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Ferry: Settled Suit Echoes “Atlas Shrugged”–$11 mil Created 0.64 Jobs There

By   /  October 19, 2014  /  6 Comments

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Newsday reported on Thursday that the City Council voted to settle a $1.7 million lawsuit filed in 2012 against firms involved in what can only be labeled a debacle at the Waterfront in the form of the bulkhead for the latest attempt to establish a ferry terminal there.Glen Cove Ferry Rendering

Newsday also reported the city would receive $700 thousand and “waive $300,000 in unpaid fees”. In return, the defendants will drop counterclaims.

At the center of the lawsuit were seven fixing bolts, which essentially connect the bulkhead together at different locations. The “botched” bulkhead could have caused the bulkhead to collapse, according to court documents. In addition, the City paid over $1 million to fix the bulkhead, and alleged that the firms “refused to cure their mistakes”.

Of course, it’s not like an honest entrepreneur woke up one day and decided Glen Cove really needed a ferry service. Instead, in 2009 a Democrat-led Congress and President Barack Obama approved a $787 billion “stimulus package” which opened the spigot for almost $11 million in federal awards for the City’s latest ferry business venture.

Comically, the award has resulted in “0.64” jobs (yes, that’s less than one) according to the federal government, which means that if we measure dollars per job, it would cost the federal government and City $17 million if it did create one job (which it hasn’t).

The laughable result of the Ferry stands as a clear example as to the folly of the idea that government can stimulate the economy. By definition, government has no resources of its own, and when it acts it takes from the people who created or earned the value already. Which is why whether it’s members of Congress or the City Council, they simply cannot allocate society’s resources nearly as efficiently and effectively as Starbucks, Downtown Cafe, and 7-Eleven.

Further, when politicians do get caught in pretentious thinking–the idea that they can stimulate the economy with other people’s resources–they often unintentionally attract rent-seeking from what we call “crony capitalists” who are not interested in engaging in voluntary exchange and competitive enterprise but rather forced exchange in the case of Obamacare, and gains from the taxpayer as we see at the Ferry.

In other words, government’s collective action enables and entrenches devious actors to impose their bad ideas on the rest of us. As F.A. Hayek noted, “the unscrupulous and uninhibited are likely to be more successful” which is why “the worst get on top” in such a society. Moral, honest entrepreneurs try to sell us stuff and services with our voluntary cooperation, while crony capitalists use government’s monopoly on the use of force to again, impose their otherwise undesirable ideas on the people.

So the federal government has spent $11 million and the City at least $1 million, and we still do not have a ferry terminal or an operator in sight. On the bright side, it created 0.64 jobs. Clearly, society has not benefited from this largess of government. Alas, “government stimulus” is by definition an oxymoron not just in this case, but to the tune of hundreds of billions per year.

Don’t forget, developers and pols have said this ferry terminal is the cornerstone of the current proposed project at the waterfront, as Mackenzie Riggs reports.

The seeming incompetence reminds me of the “San Sebastián Mines” from the novel Atlas Shrugged, published in 1957. Long story short, one of the lead protagonists, Francisco D’Anconia convinces the brother of the main protagonist and his crony capitalist friends to invest in copper mines in what had become the “People’s State of Mexico” and they vote to have their railroad company Taggart Transcontinental build a railroad there. They do not care about the facts about what minerals actually exists in the mines, they just expect to exploit D’Anconia, the world-famous Argentine-American heir to a copper mining conglomerate.

Before long, the People’s State of Mexico expropriates the railroad line and then takes over the mines. Upon discovery, the Mexican government discovers they’re worthless–”hopefully worthless”. There was no copper, it was a total waste. The People’s State held emergency meetings, they felt cheated.

“They’re in for some more knowledge. There’s that housing settlement for the workers of San Sebastián. It cost eight million dollars. Steel-frame houses, with plumbing, electricity and refrigeration. Also a school, a church, a hospital and a movie theater… A model example of progressive State Housing. Well, those steel-frame houses are mainly cardboard, with a coating of good imitation shellac. They won’t stand another year. The plumbing pipes—as well as most of our mining equipment—were purchased from dealers whose main source of supply are the city dumps of Buenos Aires and Rio de Janeiro. I’d give those pipes another five months, and the electric system about six. The wonderful roads we graded up four thousand feet of rock for the People’s State of Mexico, will not last beyond a couple of winters: they’re cheap cement without foundation, and the bracing at the bad turns is just painted clapboard. Wait for one good mountain slide. The church, I think, will stand. They’ll need it.”

“Francisco,” she whispered, “did you do it on purpose?” He raised his head; she was startled to see that his face had a look of infinite weariness. “Whether I did it on purpose,” he said, “or through neglect, or through stupidity, don’t you understand that that doesn’t make any difference? The same element was missing.”

She looked at him blankly. “What are you trying to say?”

“I am saying that the workers’ settlement of San Sebastián cost eight million dollars,” he answered with slow emphasis, his voice hard. “The price paid for those cardboard houses was the price that could have bought steel structures. So was the price paid for every other item. That money went to men who grow rich by such methods. Such men do not remain rich for long. The money will go into channels which will carry it, not to the most productive, but to the most corrupt. By the standards of our time, the man who has the least to offer is the man who wins. That money will vanish in projects such as the San Sebastián Mines.”

It also vanishes in projects such as the Glen Cove Ferry Terminal.

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About the author

Founder, Executive Editor

Before founding the Beacon, Mike worked at AOL Patch, Anton News, and most recently at Reason Magazine.

6 Comments

  1. Dave Nieri says:

    The previous Mayor Ralph Suozzi, who started this foolishness against the advice of his paid consultants, said the Ferry Terminal would be constructed with $11 Million from Federal Stimulus funds ($8M) and NYS grant funding ($3M) and ‘no taxpayer money would be needed’. Sorry, that’s a lie – where does the $11M come from if not the taxpayer? I did not hear that the U.S. Treasury won Powerball and was sharing their winnings with us, so Stimulus money must come from the taxpayers.

    And every major project is overrun, so even if the $11 Million came from Powerball or Publishers Clearing House, we still haven’t heard what Phase I of the terminal cost, officially. The current Mayor said last week it’s ‘more like $13 Million’. So there’s another lie about the cost – and we are on the hook for $2 Million additional.

    Then there’s the settlement due to poor engineering. Everyone in Glen Cove knows there are fresh water springs throughout Garvies Point and the Nature Preserve, but the engineers didn’t plan for the high water table and resulting damage to the new bulkheads. So we had to sue them for the cost of fixing it. But the City’s settlement only recoups about 2/3 of the lost money. The taxpayer takes the hit once again.

    We have a nice new terminal sitting on the Creek but no Ferry. Now we’re starting Phase II of construction – the terminal building. Thank the taxpayer again for their largesse!

    Since the Waterfront Developers are basing their success on a commuter ferry terminal, I think the City should at the very least, send the bill for all cost overruns to the Developers. It’s for them – not for us. And if a bonafide Ferry Operator never materializes or the operation fails within the first 5 years, the Waterfront Developers should be required to purchase the completed Ferry Terminal from the City. The generosity of the taxpayers need to be repaid.

    • Mike Bruschini says:

      I remembered this after publishing this post, but what is even more destructive, this instance of government spending represents at the very least a proportional opportunity cost of taxpayers investing the $11 million themselves.

      Any “jobs created” are the minimal equivalent of what would have been created if the government never spent the money. Notice that every year about a handful of businesses close up shop in the wake of every budget the City Council passes; their value is roughly equal to the amount of the increase in spending.

      And another point I didn’t get to include was that the Left–people like Paul Krugman and even Bill Clinton thought the Stimulus wasn’t big enough!

  2. Robert Panzenbeck says:

    Dave, Long Island pols continue to play shell games with taxpayer revenue. Witness Ed Mangano talking about how raising our taxes is no big deal because the state rebate will cover the difference. Who is he kidding?

    The Ferry was and is a terrible idea. It is a cart before the horse project with limited demand and economic prospects so poor that no one will shell out to operate it even though a majority of the capital investment in infrastructure has been picked up by the state.

    A similar project in Yonkers, an area significantly larger than Glen Cove with many more commuters, was unable to turn a profit, even charging a very modest rate that was heavily subsidized. Once the subsidies ran out, NY Water Taxi got out. I’m not sure why Glen Cove would be any different.

    • Mike Bruschini says:

      Never mind that he expects to take in $30 million by putting speed cameras on streets that go from 40 mph to 15. Obviously, this money comes from taxpayers, so that’s a tax increase “state rebates” won’t cover.

      I think if the Spinello administration wants to set a good example, it should do everything within the law to prevent any more of society’s precious resources from being wasted on this Frankenstein of a project. And just because the state or federal government will pay for it doesn’t make it a good idea. It’d be a good PR stunt, too.

      But the following link leads me to believe they will continue the status quo: http://www.nytimes.com/2007/09/16/nyregion/nyregionspecial2/16topicli.html?pagewanted=print

  3. Robert Panzenbeck says:

    Mike, if like Krugman and Clinton, you simply worship GDP, the context doesn’t matter.

    The problem is, GDP doesn’t account for alternatives, or utility. Here’s a great take on it:
    http://www.zerohedge.com/news/2014-09-23/gdp-waste

  4. Dave Nieri says:

    Not only the Yonkers ferry, but most of the commuter ferries crossing the Hudson and East Rivers to Manhattan operate with subsidies, and they have a captive audience so to speak. They also have a voyage of about 15 minutes compared to nearly an hour from Glen Cove.

    While I would love to see a successful ferry operation, the prior history and the realities of high-tech, high-speed ferries say the operation will likely peter out after a number of money-losing months.

    The article you referenced is laughable – Mrs Peebles enjoyed the ferry for 6 months before it ceased operations. No matter how enjoyable the waterborne ride may be, it all comes down to whether it is economically feasible. And politicians will spend whatever it takes of “other peoples’ money” just to prove that point over and over again.

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