Skip to content

“Smart Government” Can Be Pretty Dumb (and expensive too)

I have repeatedly voiced my opposition to government investing in or running business ventures.  It creates all sorts of conflicts of interest, moral hazards, and opportunities for corruption.  It is also manifestly unfair to force private companies, who must get all their funding through voluntary exchange, to compete with an entity that uses force to get it’s funding.  Businesses that use force, such as General Motors or the Mafia (same thing, actually) can run at a loss indefinitely.  They are not competitors.  They are predators.

As unfair as this is to their competitors, it’s the beleaguered taxpayers, the objects of that force, that are hurt the most.  I don’t understand why funding auto companies, banks, casinos, or municipal marinas has to be part of my life.  I never asked for it.  I don’t want it.  It’s not why I work.

When immense, gigantic, humongous, gargantuan entities such as the federal or New Jersey governments lose money on business ventures it is just a small part of their huge, massive, collossal, mountainous budgets.  It is hardly even noticed. Easy come, easy go, right?  When, however, it’s the only somewhat bloated local governments that lose money on business ventures, it gets noticed.  The residents of Buena Vista, Va may soon notice that they no longer have a city hall or police station.

Sometimes “smart government”  does some really stupid things.  Buena Vista Mayor Mike Clements had the “good idea” of constructing a municpal golf course with views of the Blue Ridge Mountains. Can’t lose, right?  It could.  It did.  Since it opened in 2004 it had one profitible year.  Each and every other year it lost hundreds of thousands of dollars.  Buena Vista has 6500 residents, roughly the size of Belmar.  How can it’s residents be forced to pay for this?

Here’s the worst part. They financed it with a $9.2 million bond that used their city hall and police station as collateral!  OOPS!

From yesterday’s Wall Street Journal:

Buena Vista, Va., borrowed $9.2 million through a bond offering in 2005 to refinance a municipal golf course. It pledged as collateral, of all things, its City Hall and police station.

Now, amid financial difficulties, the city says it can’t pay its debt, triggering a showdown over these public buildings.

On the other side of the battle is a big New York insurance company, ACA Financial Guaranty Corp., which is obligated to pay bondholders if the city defaults.

“They put up City Hall to finance the golf course,” says Bonnie France, a lawyer for ACA. “It’s collateral, so they could lose it. I’ve worked in public finance for 30 years and never seen this happen.”


Officials projected the course would pay for itself. Plans called for about 70 acres surrounding the property to be dotted with a hotel, homes, small businesses and restaurants. The city took out a loan, then refinanced it by selling bonds.

“Unfortunately, soon after the project was finished, the country fell into the worst recession since the Great Depression,” Mayor Mike Clements told residents at a recent public meeting, reading from a prepared statement. Mr. Clements didn’t return calls seeking comment.

How’s that “smart government” working out for ya, Buena Vista?

Tonight Belmar will be awarding a contract of $508,000 for improvements to the 9th Ave pier at the municipal marina. This is money that was taken by force from the people who earned it. That is on top of the hundreds of thousands of coerced dollars being spent on downtown redevelopment.  But don’t worry.  Belmar’s politicians are much smarter than Buena Vista’s.

Post a Comment

Your email is never published nor shared.