Tag Archives: Columbia

Ending KC Drug Prohibition Solves Violence, Need for Intrusive Govt. Surveillance Tech

Today Tony’s Kansas City highlights a statement by former City Council candidate and liberty activist Tracy Ward on the deployment of “Scattershot” technology to pick up gunfire activity through Kansas City:

Tracy Ward: “Why is this shot spotter program teaming with the ATA? What project for the ATA was the money originally earmarked for that they’re now using for the shot spotter? There just seems to be a lot of back room dealing in this situation. Where were the public meetings and the opportunity for testimony before this was put into place? The news just reports the hope that these surveillance mechanisms might be used to stop crimes with little statistical data to back up that idea. In reality, the public should know that those microphones in these shot spotters can pick up and listen to more than just gunfire.”

Tony responds:

Right now the rate of local violence and homicide is so bad that the locals seem more worried about security than guarding against any threat to civil liberties. Nevertheless, Tracy’s questions about new Kansas City surveillance tech are consistent with her local efforts to raise awareness about challenges to freedom in the digital age.

The elephant in this room is the cause of this wave of violence and homicide. Tracy is right in her claim that these surveillance mechanisms are worryingly intrusive, and Tony is right that Kansas City right now is focused on ways to secure life and property from violent criminals. Yet there is at least one policy option that urgently needs to be discussed as part of the solution, and for this I turn to the words of Neill Franklin, a retired police officer with 33 years of drug law enforcement:

Primarily, violence in this country. The cartels are now in over 200 cities in our country–with that comes violence. We have our neighborhood gangs–with that comes violence. And it is all attributed to prohibition of drugs in this country. And in order to eliminate that violence and harm we have to end our war on drugs.

You should also watch this video of Neill Franklin speaking to the National NAACP last year. His speech is a powerful indictment of the War on Drugs from a law enforcement perspective:
I submit that until we can deal with Kansas City’s gang problem, citizens will continue to be threatened by increasingly intrusive government surveillance, which Tracy fears, and Kansas City residents will continue to be insecure in their persons and property, which Tony fears. Yet we don’t need to live like this. Kansas City needs to come to a realization that the time is long past for this discussion to happen at all levels of our government.
Indeed, Kansas City may look to the example set by Columbia, Missouri. Popular discontent with the use of SWAT teams to enforce marijuana and drug search warrants forced the City Council and Police Department to change policy. Indeed, Columbia Police Chief Ken Burton has even endorsed marijuana legalization, indicating that this would do much to undermine criminal activity:
For taking these stances, and for further reforming the Columbia Police Department, Chief Burton has been been lauded by civil liberties and citizen groups in Columbia, who have expressed support for his leadership quite vocally. Yesterday, Keep Columbia Free Vice President Abhi Sivasailam noted to ABC 17 (KMIZ):
“All of these petitions are geared towards supporting Chief Burton and demonstrating there is a lot of public support for his tenure as police chief,” Sivasailam said.
The KCF petition points out Burton’s reforms within the department that have been applauded such as his limited use of SWAT teams when serving warrants and his endorsement of the legalization of marijuana.”I think he is a progressive and critical thinker about the laws we have instead of just blindly enforcing laws,” Sivasailam said, “The petitions are also meant to balance out opposition from CPOA’s request of removing the chief. We want to make sure the city manager hears everyones voice on this not just CPOA’s narrow one.”

What are the political risks to Burton’s stance in Columbia? As he is finding out, none. I’ll leave you with this final quote from an article in today’s Columbia Tribune:

Burton said he does not believe a majority of his department agrees with Cuttle and that the officers union is “running rampant.” He also said he believes the officers who are most vocal are having a hard time adjusting to accountability.
“Nobody likes being held accountable,” Burton said. “Rules had to be put into place to get things under control. It started with SWAT. Changes are not always comfortable.”

Matthes said the union told him its goal is to get Burton fired and that it plans to engage media outlets to foster a groundswell of public support for Burton’s ouster. “The exact opposite is what’s happening,” Matthes said. “What I’m hearing from the community, they don’t like the approach the fraternal order is using.”
Matthes said he also was contacted by officers who expressed embarrassment about the union’s tactics. Although he said he respects the views of officers who back the union’s statements, it is “painful” to see the union speak for others who do not agree.

 Kansas City, what say you?
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United we stand, divided we blight

I see the eminent domain argument against the Enhanced Economic Zone (EEZ) blight designation of most of Columbia, Missouri Enhanced Economic Zone as an important facet of the opposition to this plan, but here I want to flesh out what I see as a fundamental principle driving the vigorous opposition to this plan. It simply isn’t fair in the way it allocates economic opportunity and public investment to the rich and politically connected, and it is that failure that must be recognized first and foremost because it is the inequity and unfairness of government policy that underlies most of the deep divisions in our polity. Indeed, I cannot remember a time when America was more sharply divided against itself.

We are a diverse polity. In some ways that gives America unique strength. But it also means that there is much difference between people: Religion, culture, sometimes language. History tells us of the old conflicts that still cast their specter over our mutual association. I think sometimes we forget how deeply the scars of war, slavery, and other oppressions have marked our society.

The prime virtue of America was that it offered equal opportunity. Equal opportunity before the law, the freedom to pursue happiness. For those escaping the shackles of a particular bondage, this freedom is like air to a drowning man.

But we must not forget these principles that are the foundation of our mutual association. The effort to carve up our public weal, to submit it to the appropriations of the powerful and connected, is an anarchic project. To prioritize one person or group’s needs and desires above the rest inspires resentment, destroys trust between individuals and groups, and foments disrespect for the law itself.

Let us quit this proposal of carving out economic benefits to companies and individuals who seek personal profit at the expense of the average citizen. I propose instead the City of Columbia instead focus on the provision of its core public services to citizens. Certainly our police department is a prime example of how poorly provided public services can alienate citizens and tarnish our city’s reputation. Our schools face chronic problems of underachievement, and many of our citizens have immediate needs that might be appropriately provided through refinements and investment in the basic city infrastructure. Let us focus our public policy in areas where we can provide immediate service to the citizens of Columbia.

And I want to suggest that it is not such a bad thing to stop competing with other cities to offer companies tax breaks for relocation and promises of “jobs”. Indeed, by breaking from this race to the bottom, Columbia has a chance to show national leadership on this issue. Wouldn’t that be something?

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Against Jon Sessions on the Columbia Enhanced Economic Zone

My friend Jon Sessions, a member of the Columbia School Board, recently published an essay defending the choice to declare Columbia “blighted” as part of the decision to designate much of the town an “Enhanced Economic Zone” (henceforth EEZ) under state law. Declaring Columbia an EEZ would allow the allocation of tax credits for “Businesses moving to the designated area or expanding within it can qualify for state income tax credits worth as much as two percent of payroll and property tax abatements worth half of the expanded or new facility.”

While the incentives would be “targeted at manufacturing firms”, “many other types of industries can qualify, including those focusing on arts, entertainment, recreation, information services, telecommunications and more”. However, “Retail businesses, gambling establishments, restaurants, educational services and religious organizations are not eligible.”

Is this in any way coherent? What is the justification for targeting “manufacturing firms” as opposed to retail businesses or restaurants? Why not target retail or restaurant establishments? In fact, why not just give everyone a tax credit? Certainly, that would stimulate employment as businesses looking to expand suddenly have extra cash to finance it with. Indeed, Sessions gives no warrant for targeting specific sectors and prioritizing certain kinds of employment and business above others. America is a country founded on the notion that everyone has equal opportunity to succeed; I propose we adhere to this notion by stimulating economic growth through broad-based changes in the tax policy, rather than by carving out special or protected industries that can’t survive on an equal playing field.

Moreover, the entire concept of competing for investment and growth through the use of targeted tax credits is fundamentally unsound. You often hear politicians or tax credit advocates argue that other cities and communities are offering this tax credit or that economic development program and if we don’t do that too we’ll miss out when companies come looking to expand. This “race to the bottom” mentality is corrosive, because it allows companies to pit city against city.

An economist might turn to auction theory to share some insight here. When cities look to attract investment and growth, they face a variety of choices, some good, some bad, some of uncertain value. Hence, there is a penalty when a city incorrectly decides a bad opportunity is in fact a good opportunity, and successfully offers a package of tax credits and incentives to chase that opportunity. Such overestimation is known as the “winner’s curse” and is on particular display on TV game shows like the Price is Right. While Sessions touts the assumed benefits of his strategy, he does not explain what happens when the city makes a bad decision, or why he thinks that the political nature of the decision-making process allows fair decisions.

Fundamentally, Sessions needs to articulate why he thinks Columbia’s “experts” in the government can always pick the right projects, offer the right packages, without making substantial mistakes. I challenge his implicit contention that policymakers can accurately gauge the future of economic growth, decide that they only want to promote certain industries, and decide what businesses should or should not succeed in Columbia. It would be better policy to keep a level playing field, and offer all people and businesses who wish to do business in Columbia a reduced tax burden.

Addendum: An astute reader notes this April 2010 post where I defend the school nutrition stance advocated by then-candidate Jon Sessions from a (very) spurious attack from Show-Me Institute policy analyst Sarah Brodsky.

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The surveillance state comes home

Mark Flakne of Keep Columbia Free discusses, among other things, how the Columbia, Missouri police department is surveilling bars known as hangouts for political activists who oppose police overreach. The bar in question, the Blue Fugue, is a place where I’ve held numerous meetings with other people involved in politics; we used the space to work on my friend Mitch Richard’s campaign for city council, as an organizing venue for protests against SWAT raids following the Kinloch Court raid, and a place where I meet attorneys, political consultants, and other professionals for politically-oriented work.

 

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“A meaningless protest vote”

Fred Schmidt writes to justify his May 16 vote to fund surveillance cameras in downtown Columbia. And justification is sorely needed: Not only did First Ward voters choose to reject the installation of surveillance cameras, but Fred himself ran for office on an anti-camera stance.

Fred’s best argument for voting to fund the surveillance cameras is that “nothing would have been gained by a meaningless protest vote”. Perhaps in Fred’s decision calculus nothing would have been gained, but perhaps we can articulate what has been lost.

To represent others in an elected, decision-making body is a difficult task. Nevertheless, Fred could have at least forced a council debate over spending priorities. The First Ward is short a fire company and lacks a competent police force, yet Fred could have represented his constituents by representing their views in open council and initiating a debate.

Moreover, there is a matter of integrity. One should not run for elected office opposing something and flip flop on that issue at the first available opportunity. Can First Ward voters trust Fred from here on out? Will any of the promises Fred made during his campaign stick or will we find that political expediency and power politics are the most important determinants of Fred’s vote?

Only time, and your pocketbooks, will tell.

More here: http://www.keepcolumbiafree.com/blog/fred-schmidt-betrays-first-ward/

 

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My testimony to the Citizens Police Review Board in Columbia, Missouri, 2-9-2011

My name is Eapen Thampy. I am the executive director of Americans for Forfeiture Reform, a nonprofit that works on issues of asset forfeiture, an issue implicated deeply with the emergence of paramilitary policing in America. We have been endorsed by groups on every part of the political spectrum. Some of these groups include the Missouri Libertarian party, Ed Rosenthal’s Green Aid Marijuana Legal Defense Fund, and the conservative Right on Crime initiative, a project of Newt Gingrich, Grover Norquist, Ed Meese, and Pat Nolan.

Last May I was one of the many people at city council speaking in protest of the Kinloch raid; today I return to this chamber to ask again that we pursue a more sensible approach to policing in Columbia. Over the last year, as light has been shone on paramilitary policing practices in Columbia and around the nation, many thousands of people have contacted us, asking us to speak on their behalf, and bear witness to the harms that uncontrollable police agencies can do to their communities.

At the outset, it is important to note what we want. We want a strong and effective police presence, we want a fair and impartial justice system, and we want every man, woman, and child in America to be able to enjoy their freedoms in this brave land. We do not oppose the rule of law; rather, we wish to see it flourish. We honor and respect the sacrifices of all who serve to protect us, but we will not compromise on the high ideal we must hold our public servants to.

Nor do we intrinsically oppose the existence of SWAT teams. They exist for specific reasons: hostage crises, gun rampages in schools and public areas, to combat the threat of organized violent crime. Situations where a SWAT team might be required are by definition extraordinary.

But the emergence of SWAT policing in America and in Columbia indicate that these real needs have been corrupted by the perverse incentives provided by the War on Drugs and Columbia’s own dysfunctional police force.

SWAT policing, as I noted, is a far cry from routine policework. Most small jurisdictions do not need their own SWAT team. However, over the last twenty years, almost every medium to small police department or sheriff has managed to obtain their own SWAT teams, often without citizen approval or request. Moreover, the weapons and armor available to a SWAT team are fairly heavy duty and very expensive to operate and maintain.

A SWAT team is an expensive proposition. To simply get the APV out of the garage and back is a minimum of $2,000. Some of the raids Columbia SWAT have been involved in were on holidays; that means triple hazard, overtime, and holiday pay.

The most perverse part of SWAT policing may be the funding mechanisms that allow it to happen. Federal law allows Columbia police to seize property without proving a crime or obtaining a conviction; moreover, federal law allows Columbia police to keep this money directly, in violation of Missouri constitutional law and Missouri Supreme Court precedents that delegate seizure money to Missouri’s schools. The name of the program is Equitable Sharing, and over the last several years Columbia Police have received hundreds of thousands of dollars with essentially no oversight.

During the last year I have investigated the 106 SWAT warrants Columbia narcotics police served between January 2007-May 2011. You may view the map of these raids at

http://forfeiturereform.com/2010/11/16/columbia-police-department-swat-raids-in-columbia-missouri-2007-may-2010/

Here is Brennan David from the Columbia Tribune (http://www.columbiatribune.com/news/2010/jun/27/swat/):

Columbia’s SWAT team served 106 narcotics search warrants between Jan. 1, 2007, and May 11, 2010. The Tribune, through an open records request, received 99 of those search warrants; the others were considered closed records for various reasons.

Of the 99 SWAT narcotics search warrants granted by the Boone County Circuit Court to Columbia police, officers executed 43 percent of them within hours of being issued. Of those, 65 percent resulted in one felony arrest, and 18 percent resulted in misdemeanor arrests.

But the percentage of warrants producing a felony arrest dropped drastically to 37.5 percent when investigators waited one day before serving the search warrant. In those cases, 50 percent produced misdemeanor arrests.

I would also direct the CPRB to the video of another Columbia SWAT raid in 2008 (http://www.youtube.com/watch?v=05gLm6mSZ5M). In this raid, a family is at home when the SWAT team visits; you can see Columbia’s finest holding women and children at gunpoint. There is even a moment of pure incredulity at 7:30, where an officer handcuffs the elderly woman sitting in the bathroom, telling her that she is not under arrest and not in any trouble.

In this raid, 3-4 crack rocks were found, along with some minor paraphernalia. No weapons or evidence of trafficking were found, and despite the prior record of the men who were the target of the warrant, no indications of violence are provided that might justify a SWAT raid on this house in this manner. The woman who was not “arrested” ended up being charged with a paraphernalia possession charge; initially, she pleads not guilty until the court appoints a public defender for her, who negotiates a plea deal with the prosecutor instead of defending her in a court of law. Justice is no longer weighed by a judge in a court of law; it is held at gunpoint before being negotiated in the prosecutor’s office.

No government official here had any incentive to check the wrongdoing, misconduct, or negligence of other government officials.

Other Columbia SWAT raids bear similarly striking details. I have interviewed victims of at least 10 of these raids, who have asked me to bring you parts of their stories. Many of them are fearful that they will find themselves being retaliated against, and none are willing to give me permission to use their names. I have heard and verified tales of SWAT raids being used as retaliation for petty offenses or to put competitors out of business both legal and illegal.

This kind of enforcement is incompatible with the principles of Justice, or of her sister, Mercy.

It is important to note a contrast that I hope illustrates more clearly the problem we face. Boone County Sheriff’s Department does not generate the kind of lawsuits and publicity that Columbia Police Department does. There are a couple structural factors at work here: Columbia Police Department has had an incoherent series of transitions from one police chief to another over the past decade, leaving CPD with dysfunctional leadership and command structures that never had time to build or find the values that law enforcement must have to perform effectively. BSCD, by contrast, has a smaller, more stable force, with much more organizational integrity and continuity of leadership.

We have a few recommendations for the CPRB:

  • First, recommend that the use of SWAT raids for non-violent offences be strictly prohibited.
  • Second, recommend that any SWAT action be fully videotaped. This will allow the city to limit its liability from future civil lawsuits by demonstrating that the city has fulfilled its duty to ensure that any use of force has been accompanied by sufficient checks on its use.
  • Third, recommend that all seizures related to criminal activity be documented, strictly accounted for, and deposited into the School Building Revolving Fund as per RsMO 166.131.
  • Fourth, recommend that the city council refuse any federal funds deriving from seizure or forfeiture funds. Federal funding may be important for emergencies, but seizure money comes to our police free of civilian oversight or legislative control. This undermines our ability to influence policy at the police department. Moreover, un-appropriated funding undermines our ability to control the city budget, particularly when it is used to purchase weapons and equipment that must then be maintained with city funds over time.
  • Fifth, recommend that the city council establish the protocols for enforcement of Columbia’s ordinance regarding cannabis offenses, with particular regard for the rights and safety of chronically ill or incapacitated patients. We understand that the implementation of this ordinance poses problems from a law enforcement perspective, which is why it is important that these directives come from civilian leadership. In this way our police can avoid the criticism of how their enforcement protocols may sometime provide conflicting imperatives.

Finally, please consider the words of Missouri Supreme Court Justice William Ray Price in his address to the Missouri Legislature today (emphasis mine, available here: http://forfeiturereform.com/2011%20state%20of%20the%20judiciary%20-%2002-09-11%20-%20FINAL.pdf):

From the 1980s, in Missouri and across the nation, we attempted to incarcerate our way out of crime and illegal drug use. We thought just putting people in prison would make them better or scare them straight. We spent billions of dollars and it did not work. We were tough on crime, but we were not smart on crime. Consider these numbers.

In 1982, 612,000 people were behind bars in state prisons across the country. By 2008, that number had risen almost fourfold to 2.3 million people. In 2010, the United States incarcerated a higher share of its population than any other country in the world. The cost has been staggering. State correctional spending across our country increased from $11.7 billion, in 1988, to $47.3 billion in 2008. (One in 31 The Long Reach of American Corrections, The Pew Center on the States, http://www.pewcenteronthestates.org; The High Budgetary Cost of Incarceration, Center for Economic and Policy Research, June 2010, http://www.cepr.net)

There is a broader debate here over how we approach crime of any nature. I ask you to dare to be smart on crime and engage the broader issues of Drug War reform and incentive-compatible policing in your evaluation of these issues of police conduct and misconduct.

I furthermore recommend the following experts on 4th Amendment law and paramilitary policing:

Radley Balko, former Cato Institute scholar and senior editor of Reason Magazine; expert on SWAT raids and paramilitary policing (radley.responses@gmail.com)

Orin Kerr, Professor of Law at George Washington University; expert on criminal law, asset forfeiture, and Fourth Amendment law (okerr@law.gwu.edu)

John Payne and Audrey Spalding, policy analysts at the Show-Me Institute; asset forfeiture and SWAT raids (john.payne@showmeinstitute.org, audrey.spalding@showmeinstitute.org)

David Roland, lead litigator at the Freedom Center of Missouri; expert on Missouri and US constitutional law (dave@mofreedom.org)

John Chasnoff, Eastern Missouri ACLU; expert on SWAT policing and Fourth Amendment law (john@aclu-em.org)

Peter Kraska, Eastern Kentucky University, expert on SWAT policing (peter.kraska@eku.edu)

Please contact me for any clarification or if you have questions.

I am respectfully yours,

Eapen Thampy
Executive Director, Americans for Forfeiture Reform
3630 Holmes St., Kansas City, MO, 64109
Phone: 573-673-5351
Email: Eapen@ForfeitureReform.com or Eapen.Thampy@gmail.com
Web: http://www.forfeiturereform.com and  http://www.facebook.com/ForfeitureReform

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Dan Viets on search warrants and violence in Columbia, Missouri

Dan Viets Attorney and Counselor

15 NORTH TENTH STREET COLUMBIA, MISSOURI  65201 (573) 443-6866/FAX (573) 443-1413

Dear Friends:

As most of you are probably aware, the Columbia Citizens Police Review Board has agreed to take up the appeal of our complaints regarding the Kinloch Court incident this Wednesday evening, August 11 at 7:00 p.m. in the City Council Chambers in the new addition to the Daniel Boone Building.

Last week, the complainants were not allowed to speak before the commission.  The Chairwoman had told me that this may or may not change at this meeting.  It is likely there will be an opportunity for us to speak, but it may be after the Board has made its decision.

I know of no reason to expect that the Board will change its position.  The Board voted four to three last week to accept the decision and report of the police chief.  However, if the Human Rights Commission has replaced the member who recently resigned from the CPRB, that could change the outcome.

At any rate, it is my recommendation that we ask the CPRB to agree to investigate the question of whether search warrants should ever be used in the investigation of non-violent crime.  The CPRB is focused on the technical question of whether the complaint against the individual police officers has been properly handled.  I recommend that we ask them instead to look at the broader policy question and consider making recommendations for a change in the policy.

The execution of search warrants is an inherently potentially violent process.  The execution of a search warrant involves a home invasion.  Whenever a home is invaded, there is a real risk that the occupants of the home may respond with violence before they even realize that it is police officers who are invading their home.  The occupants of the home invariably are truly terrorized by people battering their door open, pointing firearms at them and screaming at the top of their lungs.  Frequently concussion grenades, referred to by police as “flash bangs”, are thrown near or inside of the home for the purpose of further disorienting the occupants.

There are alternative means for investigating such matters.  There is almost always a claim of an anonymous or confidential informer in the application for such search warrants.  That individual should be required to make a controlled buy of marijuana, either under surveillance or with recording or transmitting equipment.  This is commonly done and involves far less risk to the police and the occupants of the home.

I look forward to seeing you this evening.

Sincerely,

Dan Viets

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A question of voice and not of standing

Over at the Columbia Missourian, Abby Rogers covers a complaint made by Ed Rosenthal, a California citizen, who challenged the exoneration of officers involved in a SWAT raid in Columbia, Missouri, back in February. Here is the video of the raid if you haven’t seen it:

There has been some pushback by the Police Department and people sympathetic to the notion that police should serve non-violent search warrants with overwhelming force that Ed does not have standing to file a complaint. I strongly disagree, and here is the content of a comment I posted to the Missourian’s comment boards on the subject:

The standing issue in Ed’s complaint presumes several unfair things. Ed does have long-standing relationships with members of this community, and it is unfair and unjust to presume otherwise out of ignorance. It is also unfair to stipulate who may file a complaint; this is an open and free land, and we conduct commerce and the varied activities of life in all other parts of this country, bound by the common laws. In a very direct sense any American who may conceivably conduct business in Columbia, or visit family, or for pleasure, has a direct and vested interest in not being in the wrong house at the wrong night and be the victim of overwhelming force in a community where voters have expressed their clear intent to relegate these offenses to the lowest law enforcement priority.

The other major issue is not of standing, but of voice. Overwhelming violence is used to capture offenders who are non-violent and may be acquired in much more peaceful ways. After being victimized, families are terrified of voicing complaint; they have already been violently attacked, and fear retaliation from a police force that does retaliate.

Reference particularly the case of the young man who publicly complained that his rights were violated and his complaint stymied by Columbia’s Internal Affairs department. A police officer posting under the cover of anonymity retaliated by illegally disclosing closed records of this young man’s juvenile history. There was an investigation, but the officer remains on the force. There is no way for this community to trust that someone who has once violated the awesome trust that comes with wielding the power of the state will not violate that trust again.

The tone of these incidents brings a chill to those who are convinced that their exercise of their free speech may yet again be violated with force or other retaliation. To cut off their access to voices from outside the community is to silence the voices that have real complaints and risk real retaliation from voicing their petition.

I have worked with Ed and represent dozens of Columbia residents who support what Ed has done in defense of our civil liberties. There was no need to serve the Kinloch warrant late and with violence; with simple forethought, they could have served the warrant safely and without harm to dogs.

And there was no reason to kick a subdued man, for whom there was no arrest warrant, while he was down and cuffed.

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The winner’s curse: would more a more competitive bidding process ‘undermine Columbia’?

The Columbia City Council held a special council meeting last night over the proposed deal with IBM which would bring an IBM datacenter + jobs to Columbia. Christine Harbin at the Show-Me Daily has a good cost-benefit analysis on the state and local incentives IBM is receiving to bring their datacenter here; she notes that each job IBM brings to Columbia is subsidized to the tune of about $51,000.

Abby Rogers in the Columbia Missourian today covers last night’s City Council meeting. She notes:

If REDI or other city officials had shared news on the deal with IBM, competing cities might have been able to sweeten their offers and undermine Columbia. In addition, the confidentiality of the proceedings allowed Columbia and IBM to talk business, Brooks said.

It seems obvious to me that letting another city “undermine Columbia” is not necessarily a bad thing. Think of the bidding process as an auction: cities submit “bids” in the form of incentive packages, and the highest bid gets IBM and the datacenter. But consider this: the city with the highest “bid” is also the city that is most likely to have overvalued IBM’s datacenter.

Auction theorists call this the winner’s curse (“you bid, you win, you lose, you curse”). The concept was first introduced by Capen et al in the Journal of Petroleum Technology in 1971 in an analysis of oil and gas leases in the Gulf of Mexico. I was unable to find a copy of the article I could link to but here is are a couple excerpts from their abstract:

If it is true, as common sense tells us, that a lease winner tends to be the bidder who most overestimates reserves potential, it follows that the “successful” bidders may not have been so successful after all. Studies of the industry’s rate of return support that conclusion. By simulating the bidding game we can increase our understanding and thus decrease our chance for investment error.

In recent years, several major companies have taken a rather careful look at their records and those of the industry in areas where sealed competitive bidding is the method of acquiring leases. The most notable of these areas, and perhaps the most interesting, is the Gulf of Mexico. Most analysts turn up with the rather shocking result that, while there seems to be a lot of oil and gas in the region, the industry probably is not making as much return on its investment there as it intended. In fact, if one ignores the era before 1950, when land was a good deal cheaper, he finds that the Gulf has paid off at something less than the local credit union. Why? Have we been poor estimators of hydrocarbon potential? Have our original cost estimates been too potential? Have our original cost estimates been too conservative? Have we not predicted allowables well? Was our timing off? Or have we just been unlucky?

Even though Columbia “won” the auction for IBM, we could still “lose” in one of two ways. First, if what Columbia “paid” for IBM to come here is far in excess of what IBM’s datacenter is worth to the local economy. The second way is just a weaker version of the first; we “lose” if the value of IBM’s datacenter is less than what we estimated, even if there is a net gain to be had. This scenario is viable in common value auctions with incomplete information, ie, when lots of cities are bidding for IBM but all of their negotiations are private, which means that the localized information available to policymakers in specific cities is confidential. IBM gets to negotiate from a position of strength and there is no incentive for them to not share confidential information amongst bidders, though individual bidders have incentives to maintain confidentiality. Each individual city thus never gets access to the common pool of information that IBM has, meaning IBM can easily leverage city against city to obtain optimal conditions for itself.

As you might imagine, this isn’t a pleasant thought for anyone who fought to bring IBM to Columbia. Everyone who supports the idea will tell you that their valuation of what IBM is worth to Columbia is excellent and robust. It is not a pleasant thought to think that even rational actors err and err often, and it is counterintuitive that we might benefit from an open and transparent bidding process because it is easy to point to other cities that won a bid and say “we lost”. But it is much harder to win well than we think, and ultimately people are shortsighted.

Suggested further reading on the winner’s curse: Here is Richard Thaler’s excellent 1988 article in the Journal of Economic Perspectives, and here is a good short essay Sfrom Levin and Kagel from Ohio State.

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Voluntary price discrimination, Columbia solar power edition

From the local Columbia Tribune:

The city bought 10 kilowatts of energy produced by the solar panels, divided it into 140 blocks of purchasable power and, for an annual cost of $48 per 100 kilowatt-hour block, offered electric utility customers the chance to buy a piece of pure green power.

“It’s a creative way to provide solar power to the people who want it without making the rest of the city pay for it,” interim Water and Light Director Mike Schmitz said.

Ninety customers bought all the available blocks by early 2009, Schmitz said. With the success of the program, the city will soon more than double its available solar power. Quaker Oats and retailer Bright City Lights have entered a contract that will result in an additional 15 kilowatts of solar power available to customers by summer.

Schmitz said improvements in solar technology have resulted in lower costs, a savings that will be passed on to customers. The city now buys solar output for 42 cents/kwh. Quaker Oats will be able to sell the next batch of solar power at 25 cents/kwh and Bright City Lights at 37 cents/kwh.

The new blended cost will be $40 for a 100 kwh block per year. By comparison, the regular rate for electricity through the city is about $9 per 100 kwh block, Schmitz said. Solar One costs are added to a user’s regular utility bill.

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