed up by the force of law.

Congratulations to Barry Bonds on no. 756

Congratulations to Barry Bonds on hitting home run no. 756 and surpassing the record of Henry Aaron! 

With that out of the way, I don't agree with the foofaraw over whether Mr. Bonds uses steroids to build muscle bulk.  I do understand the three concerns, which I boil down to these: (1) it's unfair for him to use a drug to build muscle bulk because many other players don't,  (2) it's unhealthy for him to use steroids, and he should be protected from himself, and (3) it's a bad example to children for him to use steroids.

I dismiss concern no. 2; Mr. Bonds is an adult and can decide for himself how much he's willing to risk his health to perform better at his job.  Him taking steroids is the same thing as a sumo wrestler overeating.  I also dismiss concern no. 3.  Most adults (let's admit it) are bad examples for children.

That leaves concern no. 1: is it unfair for him to use steroids (if he does) when other players don't?  I don't see it as any different from a player using an anesthetic to numb an injured limb before a game: the player is accepting a long-term risk (heightened injury) for a short-term benefit. 

There must be more to the reason this is an issue, but I have to admit that I don't see it.

Beaverton Rounds off

The Oregonian reported yesterday that the Round at Beaverton, a troubled development project built (rather, half-built) around a light rail station near Hall Boulevard, is in default yet again.  The project is on its third developer in 10 years and is still far from complete.  The City of Beaverton has a solution to the troubles of the Round, which is to buy the Westgate Theatre site (it's on Cedar Hills Boulevard just west of the Round) and develop it in the same way to make more of a good thing.

I'm reminded of Metro's answer to the high vacancy rate at the Convention Center several years ago, which was to build even more Convention Center.  It's good to know that the suburbs are taking lessons from the regional government.

How to measure whether our transportation spending is working

The two most common measurements of transit use that I see are (1) how many riders board the buses and MAX each day, and (2) the percentage of morning and afternoon commuters who use transit.

The problem with these measurements is that they measure only the transit system, not the transportation system.  The transportation system's users include bicyclists, pedestrians, and skateboarders.  They even include motorists, though sometimes it's hard to tell that fact from official reports.

The fact is that our transit system is a part of our transportation system, not a competitor to it.

With that in mind I'd like to suggest an additional way to measure how well we're spending our transportation money.  ("Transportation money" means spending on roads, highways, buses, trains, bikeways, and any other means of transportation, not just money for TriMet, the tram, and the streetcars.)  Ignore the mode of travel and focus on travel time.  Where can you go from downtown Portland in 15 minutes?  30 minutes?  An hour?  From where can you go to downtown Portland in 15 minutes?  30 minutes?  An hour?  Ditto for central Beaverton, Hillsboro, Tualatin, Clackamas, and Gresham.  Looked at this way, spending that reduces travel times contributes to our transportation system.  Spending that increases travel times detracts from it.

My perception for some years has been that most of the traffic projects in the metro area are designed to make the system more efficient -- to increase capacity and reduce travel times.  Most of the projects in the City of Portland, however, seem intended to reduce capacity and increase travel times.  The theory that we can reduce congestion (read: demand to drive somewhere) by reducing road capacity suggests that we can reduce the demand for water by narrowing the water mains.