LETTERS; ANALYSIS: LESS RIVER CAMPUS TAX REVENUE

To the editor:

The proposed River Campus has been heralded to bring in a whopping $7.8 million in new tax revenue for the state (Southeast Missourian Oct. 10 article). Few beyond Jim Drury have questioned the economic impact of the River Campus on the city or the university. Being somewhat skeptical myself, I contacted Dr. Pauline Fox, and she graciously shared her economic-impact study of the River Campus with me. My intent in this letter is not to say that Dr. Fox's study is wrong, but to offer an alternative assessment of some of the figures presented.

A fundamental concept in economics and finance is that a dollar received at some time in the future is worth less than $1 today. This referred to as discounting. In calculating the tax revenue that would be reaped from the River Campus, Dr. Fox did not discount. I took her exact figures and discounted them back to the present using the 30-year Treasury-bond rate of 6.189 percent. Discounting caused the projected tax revenue to fall by 19 percent to $6.29 million.

A second concern I had with the study was the assumption that the money resulting from new construction, tourism and new students would turn over 2.3 times in the economy. Cape Girardeau and the state are currently experiencing a full-employment economy. Most economists think that in a full-employment economy greater government spending will crowd out private spending. In this case, the multiplier effect would be zero. Let's be optimistic, though, and suppose that the new construction funds, tourism dollars and students would result in a one-time increase in spending. In this case, the discounted value of the extra tax revenue would be $2.75 million, far below the $5 million in tax credits.

Third, there are likely to be significant diseconomies associated with an off-campus facility. Transportation, maintenance, security and an alternative energy source would all add to the general expense. Didn't Southeast Missouri State University have an uneconomical off-campus facility at the old hospital not too many years ago?

Several other factors should be noted. This summer articles in the Southeast Missourian outlined the dire financial straits the new $12 million Black River Coliseum in Poplar Bluff has found itself in. An informal conversation I recently had with faculty at Southwest Missouri State University revealed that their performing arts center was losing $1 million a year in a Standard Metropolitan Statistical Area with a population at least four time greater than Cape Girardeau. During the 125th anniversary year of SEMO, former alumni spoke highly of the many fine emeritus faculty who taught them over the years. One wonders, then, why university leaders are so attracted to bricks and mortar when nationally recognized teachers of the performing arts can be obtained at a fraction of the cost while still attracting new students.

BILL WEBER, Professor of Economics

Southeast Missouri State University

Cape Girardeau