Foreclosure reminds of Bossier City officials' stupidity

The chickens continue to come home to roost, more egg piles up on Bossier City elected officials’ faces, or choose a non-fowl-related metaphor if you please, but the fact remains the errors of their strategy to trust government, not people, as the engine of economic growth continue to compound.

After spending wildly – nearly $120 million for a decade on things the city didn’t need and should have been done by the private sector but tellingly were not since they are money-losers – the economic incompetents that have managed to stay in office in the city were forced to make public the bad budgetary situation they created during the 2010 budget deliberations. Propped by years of not being Shreveport and benefiting from out-migration from it, national economic difficulties exposed a huge deficit in city operations. Had the city not gone into so much debt, the crisis largely would have been averted. Making matters worse, 2009 was the exact year that, because of the timing of the city’s past profligate ways, that debt service leaped dramatically.

Now the public has gained more insight into the making of the crisis with the revelation that the Louisiana Boardwalk in its several years of operations has performed so poorly that its owner managed to pay off only $4 million of its $128 million debt, forcing it into foreclosure.
Another operator was secured but, regardless of who ends up owning it, the underlying problem remains – business is too slow to justify higher rents that could pay off loans and support the operating expenses of the outdoor mall.

That figure would have been about $21.5 million higher had the city not built and paid for a parking garage on behalf of the developer. The city also paid millions more to develop the infrastructure of the previously-barren area, necessary to provide access and city services that made the area capable of sustaining tax-generating activity. But the garage was totally unnecessary for the citizenry to pay and, in some ways, that action confirms the city’s foolishness with the project. If the developer had said he wouldn’t build without the garage, that directly signaled that the project could not pay for itself and needed that kind of subsidy.

The default also definitively puts to rest the argument to have taxpayers foot the garage’s bill would make it worthwhile, because the tax revenues otherwise forgone would be greater than the amount to pay for it. (Of course, there are other costs those revenues must cover, like the additional police and fire protection.) If the facility for its owners drew barely enough above operating expenses and interest payments to pay so little down on debt, then sales and (to a lesser extent, since they change more slowly) property tax revenues from the property likely are much lower than the optimistic scenario necessary to sustain this claim. In fact, some years ago in this space using more optimistic numbers the payback period was estimated at 30 years. These latest numbers demonstrate that day may never come.

Officials claim the enterprise as a whole has brought in $17.4 million through 2010, although it's not indicated whether that includes the free-standing Bass Pro Shop, even though that figure is two-and-a-half times higher on a daily basis than figures released in the earlier days of the project. And this neglects to factor in beggaring – would not many of the sales that occur at the Boardwalk have happened elsewhere in the city without it? While some of the turnover does come from those who would not have shopped in the city including from out of state, some unknown but probably very significant part of it simply cannibalized business from other Bossier City merchants.

Nor does it include ancillary costs, one of which this week Bossier City had to pull the plug on due to budget woes, dedicated police patrols (of private property; another sweet deal for the developer). Once again, all of this points out the folly by which policy-makers then – all of whom still are in positions of power today – committed in thinking they could grow a tax base through bigger government subsidization of consumption rather than in smaller government leaving resources in the hands of the people for them to use to produce and create more wealth to be taxed.

Unlike with the two money-losing monuments to government-as-venture-capitalist, the CenturyTel Arena and Cyber Innovation Center, Bossier City can’t cut its losses by selling out. The garage is useful only to the Boardwalk owner/operator and it wouldn’t want to buy it if it can’t make money off the retail space. So what would could the city do, change admission or deny its use, which would depress the number of shoppers and destroy any hope of the Boardwalk ever being able to pay for itself, much less its garage, and reduce taxes generated to insignificance?

No, the citizenry is stuck with this bad decision – with interest, to the tune of a little over $500 for every resident. For now this reality has quieted the once-loquacious politicians who puffed their chests and dismissed more erudite folks who pointed out the poor economics behind their garage gift decision. Whether it has chastened them into changing their behavior to put more emphasis on wisely using the people’s money, thereby forgoing their egos, is another matter.