Thursday, January 20, 2005

Rainmaker Renovations will hurt Tourism and Economy

The Fono’s House Loan Bill proposes to authorize the American Samoa Government (ASG) to use public funds to bail out the American Samoa Development Corporation (ASDC) and to renovate the Rainmaker Hotel. The ASG is threading dangerous waters, because this move has serious implications.

It is advisable that the government conducts a study to determine whether the territory’s infrastructure, such as our roads and telecommunications, had more to do with tourism’s decline than an aging Rainmaker did. Such a study will be less expensive than renovating a hotel that is probably less of a factor tourists consider when deciding whether to vacation here or not.

In addition, many people make the mistake that taxes do not fund the loan, and that the loan is solely coming out of monies from settled court cases won by the ASG against various parties. This is partially correct. If the ASG used the funds won from its civil litigations for core government functions, then it would forgo current taxation and fees it collects as revenue for such purposes. Ultimately, the ASG lending of litigation monies is an indirect tax on the people.

The most destructive effect will be on the hotel private sector. If the governor’s plan fails and tourism does not increase by a substantial proportion, the only effect bill 29-2 will have is allowing the ASDC to use public monies to attract current customers away from hotels not equally subsidized by the ASG. Since this subsidy is an indirect tax, the Hudsons, the Halecks and other hotel owners are practically paying the government to support the competition.

What would the ASG do in the event the tuna industry starts to deteriorate? Will they go in with a different version of Bill 29-2, and loan our money to the likes of Starkist and buy out their shareholders? Luckily, those tuna companies far exceed the capacity of the ASG to do either. Clearly, this activity is not the role of government nor should it be its business.

All three branches of the ASG are walking hand in hand in pursuit of this objective. Like many other ASG initiatives, what is starting out as a good intention is likely to have dire consequences.

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