Should NC cities be in the broadband cable business?

The broadband cable bill (H129) over in the legislature has produced a lot of smoke, but little light. Chargers and countercharges are generating most of the smoke. Is the bill a TimeWarner bailout bill, or does it just prevent unfair competition from cities that can forcibly pick taxpayers' pockets?

Salisbury's experience with broadband cable sheds light on the way some cities hide the financial risk that ultimately falls on taxpayers.

The City of Salisbury borrowed $30 million in order to get into the broadband cable business. Documents submitted by the city to the Local Government Commission in August 2008 indicate the terms of the financing agreement. The term sheet indicates under section "(4) Security" that "This financing shall be secured by the City's pledge of the City Hall, multiple fire stations and related collateral."

The city seems to have several options if the cable system fails. First, city officials could call a press conference and officially turn over the keys to "City Hall, multiple fire stations and related collateral" to the bank so it could recover its $30 million. This would make a great photo opportunity that would leave taxpayers with a lasting memory and send a message to all other North Carolina cities considering entering the cable business.

The second option is more likely. The city would raise taxes to cover the losses. Thus, city taxpayers, some of whom cannot afford or don't want a computer, would be paying for the broadband service of those receiving the benefits of the system.

A third option has been popular in some cities with failed cable systems. When the system goes bankrupt, the city sells the system to the private sector, often at a loss. For example, Lebanon, Ohio passed a nearly $59 million loss on to city taxpayers.

Forced annexation gets boost from the N&O

News & Observer staff reporter Rob Christensen forgot his journalistic code when he penned this pro-forced annexation article -- it should have been an editorial -- last Sunday. The headline gives away the bias: "Many hail N.C.'s annexation law: Expert calls it 'the difference between being Charlotte and being Newark.'" Of course, any intelligent citizen would hate suddenly residing in Newark.

Christensen failed to interview one of the most qualified urban experts in the country for his article. Elinor Ostrom, the 2009 winner of the Nobel Prize in Economic Sciences, has more than 30 years' worth of peer-reviewed research that shows smaller cities are more responsive to residents and more efficient in delivering services. How can a smaller city deliver better services at a lower cost? Large cities -- Los Angeles, New York, and even Denver -- are similar to private sector monopolies and are controlled by special-interest groups that often ignore the desires of the average citizen who have little political power in these large jurisdictions. North Carolina's forced annexation law allows Charlotte, Raleigh, and other N.C. cities to become larger monopolies that are even more unresponsive and inefficient than they already are.

The best primer in this area is Understanding Urban Government: Metropolitan Reform Reconsidered written by Vincent Ostrom and Robert Bish.

$461 million for slow-speed trains in North Carolina

Of course the N&O is one of the principal boosters of the "Great Train Boondoggle" with its reporting here. It seems the N&O has never seen a federal project that it did not like.

But those of you who want a more skeptical perspective please consider the following from Michael Rosen at the AEI blog, The American. Here is the punch line. The rest is well worth reading :

So what's wrong with the Obama administration's plans to implant a high-speed rail (HSR) network around the country over coming decades?

In two words: finance and politics. In a sentence: we're borrowing late 21st-century money to build late 20th-century technology to benefit early 21st-century politicians.

HSR's problems stem mainly from implausibly rosy economic predictions followed by deeply disappointing financial results. One expert calls HSR a "budget-buster," contending that California's high-speed costs have risen at least 50 percent.

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