Show Your Work

Remember that instruction on math homework assignments and tests? "Show your work."

It wasn't enough that you could luck into the right answer. By showing each step you took to get to the answer, you could demonstrate that you understood the methods and techniques required to solve the problem.

Showing your work is even more important when the answer is unknown and the point of the assignment is to figure out what the right answer is.

For example, when scientists test a new drug, they can't just print a bunch of random but impressive numbers to prove that the drug cures disease and doesn't cause dangerous side effects. They have to publish a detailed account of their testing method and the results of the tests.

This detailed information allows for other scientists to examine their work and determine whether the procedures are sound and sufficient and the assumptions are well grounded.

Scientific openness about methods, data, and procedures, and the public scrutiny enabled by that openness is crucial to scientific progress. It exposes flaws that, if left hidden, could result in injury, illness, or death.

Public officials aren't usually so open. They're quite happy to fund a study and then trumpet the study's conclusion which justifies whatever they wanted to do in the first place.

They aren't as eager to expose to public scrutiny the assumptions and methods that were used to produce those conclusions.

We've seen that happen with feasibility studies for the new arena and the City Hall move, and now with the economic impact prediction for the Tulsa County river tax increase and the Vision 2025 financial plan that explains what happened to that extra $215 million that the tax is projected to raise.

Sadly, too many people in government, the media, and the general public are content to believe the invariably happy conclusions of feasibility studies and are uninterested in verifying that the conclusions have a sound basis.

In the August 29 UTW, reporter Brian Ervin delved into the economic impact prediction made by the Tulsa Metro Chamber. Robert Ball, the Chamber's economic research manager. (Shouldn't his nickname be "Crystal"?)

Ball's numbers claim that the $282 million sales tax increase will not only release the promised $117 million in private contributions being held hostage to passage of the tax increase, but will stimulate $450 million in private investment, resulting in an impact of $2.8 billion on the local economy over a seven-year period.

Public officials who were already supportive of the tax increase welcomed the numbers uncritically. Ervin's story quoted Councilor Rick Westcott:

"Following last week's Chamber presentation, Westcott said the 10-to-one return promised by Ball is 'pretty impressive.'

"'If people take a look at this, they're going to find them persuasive--it's more than I envisioned,' he said."

Of course, 15-to-one and 20-to-one would be even more impressive. 100-to-one would put you into televangelist seed-faith territory.

The issue isn't how big and impressive a number someone claims in a press release, but whether that big and impressive number is based on valid assumptions and a reasonable methodology. But we can only assess that if Mr. Ball is willing to show his work.

Brian Ervin's delving uncovered some information about the assumptions and process:

(1) The private investment number is based on some "casual conversations" with unnamed developers and Ball's hunch: "Why wouldn't they want to develop? We've already got Riverwalk Crossing." Perhaps that's not the strongest foundation for such a big claim.

(2) The economic impact multipliers are from the Minnesota IMPLAN Group's input-output model.

Ball also supplied Ervin with a hardcopy of an Excel spreadsheet, breaking the various inputs out between public, private charitable, and private investment, and spreading them out across seven years. It appears that a specific constant multiplier was used for each class of spending: input X multiplier = economic impact. Economic impact / dollars per job = projected number of jobs. Simple arithmetic.

Usually, economic impact is claimed for developments that bring new money into a city. When a manufacturer locates a factory in town, it means a certain number of jobs at a certain salary. That local payroll is being generated by the sale of the factory's products in other parts of the country, possibly in other parts of the world. The impact of that new money circulating in the local economy is often used to justify tax breaks and direct subsidies to attract new industry to a city.

Of course, the same kind of impact can be achieved when a local business expands -- to name two of the more spectacular examples, when Bama Pie became fried pie and biscuit supplier to McDonald's, and when FlightSafety was contracted to provide 31 new helicopter simulators to the U. S. Army, worth about half a billion dollars, much of that going to local payroll and local suppliers and subcontractors.

Predicting the economic impact from a convention, a major event, or a tourist attraction is much less certain. Assumptions are made about the likely number of attendees, and how much each is likely to spend on a hotel room, meals, souvenirs, and incidentals. An event might draw business people who will be entertaining clients and charging everything to their expense accounts. Or it might draw retirees who share a room at the Motel 6 and eat Quik Trip taquitos to keep expenses down.

It's noteworthy that the Chamber isn't claiming that more people will come to Tulsa County to spend money if these projects are built. They are assuming instead that the mere act of taking your money and spending it on constructing and then operating the public and private projects will generate economic activity.

Panning for Gold

The problem with applying this Input-Output Economic Model to this tax plan is that it assumes the money wouldn't be input to the local economy otherwise. It doesn't account for how local taxpayers would spend those tax dollars if they were allowed to keep them.

The assumption that the tax would unleash all those dollars into the economy means one of two things: either taxpayers are selfishly keeping the money locked up in savings or they will be willing to go into debt to pay the extra tax without diminishing their own spending.

Even if you accept the Chamber's numbers as accurate, the impact isn't going to be evenly distributed. Those employed in manufacturing or service industries, businesses that bring income to the region by producing products and services for out-of-state customers, won't see any of that direct or indirect impact.

At best, they'll see an eventual, gradual, boost in sales and property tax receipts that could be spent on basic government services -- fixing potholes, increasing the number of police officers. But using the numbers in a recent "vote yes" mailer, the $282 million of sales tax sacrificed by Tulsa County citizens will eventually generate "as much as $85 million dollars" in sales and property tax receipts "for basic services, like better streets and public safety."

That's a pretty poor return on investment; we don't even wind up with as much money as we started with. That's like one of those nutty alternative energy schemes that consumes more energy than it produces.

If we're going to raise taxes with the intent of improving basic city services, it would be far more efficient to spend the money directly on basic city services.

What this plan increasingly looks like is a transfer of wealth from all Tulsans to the local construction industry. The "input" money in the Chamber's model is already here in Tulsa. The river tax plan will take that out of the hands of all Tulsa County taxpayers.

The money will eventually find its way to the retail and service sector via the construction industry, rather than through the direct spending of the taxpayers who will lose access to that money.

There's an arrogant assumption at work: Government will do a more productive job of spending your money on entertainment and amenities than you will, you peasant. Fie on you, you boring bourgeois family, for wanting to spend that $100 a year on an occasional night at the movies, a latte at the local coffeehouse, or tickets to Frontier City (since Randi Miller killed your only local amusement park option). And how boring is it to spend that money on food or medicine! Feh! That's no way to attract the Creative Class.

It's a strange position for the self-described fiscal conservatives who back this tax increase -- Smaligo, Miller, and Perry, Westcott, Martinson, Christiansen, and Carter -- have staked out for themselves.

I'm sure the good folks at the Chamber and the other supporters of this tax increase will dispute the conclusions I've drawn and will complain that there's much more to their model than I've portrayed here.

Fine. Let them publish their full economic analysis, with a detailed justification for each of their assumptions and their methodology. Put it up on the web where every Tulsa County taxpayer can see it for themselves. Include all the gory details, so that economists, business people, and other interested taxpayers can judge for themselves whether the assumptions made by the Chamber about this river tax plan's economic impact are reasonable.

Tax proponents have already complained that my analysis of the Vision 2025 surplus is all wrong, that it overestimates future revenues and underestimates future expenses, so that we have to raise taxes again to pay for the low water dams promised as part of Vision 2025.

And this . . .

Three weeks ago I requested a copy of Tulsa County's financial plan for the Vision 2025 tax. After determining that Tulsa County's fiscal officer, the County Commissioners, and the Vision 2025 program manager didn't have a copy of it, I requested a copy from the one person who seems to have it -- maybe the only person who's ever seen it -- bond consultant John Piercey, a private contractor to the county.

Mr. Piercey was very gracious and promised to get me a copy within the next 24 hours. A week later I called again and left a message -- no reply.

Last Friday I called again and left a message -- no reply, until I called Commissioner Fred Perry and relayed my request to him. Perry promised to help, and I had an e-mail reply later that afternoon from Piercey saying I'd have it late Monday or early Tuesday. (That's after the deadline for this column, so as I write this, I don't yet have it in hand.)

Here is my personal commitment. If anyone will make available to me the details of Tulsa County's Vision 2025 and Four to Fix the County financial plans or the detailed economic analysis for the river tax, I will publish it on my website (batesline.com) as is, available for any interested member of the public to download and review and draw their own conclusions. Of course, I'll publish my own critique, but the raw data will be there for those who wish to critique my critique or the plans and analyses themselves.

If someone's going to ask for our tax dollars, we ought to insist that they show their work.

* * *

This next Tuesday night, September 18, there's an opportunity for voters to demand detailed answers to some tough questions. TulsaNow is sponsoring a public forum featuring supporters and opponents of the county river tax proposal. See tulsanow.org for details. I plan to be there, and I hope you will be, too.