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Archive for February, 2013

Flashing red light: American Airlines applies for more Sao Paulo rights

To start daily nonstops from Los Angeles (this fall) and Chicago (fall 2014).

It’s hard to imagine a route announcement that more calls into question the conventional wisdom in this town than that the proposed US Airways/American Airlines merger will bring about an increase in international flights from CLT. Forget growth, this calls into serious question whether Charlotte’s two routes to South America will still be around in two years.

US Airways currently has a daily flight from Charlotte to Rio de Janeiro and begins Sao Paulo service in June. Demand to Brazil is highly concentrated — about half the market is from Miami, Orlando, and New York City — and making these flights work depends heavily upon connecting traffic. In other words, it’s a bit of a challenge in the best of times.

American Airlines is the dominate airline to South America in general and Brazil in particular, with existing flights to both Rio and Sao Paulo from Miami, Dallas, and New York City. Post merger, Charlotte is going to drop to at best the fourth priority for Brazil flights. Miami is the obvious issue that will get most of the attention, but those New York City and Dallas flights will have a significant impact too, as they cut the amount of feed into Charlotte’s Brazil flights.

But when you add Chicago to the mix, it takes it to a whole new level of difficulty. And that’s especially true as United already has a daily Chicago-Sao Paulo flight, which heightens Americans need to draw people from the Midwest to help fill its flight. That really doesn’t leave much of the country from which a Charlotte-Sao Paulo flight can draw.

The only reason that you make these route applications now is if it doesn’t matter how well the Charlotte-Sao Paulo flight does, that you’re going to keep it regardless or can it regardless. And it certainly implies LAX>CLT and ORD>CLT to Brazil for American.

Bonus concern: UA>AA in Chicago and the Midwest in general. To the degree that this signals that the combined American/US Airways intends to do something about that, be worried. The major markets in Ohio and Kentucky are closer to Chicago than Charlotte yet US Airways currently offers more seats to Charlotte than American does to Chicago. And that’s not true overall, it’s true for every market that both airlines serve in Kentucky and Ohio. If Chicago becomes a battleground as this application suggests, then it’s very easy to imagine a significant amount of capacity shifting from Charlotte to Chicago.

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Meanwhile in Wilmington…

A state lawmaker is trying to establish a “film caucus” to argue for continued state incentives for film productions in the state. And he’s inviting legislators from all 30 counties in the state where filming has taken place in recent years to join in.

As my JLF colleague Jon Sanders wrote back in July:

The problem with these incentives is that the lower tax burden on film productions comes with the consequence of keeping tax burdens high on nonfavored businesses and industries. When government chooses one industry or business for special deals and breaks, there’s a good chance that cronyism is at work.

Bonus observation
: The lawmaker organizing the caucus, Rep. Ted Davis, is a Republican, proving yet again that all politics is local.

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More incentive silliness

The most pointless use of incentives remains to attract retail stores and shopping centers. Retail follows income and population. This basic truth seems lost upon the city of Charlotte and Mecklenburg County, as they just voted to give $5.1 million in property tax rebates for an outlet mall. Just sad.

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NASCAR investigates NASCAR

Over track safety, which is unlikely to truly fix the problem. Those sorts of studies never do. And that’s especially true when the issue is so fundamental as two of NASCAR’s most famous tracks (Daytona and Talladega) are simply too fast, thus creating the need for restrictor plates. Restrictor plate racing produces pack racing, which greatly increases the chances of “the big one” — accidents involving multiple cars, which in turn increases the chances of spectators getting injured. The solution? Reducing the extreme banking at Daytona and Talladega would go a long way towards eliminating the need for restrictor plates. Odds that happens? Slim to none.

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Secret arrests in Adkins’ case ?!?

Capt. Chuck Adkins is before Civil Service Board hearing about his decision not to report a 19-year old prostitute who had been kidnapped and beaten by her pimp. Adkins was off duty when the woman spotted him and instead encouraged her to report what had happen and let her use his cellphone. That’s not the weird part though. As the Charlotte Observer reports:

The case is now part of a federal investigation. Details remain sketchy, but officers testified the Department of Homeland Security has interviewed the woman.

They did not say who the federal probe was targeting or what allegations the Department of Homeland Security were investigating.

Two men have been charged with kidnapping the woman who came to Adkins’ home. Authorities did not divulge their names, ages or other identifying information.

We have secret arrests now in the United States? What’s next, secret trials?

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One from the cold day in hell department

Charlotte Motor Speedway bans smoking except in designated smoking lounges. There are a total of 10 such lounges at the speedway.

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Panthers to face major salary cap issues in 2014 and 2015

ESPN’s Pat Yakinkas reports that the Panthers are facing severe salary cap issue not just for the upcoming season (they have to get down to the salary cap by March 12) but also for 2014 (43 players signed for $139 million) and 2015 (20 players signed for $111.6 million and Cam Newton is not one of those 20). Yakinkas states:

That’s why restructuring many more contracts to push money back isn’t good for the long term. The Panthers need to get some of the big money off their books now.

Yup. Interesting to see how they do this and how much talent the team loses as a result.

Bonus observation: The salary cap mess makes it all the more important that the Panthers draft exceptionally well this year. They literally can’t afford to miss.

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No big hotel, at least for now

For years, the powers that be in this city have bought into the convention center as an economic development tool. The theory was that it draws in so much visitor spending that the convention center more than pays for itself. Or that it would it the convention center were just bigger. Or if we just had more hotels. Or a bigger hotel. Or something. And, of course, the missing element, whatever it might be at the moment, must be provided with tax payer dollars.

The Charlotte Observer pretty much demolished this line of reasoning a couple of months back. The reality is that the economic impact of the convention center is vastly overstated and likely negative, Charlotte is a second-tier destination, and the convention market is awash with capacity.

Now comes word that there’s suddenly been a change of plans by the Uptown crowd. The most desired item as of late, a 1,000 room hotel, is suddenly no longer the most desired item. As the UPoR reports:

Charlotte tourism officials have for years said a 1,000-room hotel could bolster the city’s convention business.

As the city prepared to host the Democratic National Convention last year, the head of the Charlotte Regional Visitors Authority said a 1,000-room hotel could help the city land up to seven large conventions a year, which would bring thousands of visitors uptown. CRVA chief executive Tom Murray said a hotel of that size would have to be subsidized by taxpayers, as the 700-room Westin was a decade ago.

But Murray now says this isn’t the time for a mammoth 1,000-room hotel, or a subsidy, and that the uptown hotel market should instead focus on midsized projects, with hundreds of rooms instead.

“Bringing in a 1,000-room hotel could have a disruptive effect on our existing hotel inventory,” Murray told the Observer last week. “That’s probably not the strategy that we would be working moving forward.”

Which is nice to hear. But don’t get too excited — it seems that this new found embrace for the market seems to have been brought about by another need for the pile of money that would have been used to subsidize a 1,000-room hotel. As the UPoR notes in the same article:

If the city ever did subsidize a 1,000-room hotel, the money likely would come through two taxes that fund the city’s convention center: a 1 percent tax on prepared food and beverages, and a tax on hotel and motel rooms. The fund comprised of those taxes currently has enough money to finance up to $110 million in debt, the city has said. Charlotte Deputy City Manager Ron Kimble said that money should be reserved for an expansion or renovation of the existing convention center, which opened in 1996.

So instead of doubling down on a failed convention-driven economic development model by throwing public money at a big hotel the city instead wants to doubling down on a failed convention-driven economic development model by by remodeling or expanding the convention center. That isn’t really an improvement.

Bonus observation: Note the group think involved here, how suddenly all the major players are on the same page.

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The CMPD Citizens Review Board fail

The Charlotte Observer has a length piece out on the city’ Citizens Review Board. The board is literally worse than useless — over 15 years, it has never found a case of police misconduct. Public claims of misconduct have been dismissed in all 78 cases brought before the board. The board’s structure, the Observer writes, makes it difficult for citizens even to get a hearing, as they lack access to internal affairs summary of cases. The review board also lacks investigative powers. A highlight:

Don Luna, coordinator for the Police Civilian Review Commission in St. Paul, Minn., expressed amazement that no appeals before Charlotte’s review board have been successful.

“How can you get complaints and have none substantiated?” he asked. “I just don’t know how that’s possible. Everybody makes mistakes.”

True enough. And exactly from that comes the danger of having a review board whose setup makes it extremely unlikely to ever side against police. It’s the danger of essentially believing your own press, that because the (inherently flawed) review board is finding no misconduct, that thus no misconduct exists. Some city officials are falling into this trap:

City Council member Patrick Cannon, who pushed for the creation of the board in the 1990s, said he isn’t bothered that the board has never ruled against CMPD. Cannon said he believes the panel looks at cases objectively.

“I would like to believe we have officers who conduct themselves in a better fashion” than police in other cities, Cannon said.

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Charlotte’s latest astounding negotiation fail

Seems Charlotte City Council now wants to stockpile cash from the proposed increase in the prepared meals tax to help pay for additional Bank of America Stadiu upgrades or even a new facility for the Panthers… in 2028. This would be a very bad idea for many reasons. The Charlotte Observer describes one problem with this approach:

UNC Charlotte economist Craig Depken said governments usually focus only on paying for either a new stadium or renovation, not a potential second deal decades in the future. He isn’t aware of a city that has enacted a plan similar to Charlotte’s, where money would be put in reserve for a future request.

“Governments hand over power to the next government,” Depken said. “Locking down millions of dollars for a hypothetical future project? It’s a bit of a head scratcher.”

Depken said having cash reserves on hand could hamper a future City Council in negotiations with the Panthers in 2028 or beyond.

He said it would be like saving $50,000 to a buy new car.

“You walk into the dealer and say you have $50,000 for a new BMW, but you only want to pay $35,000,” he said. “You are going to pay $50,000. It doesn’t help your negotiating.”

Depken is correct, but City Council’s move (sadly) isn’t very surprising as there’s little evidence they have any idea of negotiating basics.

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February 2013
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