Sunday, September 11, 2011

Cities and Rinks - a bad combination

As part of the debate about the City budget a few years ago, City staff had floated the idea of increasing fees for indoor ice rink time, almost doubling it for kids’ activities and a 26% increase for adult activities. One online petition garnered about 6,000 signatures.  I have two kids in competitive ringette and such an increase would no doubt cost me hundreds of dollars per year.  You would think I’d be firmly in favour of holding the price of ice time at the current level - but you would be wrong.  After brief second thoughts I decided I was totally in favour of changing prices – but with one big caveat.

The City of Ottawa has a near monopoly on indoor ice in Ottawa.  A few private rinks like Minto and U of O can be found, along with a couple of now notorious “public-private partnership” (P3) experiments at the Bell Sensplex and the Ray Friel Centre.  The P3’s have turned out to be a mild disaster for all involved.  The company running the two new rinks at Ray Friel could not compete with City-subsidized rinks and the rinks were handed back to the City.  The Sensplex deal is at present a marginal exercise.  Sports groups in Ottawa regularly complain of the lack of available ice time and this shows no sign of changing.  How could it change when most rinks are City-owned and the City is constantly under financial duress? 

The root of the ice shortage can be found in the economic concept of monopoly power.  A monopoly can only endure when the coercive power of government is used to support it. In a monopoly the supply is suppressed and the price distorted.  With regard to rinks, the government covers their operating costs through a mix of taxes (coercive force) and user fees (voluntary).  Under these conditions users pay less than market rates and so are naturally reluctant to pay a fair market price for the limited private ice time.  Instead, they lobby politicians to do something about the shortage of artificially low ice time.  Many taxpayers naturally object to having to pay higher taxes for things they don’t use, and so there is a struggle between political pressure groups over control of tax revenues.  Rinks generally deteriorate and remain in short supply.  The same can be said of most services run under the monopoly power of the City.

There is a simple solution to the shortage of ice time: free the market for ice time from government control – sell all the rinks to the highest bidders and they will have to compete with other rinks to offer the best service at the lowest price.  If there is demand for rinks then entrepreneurs will meet that need until there is a balanced market – just like they do for houses, cars, hockey equipment, groceries, computers, clothes and everything else the government does not monopolize. Without a free market who knows how many rinks are actually wanted or how efficiently they can be run?  I suspect all sorts of innovative arrangements would be created to meet the large variety of demands for ice.  If a family cannot afford much ice time you or any charity would be free to lend a hand, and certainly fundraising is possible.

Now for the caveat. The same thinking applies to almost everything the City does.  For you to have enough money to pay for the likely higher ice fees, your property taxes would have to be drastically cut so you are no longer paying for the myriad of programs you don’t use.  The City would operate police, fire and roads.  Only when the price of what you buy is clear and the provider is accountable to you can true efficiency be reached.  That’s why the Mayor efforts to contain costs is doomed to fail.  The demand for the government to run a program is a demand to defy reality – to operate outside of economics and obtain something for nothing.  “Someone else will pay for it, not me.”  Today, your property taxes are subsidizing my kids’ recreation.  Given the choice, I’d let you decide how to spend your own money (you will do it better than the politicians) and I’d choose how to spend mine.  The package deal of City-run rinks is a long-range recipe for certain disappointment.

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