Juneau County Guarantees Woodside Ranch Disaster

Well almost. The Juneau County Board voted 12-7 with one abstention on Tuesday March 20 to pass a resolution guaranteeing Midwest Disaster Area Bonds of up to $8 Million to to be issued to Woodside Ranch for a sports complex. This is a special category of tax free bonds authorized by the Federal government, that can be used to fund private development. The resolution also requires a personal guarantee from Damien Grunwald the owner of Woodside; that the money only be doled out as needed to complete the project; and that WHEDA (Wisconsin Housing and Economic Development Authority) guarantee up to $2.1 Million. Other provisions include that the sports complex be put up for collateral for the loan, that the bonds can be sold at no more than 7%, and that an escrow account of one year's worth of payments be established.

One county supervisor asked if the whole of Woodside Ranch was to be included as collateral, but the corporate counsel for the county answered that the sports complex would be surveyed and platted off of the main property, and only the sports complex area would be held as collateral.

Proponents tout the plan to build multiple sports fields and arenas for various sports, with the idea that sports camps for youth, and tournaments will be held there. It is said that 750 participants or more will be there at any given time, plus spectators when fully developed, and that some 780 jobs will be created.

While it appears that the county board put in a number of sensible guarantees, one audience member later observed that the whole Woodside Complex should be collateral, as it would be unlikely that any part of the $8 Million could be realized in a distressed property sale. On that I agree. While the county attorney and others said that the risk is vanishingly small, why not eliminate the risk to the taxpayer altogether? The 12 county board members who favor this could have co-signed the note themselves, eliminating risk to taxpayers.

I talked to several board members about this, and all I talked to favored the proposal, said it had been studied by two separate firms, and was very close to a sure thing. One need not look far for economic “sure things” that failed. There is a grocery store in Necedah that is partially built, after about $340,000 in subsidies from taxpayers. On the edge of Necedah there is a golf course that taxpayers invested $5 Million in, and at least 2 of its owners gone bankrupt. And mark my words, the heavily subsidized ethanol plant just south of Necedah will soon become a pile of scrap metal, as state and federal ethanol subsidies have expired. The current prevailing winds of the economy and politics are not conducive to renewal of these subsidies, and the political forces against them are now considerable, so tax payer derived income to the ethanol business will greatly decrease.

Numerous other subsidized failures could be cited, but one I want to draw attention to is the Blue Harbor project in Sheboygan WI. This is a “sure fire” resort/convention center/water park near Lake Michigan in the downtown area that is a financial failure despite approximately $20 Million in subsidies. Not only that, Great Wolf Resorts Inc, owner of the original Great Wolf Resort in Wisconsin Dells, various other Great Wolf resorts throughout the Midwest and one time owner of Blue Harbor is in financial difficulty. It seems that if you build it, they may still not come.

The larger question in my mind is, should the guarantee have been extended at all? Admittedly I am a free market purist. I am of the opinion that NO business EVER ANYWHERE FOR ANY REASON should get a direct or indirect subsidy, grant, government sponsored loan of any kind, or tax break not generally available to all. One only need look at the current system of subsidies, grants, and regulatory interference to see that, overall, we have created an unsustainable disaster, whatever marginal successes there may have been. Our economy is weaker as various levels of government have spent more in the name of “economic development.”

How do we know that this is the best or most efficient use of these funds? It may be that 100 smaller firms each getting $80,000 subsidized loans would create more wealth, more jobs than Woodside. Moreover, as the pool of investment money is limited, there will likely be fewer funds, more competition for the remaining pool of capital, and a higher price for those who do not get the guarantees and tax exemption afforded the Woodside bonds.

Another consideration is that by granting this first guarantee, we are opening up a veritable Pandora's Box. Will other firms, seeing the success of Woodside, come and lobby their case and get similar grants, subsidies and guarantees?

And then there is the potential for corruption. When I lived in Tempe Arizona, a man named Harry Mitchell was the mayor. He often talked about the many improvements to the city since he was first elected. I look at his list of donors, and found that the top 3 developers in the community were also among his top donors. These developers had benefited mightily from below market land sales from the city, the use of eminent domain to take property they wanted, and fortuitous placement of infrastructure, such as roads placed in ways that favored their properties. There were also significant campaign donations from the principles of firms that contracted with the city. So did these folks just reward Harry for being so civic minded? Or was there a virtually unprovable quid pro quo, tit for tat arrangement going on? The fact that Harry never had a serious challenger made all this even more suspicious.

There was one episode though, that I found either revealing, or especially suspicious. At one time, a couple young fellows bought a commercial lot and wanted to build a fast food, hamburger restaurant. It was shot down, ostensibly because of residential neighbor complaints, competition to an existing nearby restaurant (since when is it the business of government to protect one business from competition of another?) and because there were law enforcement issues with folks who hung out at the existing restaurant. The conditional use permit for the new restaurant was denied, and the young entrepreneurs either sold or lost the property.

Two years later, a nearly identical proposal made by different businessmen sailed through without objection. After it passed, I used the public comment section of the meeting to question what the difference was that made the new proposal so much better than the old? Were there other factors in the decision that were not publicly discussed? Or did someone get PAID to vote differently this time? My questions were not answered, at least not verbally, as a number of council members looked down, not making eye contact, and appearing to me rather sheepish. The more government involves itself in enterprise, the more likely that there will be this type of (apparent) corruption. The primary purpose of government should be to protect our lives, liberty and property. The more it involves itself in business, the greater the opportunity for corruption, the more likely it violates one or more of our basic rights. For all these reasons, and because government involvement almost always means negative consequences on at least some people, some foreseeable, and others not; because government participation ALWAYS skews the marketplace, the business of government is not and should not be business.