In the last two years, I have become a landlord. My wife and I have bought a wonderful home in a historic neighborhood that came equipped with a nice apartment above our detached garage. Economically, it makes sense to rent the place. It was easy to fill for a variety of reasons, and we have a wonderful tenant that is happy to be there.
When we bought and moved into our home, it left our former home empty and still listed for sale. After a long and losing battle to sell it, I have now found a family that is willing and able to rent it. So now I have two contracts with other people in my personal life. Ok, technically three if you count the awful deal I have with my wireless provider. Both rental contracts provide benefit to me and to my tenants, but they are complicating to my life, and if I didn’t need the money, I certainly wouldn’t mess with it. We will review, renew, or terminate each lease on an annual basis. Thank God for that because times change, and people change, right?
Which leads me to our topic: contracts create partners, some partners turn out to be better than others, and partnerships with the government are less reliable than most think. There is something about certain “agreements” with the government that make both “partners” unreliable.
First, whenever a law is passed that creates economic opportunity for any specific entity (stadium deals, casino licenses, alcohol retail regulations), the passage of the law is the beginning of the renegotiation. The public sees it as THE deal that has been chiseled into our permanent cultural fabric. It isn’t.
In my career, this dance has become so predictable that I already envision the demolition of the proposed Indy Eleven Stadium in our future. Who doesn’t see the sale of the two “racinos” if they are granted the ability to become full fledged, land based casinos? And how do we all feel about the recent arrangement between the city and Angie’s List? What happens if the not-yet-profitable company never becomes one?
These are scenarios where the private entity is risky. But what about when the governmental side is unpredictable? Yes, that happens like clockwork as well. Not so much when there is an actual contract, but almost uniformly when the “contract” comes in the form of a new law. Legislatures are bad partners, almost by definition. Why? Because new legislatures never feel bound by the prior one that made the deal.
So, any deal with the Indiana legislature that is longer than two years is tough. 125 of 150 of them are elected, or not, every two years. If it’s longer than four years it’s risky. Every one of them will have stood for election or reelection in that time, plus at least one gubernatorial election. And if it’s longer than eight years, it’s just plain stupid.
Big investments, like stadiums, power plants, casinos, industrial parks, etc. ALL are on an investment schedule longer than eight ears. Any partnership with the legislature that is longer than that, is wildly risky, and ultimately unreliable. Invest and plan accordingly.
Now enough of these public private partnerships succeed to justify the dance continuing. However, as a culture, we need to be more aware of their nature. They are partnerships that are far softer than they appear at the ribbon cuttings.
Now back to my tenants. I check on their credit rating and their employment status before signing leases with them. And I have only done this a couple of times so far. It’s a good thing for me that the leases are relatively short in term.
But most importantly, I am fortunate that my new partners don’t know I work at the Statehouse.