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Public Finance and the Coralville Rain Forest

Nicholas Johnson, Guest

Gayane Torosyan, Host

"Talk of Iowa," Part 1 of 2
[WSUI-AM, Iowa City; WOI-AM, Ames]

June 22, 2005

Note: Nicholas Johnson appeared on "Talk of Iowa" during the 10:00 to 11:00 o'clock hour on June 22, 2005. Both segments of the program dealt with the role of public finance for non-profit and for-profit projects. Part 2 of 2, "Public Finance and Public Broadcasting," focused on the then-current controversy over $100 million cuts in funding for public broadcasting. This segment, Part 1 of 2, dealt with the $50 million in federal money for a proposed 4-1/2-acre covered rain forest.



Gayane Torosyan [GT]: Hello and welcome to "Talk of Iowa," the ten o'clock hour.  Today is Wednesday, June 22, 2005.  Iím Gayane Torosyan.
They hang the man and flog the woman
That steal the goose from off the common,
But let the greater villain loose
That steals the common from the goose.

ó English folk poem, ca. 1764

I recite this 18th Century English folk poem at the beginning of our conversation with Nicholas Johnson, our guest, because it appears on the first page of his personal website, and I think it describes Nicholas Johnsonís intellectual quest fairly accurately.  Heís a passionate advocate for the Common, a former Federal Communications Commissioner who currently teaches at the University of Iowa College of Law.

Nick Johnson was born and raised in Iowa City where he returned eventually after a long and interesting career as a co-director of a public health policy institute, a network TV host, Congressional candidate, author of books, articles and a nationally syndicated column Ė also a law clerk to U.S. Supreme Court Justice Hugo Black.  In 1971, he was featured on the cover of Rolling Stone Magazine along with people like Yoko Ono, John Lennon and Bob Dylan.

How do we use public money? That's the question that Nicholas Johnson tackles on todayís program and basically we could say all his life.  Hello and welcome to "Talk of Iowa," Nick Johnson.

Nicholas Johnson [NJ]: Hi. Thank you.

GT: Our listeners can join in by dialing 1-866-780-9100 or also you can send us an email: talk@uiowa.edu.  Professor Johnson, letís talk about the main question that you want to address today.  How do we use public money in a mixed economy? Please explain that concept.

NJ: We ideologically often distinguish between what we call socialism and what we call free private enterprise, but in point of fact there is an enormous amount of interweaving of the two.  One of the fastest growing free private enterprises countries today is the socialist, the communist, country of China.

Similarly, here in Iowa, we see the use of tax money given to for-profit enterprises Ė a half-million or more to Wells Fargo Bank as an inducement to bring them into the state.  So we very much have a mixed economy.

This means that we, as citizens who care about the growth and development of our communities and how to make them attractive places to live, that we need to be able to think a little more precisely about where the money is coming from and how these decisions are being made.

There is a kind of business approach that is brought to a for-profit enterprise without any tax support. Someone has to go to the bank to borrow money, find the property where they are going to put their business, get the inventory, hire personnel, and so forth.

The very same questions have to be addressed in a non-profit undertaking.  We are fortunate in this community. We have institutes such as that run by former University of Iowa President, Sandy Boyd, for non-profit organizations. We have the entrepreneurial center at the College of Business. We have a lot of resources around here, and a lot of very generous people, folks giving their time, like Tom Cilekís leadership in the effort to bring a more creative community into being. Last evening in North Liberty, Dave Franker and others were talking about how we can provide a better transportation system. There's an ever-increasing  opportunity for more and more cooperative efforts along the northern corridor between Iowa City and Cedar Rapids.

The two examples I would like to talk about today, because we do have limited time, are, number one, the proposed rain forest project here for Coralville, and, number two, the funding of public broadcasting, which was the subject of Talk of Iowa, ten o'clock, last Monday. There have been major national issues with efforts to politicize public broadcasting and efforts to cut the funding.

Let me say first of all about the rain forest that I have not been one to ridicule the project. It has received more than its fair share of ridicule, everything from Dave Barryís humorous columns to Bob Novakís attack, to Republican Speaker of the U.S. House, Congressman Denny Hastert, and other members of the House and Senate making fun of it, to the reference on an episode of West Wing and so forth.  But, thatís not been my focus.

On my Website, www.nicholasjohnson.org, you will see a link to another site that I maintain about the Coralville rain forest.  Iíve made an effort to put all the positive material I can find about it there as well as the humorous material, as well as the criticism, as well as the things that Iíve written.

There are things one can do with the proposed structure -- which is about the only thing that has been agreed upon from the beginning -- that would be interesting things to do.  But I would have to say there is no one in my acquaintance in this area, that is, no one who is not formerly identified with the project as an adviser or an employee, who really supports it in terms of its ability to function financially.

The rain forest's promoters have 50 million dollars of federal money, and they were at least saying a couple of months ago they wanted to go for another 20 million of State money.

I think there are a number of questions we need to ask that Iíve been unable to get answers to in regard to this project.

One is what Iíve called "the elephant in the rain forest." They simply donít have the money. They are talking about a 180 million dollar project. They have 90 million. And so far as they have disclosed to anybody, theyíve received not one additional dime during the past year from wealthy individuals, granting authorities, government agencies, corporations or foundations.

Another fundamental problem is we really donít know what they are talking about it.  Thereís a blogger named State 29 and as he put it on the blog, ďItís a floor wax, itís a dessert topping, itís an aquarium, itís an IMAX, itís whatever they want it to be."

We donít really know what they are talking about.  Is this going to be a teacher training facility as the former Director of Iowa's Department of Education, Ted Stillwell, indicates?  Is it going to be a national center for scientific research as Sandra Hudson wrote in the Press-Citizen?  Is it going to be a tourist attraction?  At one point it was going to be a K-5 school.

Until you know what this thing is, itís simply impossible to be either for it or against it.  You donít know what it is.  Itís been around for nine years as an idea, and so far as I know theyíve yet to finally settle on what they want to call it.

There are no details, no construction, programmatic, staffing, or operating details, so that even if a focus were revealed, there would be no way to evaluate its feasibility.

Thereís no detail with regard to costs and budget.

Theyíve talked about $180 million, although in the statement on their newly designed Web page, the statement by their chairman, former Governor of Iowa Robert Ray, he is still referring to $220 million.

Whatever the number may be, what does it include?  Is this just the construction of the shell?  Is that going to cover the cost of plants and animals?  The pre-opening promotions? Subsidies for low-income children?

What about cost overruns?  The wonderful Englert Theatre renovation project here in Iowa City ran five times the projected one million dollar cost.  Similarly, the Boston Big Dig also ran five times over the initial projections.  If there are cost overruns, where will that money come from?

But, in some ways, the most serious problem is where are we going to find the perpetual operating funds? Whether this is going to be a tourist attraction, a research center, or a teacher training facility, youíve got to have a very substantial flow of money, and most independent economists say it is going to be hard to find.

So, Iím saying, hereís an example of a publicly-funded project where conventional business planning would be not only useful but essential. Where is the project's business plan? There's a benefit to the overview that steely-eyed bankers can provide when they have to evaluate whether a loan application is for a proposal that can actually work. That kind of overview is as necessary for public as for private projects. It needs to be done, and and yet it tends not to be done when you can simply go to a Senator Grassley and get 50 million dollars of federal money toward this project.  There really isnít that kind of review that the free private enterprise system provides.

And I think that should cause us some concern, lest this thing ends up as a monument to our triumph of hope over reality along I-80: a rotting rain forest and an empty aquarium with dead fish, which is a distinct possibility. At that point we'd have to figure out what do we do with all that.

Well, thatís a long-winded introduction to all this and I apologize for that.  But, thatís one case study and then later we can turn to public broadcasting.

GT: Let's take some questions from callers and email writers.  Andy from Iowa City asks:  ďShould the refusal of Des Moines, Cedar Rapids and Iowa City to host the Iowa Child project be seen as a negative sign?  Why does Coralville want the project when no one else obvious did?Ē

NJ: Well, I think thatís a very good question.

It was offered to Des Moines. It was offered to Cedar Rapids. Thereís a difference of opinion as to the details of what happened, but the bottom line is that itís not going into Des Moines and itís not going into Cedar Rapids.  And unless they can come up with the money, itís not going into Coralville either.

I think Coralville has been a very imaginative, progressive, aggressive community in its leadership, its citizenry, its business community, the non-profit organizations, and just good public-spirited citizens.  I one time characterized it like the old cereal commercial with the two kids that donít want to try the new cereal. They say "Well, letís give it to Mikey, heíll eat anything."  I think thereís a little of that here, "Letís give it to Coralville, theyíll take anything."

GT: Rather than Des Moines, they have no other core to build around.  Iowa City has the University and many other things. But Coralville is just a community around Ė well, it was there before the Coral Ridge Mall was built.

NJ: Thereís such an enormous difference between what Coralville was when I was growing up in this area in the 1930s and 1940s and what it is today: the public library, the civic center, the park, the shops, the Coral Ridge Mall, the plans for development of this area where, if there were ever the money, the rain forest project might go.  Theyíve made remarkable progress.  I think those of us in Iowa City who are sometimes a little more stodgy have something to learn from Coralville Ė but just not a Rain Forest.

GT: Andy has another question on the same topic:  ďIs there any news about the secret donor of the $10 million?  Is it still believed to be the CEO of a local power company?Ē  You talked a little bit about money and Andy just maybe researched and found out there was a $10 million . . .

[NJ]  Iíve worked with David Oman as well as raising these questions, and made suggestions about what they might do to be a little more successful.  But one of the problems this organization has had is that I just donít think it served their best interest to engage in this stonewalling that they have, and their failure to make public the documents that they do have.  I think people would understand that some of them are dated and so forth.

But this is one example of that.  There has been a representation that a public utility, an unnamed public utility, has offered 10 million dollars toward this.  One of the major issues, of course, is how much of that are they going to get back in the first few years, as they try to air condition in summer and heat in winter, a 20 story, 4-½ acre structure.  So, thatís really more of an investment, it seems to me, with a very nice rate of return than it is a philanthropic contribution. But it does turn on who they are and that has not been revealed.

GT: Is one of the main concerns the unpredictability of the outcome?  We know that the Mall, for example, increased construction of housing developments in the area. But with this 1.5 million visitor flow as predicted, and this is from a message from Dylan in Iowa City, he is talking about that many visitors.  Do we know what to expect? The numbers may be different, but any sort of outcome can be envisioned. Is that one of the main concerns?

NJ:  Well, first of all, if itís going to be a teacher training facility, I doubt if we will have a million or more visitors going through there.

If itís a national scientific research laboratory, I doubt that we are going to have a million visitors going through there.

So, until we find out what this thing is, whether it is as State 29 says, a floor wax or a dessert topping, itís very hard to deal with numbers like this.

On their newly designed website thereís one reference to 1.1 to 1.5 million visitors, and immediately below it a reference to 1.3 to 1.5 million visitors. All the independent economists that I have talked to think that anything like those projections is unrealistic.

Iíve recently visited Colonial Williamsburg.  Iíve taken a great interest in what makes developments and attractions like this work. Williamsburg, which runs with something like a 200 million dollar a year budget Ė Iíve yet to do all the research and write the column on this -- is attracting something like 800,000 visitors a years.  Now, the Colonial Williamsburg attraction has been around a long time. It was fully funded by Rockefeller and others. It has a staff of hundreds of people and significant scientific research going on.  It can draw on the population of the Eastern Corridor. And yet it only gets 800,000.  All the presidential libraries combined do not get as many visitors as what the rain forest promoters are predicting for this quasi-educational experience.  The predictions of attendance are notoriously overstated for new projects generally, and I have on my Website numerous examples, sometimes 10 to 30 times what the actual attendance turns out to be.

Iíve noted that in order to get these numbers to the rain forest, every man, woman, and child in Iowa from the moment of birth to the moment of death would need to visit this rain forest every two years for the entirety of their lives in order to meet these attendance projections.  And I think the people in western Iowa would probably just as soon go see the rain forest at the Henry Doorly Zoo in Omaha which is, not incidentally, one of the things I did write a column about for the Des Moines Register ["Coralville Project Can't Match Up to Omaha's Zoo"]. I compared the Henry Doorly Zoo with the rain forest proposal here, and what the differences are, and what it has taken to make the Henry Doorly Zoo the tremendous success that it is, elements that we have not included with the rain forest proposal here.

GT: Are there other precedents? There was a project just like this one in England, which was cited and images of it were shown at presentations, at least when I attended those. How are those projects doing?  Do we have any reassurance?

NJ: All projectsí attendance tends to drop off after the first year.  You can open a new restaurant in Iowa City and you are going to have a lot of people coming to eat for the first couple months.

But they have a lot going for them in Cornwall, where the Eden project is.  The temperatures are more moderate, for one thing.  It is a vacation site. As I have pointed out, Coralville is not Las Vegas, itís not Washington, D.C., itís not San Diego and La Jolla, California.  It is not a place that people are going to come by the millions.

GT: And cover a long, long distance.

NJ:  Yes, and cover a long distance to get there.  The fellows at Williamsburg, Colonial Williamsburg, told me that 80-90% of the people that come are within about 100 to 200 miles of Williamsburg. That is usually the experience of an attractions like this.  Of course, people come from all around the world to this extraordinary venue, but most are local. Williamsburg has millions of people along the Eastern Corridor to draw upon. We simply donít have that pool of population within 50 or 100 miles of Coralville, Iowa.

GT: One last question before we have to go into a break, Mr. Johnson.  What are some of the more important needs that the Iowa Child money could be allocated to rather than a rain forest?  And this is again from Dylan, I am continuing reading from his message Ė Dylan in Iowa City. And to add to this question, maybe we will continue after the break if we need to, but, what kinds of public funds, what sort of funds and again, Dylanís question, how could they be used better or differently?

NJ: You have to consider, even if the 180 million were correct, and as I say, we have absolutely no backup for what this covers, what the total operating costs per year are going to be, where weíd come up with the cost of overruns if it's anything like two to five times whatís being projected.

Compared with the Iowa City Community School District, itís two times our annual budget for running all the schools in Iowa City and the other communities.  Itís a significant chunk of what it takes to run the University of Iowa.  This is an enormous amount of money by Iowa standards, actually by anybodyís standards.

So, thereís no limit to the projects that this could be used for Ė everything from the social programs that are being cut, K12 education, whatever.

The problem is the $50 million that has come from Congress. It's now being used for purposes they will not reveal.  I assumed the $50 million was to go towards construction. My sense is itís being used for ongoing operating costs, public relations, salaries, and so forth. If thatís the case, some investigative reporter needs to get in there and find out about that, because the project wonít reveal it.

But the way the federal grant for the project had been put together, if indeed it is limited to construction of a rain forest in Coralville, then that money is not available for these alternative uses. So it doesnít make any difference what we could do with 180 million dollars if we had it.  We donít have it unless we want to use the $50 million on the rain forest.