Marta Mossburg: A cautionary tale on spending state dollars on the arts
By: Marta Mossburg
Examiner Columnist
July 17, 2009
Giving money to arts groups may save some jobs today. But nonprofits by definition do not generate wealth, they redistribute it.
So the decision by the federal government to give $900,000 to Maryland arts organizations in the name of stimulating the economy and saving a government-estimated 40-plus jobs defies common sense. It also primes state taxpayers to hand over more of their money to arts groups in coming years to again save those jobs when the federal dollars run out.
A few fundamental questions should have been asked before granting the money. First, why choose arts organizations over homeless shelters or food kitchens? Or why not pick businesses, which create wealth and jobs? Second, how did the government choose the arts organizations? And most importantly, why should the government be allowed to pick winners and losers?
The bigger grants sent directly from the National Endowment for the Arts read like a who's who of the state art world: They include $50,000 to the Baltimore Museum of Art and $50,000 to the Baltimore Symphony Orchestra.
The smaller grants distributed through the state are lovingly scattered throughout Maryland's counties in the same fashion that Juan and Eva Peron used to hand out home appliances to political supporters in Argentina.
Politicians always use the money and power of government to increase their popularity whether it be through public service commercials or billboards or targeted aid, like the arts grants, but it does not make them right - or an effective use of tax dollars.
And the fate of the Senator Theatre in Baltimore City explains why the government should not pick winners and losers. The Senator, a one-screen Art Deco movie house opened in 1939, is scheduled to be auctioned July 22 on behalf of city taxpayers after years of draining their and state taxpayers' pockets.
Let's start from the beginning. In 1999, the state Department of Housing and Community Development loaned Tom Kiefaber, the owner, $385,000. DHCD then loaned an additional $378,000 to Kiefaber in 2005 and 2006 to prevent him from defaulting on other loans. At the time, he was delinquent on the original DHCD loan.
DHCD explained its decision this way: "While on the surface it may seem prudent to deny additional funding to delinquent borrowers, the ability to modify loans is a very useful tool that allows projects to survive and eventually prosper that otherwise may fail."
In the meantime, Baltimore City gave Kiefaber $180,000 in 1999. And in 2002, it guaranteed half of the theatre's $1.2 million loan with 1st Mariner Bank. In May the city decided to purchase the mortgage, making city taxpayers' liability $950,000. As of June 2008 the DHCD liability was $688,000, making it a total wash of at least $1.82 million for taxpayers.
Baltimore City Mayor Sheila Dixon rationalized the city's decision by saying the city had already invested $3-$4 million in the Belvedere Square neighborhood surrounding the Senator and didn't want the neighborhood to fall apart.
City Comptroller Joan Pratt opposed the decision to buy the theatre because she said the city would likely have to spend more money to fix it in order to sell it and questioned its ability to make money with multi-screen theatres nearby. She said she is hopeful the city will recoup its losses at the auction, but added, "If the theatre closes, I believe Belvedere Square will be viable without it."
Amen. So for $1.82 million, the state and city saved a handful of jobs that could never sustain themselves and bought a property that will likely require more money to fix and never achieve the city's $1 million asking price - at least without massive incentives from taxpayers.
It begs the question of how an additional $1.82 million in the hands of taxpayers could have helped the economy. Could that money have generated $3 million or maybe even $10 million and 50 jobs?
Taxpayers will never know, in the same way they will never know how millions directed to nonprofits favored by state legislators through bond bills could be used in the private sector.
But it's clear that letting the government decide how to use money - many times in secret -- often leads to failure and subsidizes a few well-connected individuals. So taxpayers should shudder and withdraw their hands when the government comes bearing checks - unless they want a Trojan Horse.
Examiner columnist Marta Mossburg is a senior fellow with the Maryland Public Policy Institute and lives in Baltimore
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