Ladies and gentlemen of the Council… Having recently seen the video Mayor Winnecke uploaded to Youtube, and having disagreed on virtually every fundamental point he made in that video, I feel like a public rebuttal is in order. I will address a few of my disagreements here, if it please the Council…
First, the assertion that there will be “more heads in beds†is ludicrous. Building a hotel to meet a non-existent increase in demand does not magically create customers for a business. Those customers, IF they come to this new downtown hotel, will be taken from other hotels in the area. So, no, you will not create new business, you will merely spread the existing customers across a larger number of hotels.
It is an immutable principle of economics that you don’t create a larger demand for a product or service simply by offering more of it. Because of this, there will be no appreciable gross increase in the innkeeper’s tax. The claim that a new hotel will boost the gross innkeeper’s tax is just as ludicrous on its surface as the assertion there will “be more heads in beds”. If anything, a new downtown hotel built with the aid of taxpayer subsidies will push some other hotel or hotels in the area out of business. Any new permanent jobs created at this new hotel will be jobs lost from some other area of town. The net effect overall will be zero.
Excuse the parallel, ladies and gentleman, but this is not Field of Dreams. None of us here is Kevin Costner. We do not converse with ghosts possessing the gift of foresight. No matter how much we might try to argue the contrary, the fact remains, if we build it, they may not come, and even if they DO come, those customers would come at the expense of other competing hotels in the City.
No one, not Mayor Winnecke, not even Conrad Hilton himself could create an increase in aggregate demand for hotel rooms simply by building another hotel. I mean, imagine that… If building a hotel created the demand for said hotel, we’d have hotels on every block. Demand is based on larger factors such as overall employment, wages, and production in the larger economy. This is not something one or two, or even nine people on a City Council can control.
America was built upon principles of free markets, free enterprise, and free competition. To subsidize one hotel by essentially GIVING that hotel owner over $30 MILLION of City funds created out of future DEBT, while continuing to penalize the competition through a putative City innkeeper’s tax, is patently un-American. Worse still, like so many other well-intentioned public projects of the past, it will not create the desired effect.
I urge the City Council members to look long and hard at this proposal before ultimately casting a vote of “no”. I urge you to revisit your assumptions and during what I hope is a thorough and arduous vetting process ask the question: does oversupply of a good or service really create more demand for that good or service? Or is it more truthful to say that free market entrepreneurs risking their own capital know best where and when to build hotels, not politicians spending the money of future generations of Evansville residents. We should leave the hotel building to the hotel magnates and let the politicians stick to the sewers where they belong. Thank you for the opportunity to speak on this issue.
Man, that is one nicely stated argument. Kudos.
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