Can’t See the Forest Or the Trees
Corridor Business Journal
October 4-10, 2004, p. 13
But this publication's readers know projects can’t be evaluated on the basis of “benefits.” Benefits must be balanced against costs.
The rain forest has possible benefits, some of which are itemized elsewhere in this issue. A breed of pigs that could fly has possible benefits.
Ask: (1) "What are those benefits?" (2) "What are the probabilities they’ll be realized?" (3) "Do those benefits justify their costs?"
“Risk assessment” is relevant. What’s the downside? The worst case scenario? Is the possibility of benefits worth it?
Analyzing this project is like nailing Jello to a wall.
The focus keeps shifting. What are we talking about: elementary school or tourist attraction? Eight years and they haven't even settled on a name.
The promoters either don’t have, or are unwilling to share, detailed construction, pre-opening or operating budgets.
“If you build it they will come” only works in the movies. The laser center failed to bring us promised world class laser scientists. The Hawkeye Hall of Fame is usually vacant.
Promoters don’t have the construction capital. Clearly, a $90 million shortfall in a $180 million project is a bit of a problem.
But construction costs only divert attention. More serious is attracting necessary attendance. The first year anything new attracts the curious. But what of 5, 10 or 20 years from now?
Coralville simply does not, yet, qualify as one of America's most popular "destinations."
Individual attractions, especially those not in "destinations," mostly draw attendance from surrounding areas.
For it to get up to the 1.5 million annual visitors it needs means every man, woman and child in Iowa must pay it a visit, every two years, forever.
The nation is littered with boosters' dreams turned to nightmares.
· Detroit’s 2006 Super Bowl claims it will produce $342 million. Independent economists say one-tenth that.These experiences don’t mean the rain forest's projections are also overly optimistic. It does mean they may be, and that we need second opinions from independent economists.
· Two researchers of arts projects concluded, "many of the audience and visitor estimates were highly over-optimistic.”
· The Minnesota Department of Natural Resources said of an ATV trail proposal, "visitor estimates are overly optimistic."
· Marion County, Oregon, commissioners, approving a $5 million bond for a major garden, were assured attendance would increase 5 percent a year. It declined by 24 percent one year and 13 percent another.
What are our options if, as so many predict, the forest doesn’t make it?
· We can leave the rotting rain forest and empty aquarium as a monument to boosterism that didn’t bloom.The elephant in our rain forest is that promoters have only half the money. The problem with their default plan, to build “something,” is that it will have even less chance than “the world’s largest rain forest.”
· Local taxpayers can pay to demolish it.
· We can cut the operating budget so severely no one will want to visit.
· Probably, taxpayers will be asked to provide an ongoing subsidy.
Boosterism and cheerleading have their place, in business as well as in athletics.
So do business plans.
Nicholas Johnson teaches at the University of Iowa College of Law. A longer version of this theme will be available from his Web site, www.nicholasjohnson.org, early next week [see Nicholas Johnson, "Boosterism and the Fog of Rain Forests," http://www.nicholasjohnson.org/politics/IaChild/optimist.html].