An Update on the El Paso Economy

econ-fiasco-215Those opposed to the ballpark fiasco continually pointed out that the economics did not make sense. That it was going to the taxpayers that were going to end up paying for the horde’s playground. Last Tuesday some economic news came out at city council but it was glossed over by the city and ignored by the news media.

Three items clearly point that the city is in the edge of an economic disaster.

The first was the presentation by city staff on the first quarter financial status of the city for the current fiscal year the city’s drop in revenues from franchising fees was pointed out as a concerning issue. Very little discussion on this was held and it is likely most of the city council members missed it entirely. The city staff presented the drop in revenues from franchising fees as concerning. Yet they minimized the significance by stating that the major source of the drop in franchising fees has to do with the changes in the telecommunications industry. They are correct in that the telecommunications industry is going through a major restructuring of their industry and as such, many of the fees that municipalities came depend on are disappearing as a result.

The thing about franchising fees is that they are a value-added tax that is paid for by consumers, much like the gasoline taxes. The burden on the property owners is lifted somewhat by the fees paid for by consumers in sales taxes and franchise fees. I reduced my monthly cell phone bill significantly just by changing my service address from Texas to Florida although I still retain the 915 area code for my number. This is the type of significant changes in the telecommunications industry that will continue to affect the bottom line for municipalities like El Paso. The franchise fees will continue to erode in almost all sectors as the monopolies on access to municipal infrastructure is removed by the technology.

The problem with Tuesday’s presentation is that city council was informed that the rapid drop in franchise fees was concerning and yet not one member of council stopped and asked a very important question. Who will make up the difference?

The problem is that city council continues to create new debt for the city and has not done anything significant to reduce the city’s budget. The reduction in revenues from franchising fees means an increase in property taxes.

The city continues to spend as if the franchise fees will still be there tomorrow.

As if that wasn’t bad enough another looming issue was presented to city council but it was manipulated to disguise the actual problem. The problem was disguised as a new incentive program for airlines to consider El Paso International Airport as a service airport. Although the airport has the name “international” on it, it currently does not service any international flights. It is an international airport without international flights. Typical El Paso.

Since the Wright Amendment ended, many non-stop and other flights to and from El Paso International Airport ended as well. I have been pointing out for many years that only reason El Paso International Airport had some many flights by Southwest Airlines was because the airline needed a Texas stop before leaving the state. I wrote that as soon as the Wright Amendment ended so would the flights.

I was ignored then and now that the reality has set in, city council continues to throw incentives at the problem as if that would solve it. Reduced flights in and out of the El Paso airport has a domino effect on many sources of revenues for the city. Revenue sources that helped offset the burden on the property owners.

A robust flight schedule at local airport not only results in fees to the city coffers but it also infuses the local economy with business activity fees, car rental fees and the ever-important hotel fees. On Tuesday city council happily signed off on offering even more incentives to airlines to land in El Paso completely ignoring a significant problem – that there is no reason for passengers wanting to go to El Paso.

It is not the airlines that decide to make a stop in El Paso; it is the passengers that they fly.

The problem is that the city council will proclaim acumen in their politics by the simple fact that because of the bowling tournament, happening this year in El Paso, the HOT taxes and other fees from the traveling participants will be artificially inflated for 2015, much like the temporary influx of economic activity in 2006-2009 as a result of the drug war in Cd. Juárez.

It is a temporary influx of cash that is unlikely to repeat itself the following years. Yet, as the political season intensifies, the politicians will slap each other on back and tell you how the El Paso renaissance is on the rise, because of the decisions they made.

However, the underlying problem has not be acknowledged and much less addressed; El Paso’s economy is unsustainable. El Paso’s economy has been temporarily and artificially propped up and no concrete steps have been taken to address the lack of long-term economic activity.

Yet, city council continues to spend its way out by offering incentives and spending money it does not have. The much-touted Quality of Life projects are severely underfunded and as a result, the city government addresses the problem by spending even more money.

There has not been any concrete plans created to address the fact that the only way the city will pay for all of the debt it has amassed and continue to amass is on the backs of the taxpayers of the city.

Just as the end of the Wright Amendment was pointed out by many of us for many years, the signs of an unsustainable economy is all around. The local news media is oblivious to it and city government dutifully reports “concerns” with different revenue streams but immediately glosses over it with excuses of industry restructuring or by throwing feel-good incentives at it that everyone knows is nothing more than fantasies.

2 thoughts on “An Update on the El Paso Economy

  1. El Paso suffers from a spending addiction that started with pitching coins to rolling dice on the sidewalk to playing cards in smoked filled rooms( the house rigs the games) to full blown addiction. An addiction that has reached the point that city council addicts will spend money on ANYTHING in attempt to ease the craving.

    Look at all the schemes to spend with promises that the debt will covered by some ” sure bet”. Got it the inside scoop that Bean Burrito is sure to win in the fifth race. Only to lose again and cover the debts by moving money around. The state or Feds give them a grant for one project and they spend on another.

    The infrastructure has been neglected, buildings are demolished to make room for “feel good” projects and the debt steady rising by bonds, fees(taxes) and parking fees. They use the shady used car salesman scheme. Telling the uniformed buyer how great they will look as they drive thru the hood. You will be the envy of the hood ! Girls will flock to you. Never mind the tires are bald, paint has been sun bleached and the seats are torn. Unfortunately the buyer(the public) swallows the bait overlooks the “minor details”.

    They say there is a sucker born every hour, it’s true just look at how easily the public believes the stories of how the city looks or will in the future.

    Well, slowly the people are starting to realize they have been suckered. The public (buyer)handed over their money for a busted up car and didn’t read the small print on the sales contract. The car is junk( infrastructure), no one envys you ( demolishing and building to look like other cities) and the girls don’t flock to you(tourists). Not to worry the loan shark tells you, we’ll loan you money at a nice interest rate, what’s that ? You want 50 million and in the end the interest will be close to a billion. Quick, before we the week is out, we have to have the weekly interests or else. Get budget to find grants or new fees to make the payment.

    Did you know that El Paso is up there on the list of the worst individual credit? So is it a real surprise that some of public sees nothing wrong with the city living beyond its means. Their logic is it takes money to make money or you are against progress. The neighbor just bought ……..The truth and reality is going into debt to get out of debt never works. It becomes “rob Paul to pay Peter”. Our great grand children will have to bear the brunt of all this spending addiction/folly. I doubt that’s the legacy you had planned to leave for them. But, someone has to pay. Ah yes, some of the highest tax rates in Texas with low wages……….,

  2. I thought the car salesman line went, “A ‘Vette gets ’em wet.” Hey, isn’t our mayor a car salesman? Where is his vote in all this?

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