Summary
The implication that private business success stories are really dependent on government subsidies needs to be looked at critically. Contrary to the impression made by a recent New York Times article, Bandon Dunes Golf Resort on the southern Oregon coast was developed and became successful due to private risk taking and entrepreneurial skill.
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Some of Oregon’s most highly regarded golf courses are those at Bandon Dunes Golf Resort, located just north of the small city of Bandon on the southern Oregon coast. Privately developed by Chicago recycled greeting card entrepreneur Michael Keiser*, the first course opened in 1999, the second in 2001 and the third in 2005. The first two courses have magnificent views of the Pacific Ocean. The resort employs some 480 people and is one of Coos County’s major employers. It draws an affluent crowd of golfers from around the world.
Bandon Dunes is seen as a great example of a private entrepreneur risking his own money to create a profitable business. But this view was challenged when the New York Times published an article on June 15 which implied that Bandon Dunes was dependent on government subsidies (“Assisting the Good Life” by David Cay Johnston). The Oregonian ran a shortened version that it headlined “Subsidies underpin Bandon golf resort.” Looking beyond the headlines reveals flaws in the subsidy-dependent argument.
The first problem is that it took 16 paragraphs in the Times and 11 paragraphs in The Oregonian before readers were told that “In the beginning there were no subsidies.” The article correctly states that the first subsidy came in the form of a three-year property tax break worth $99,000 this year. Left unsaid is that it was actually the nearby Coquille Valley Enterprise Zone that offered the tax break to Bandon Dunes in return for being able to claim the jobs created by its third golf course. The zone hadn’t created any jobs on its own, so perhaps it needed a successful development to justify its existence. Such subsidies aren’t supposed to go to firms willing to develop without them, which Bandon Dunes was. It’s disingenuous to blame a private firm for taking money thrown at it by a failed government entity.
Next, the author writes about the proposed new reservoir that will serve both the city of Bandon and a possible future Bandon Dunes golf course. It may require condemnation of some private land, but this seems to be the type of public project that eminent domain is meant to facilitate. As long as the landowner receives full compensation, Bandon Dunes shouldn’t be faulted for benefiting along with others.
The story then talked about lottery funding and airline ticket taxes used to expand an airport “about 20 miles north of Bandon Dunes.” This implies that the airport is out in the middle of nowhere, and its expansion is totally driven by high-paid executives flying their private jets to golf outings at Bandon Dunes. In reality, it’s the Southwest Oregon Regional Airport, serving Coos Bay and other coastal communities, not just Bandon Dunes. While it would be better to fund more of the expansion with fees on the private flights using the airport, this seems more an example of a public airport district maximizing its budget and power, rather than affluent golfers seeking government favors.
Only by assuming that airport expansion benefits just Bandon Dunes does the author get to his conclusion that it represents a one-time $48,000 taxpayer subsidy for each new golf job that pays $36,000 every year. Even if this were correct, that’s a relatively low amount of capital to create one job. The average American job requires more than $200,000 in private investment capital.
The author believes the biggest subsidy to Bandon Dunes springs from the fact that corporate executives and their companies get federal tax breaks to fly private jets to golf outings, or anywhere else. Attributing those subsidies to Bandon Dunes is a little like saying the tax break a small business owner gets when driving his car to the local office supply store should be considered a tax subsidy for that store.
Finally, The Oregonian cut out some important paragraphs from the Times story: those that question whether subsidies really benefit economic development at all. The author referred to groups across the political spectrum whose economic analysis leads them to oppose such subsidies, including the libertarian Cato Institute, the conservative Heritage Foundation and the liberal Good Jobs First organization. Here in Oregon, Cascade Policy Institute Chairman William Conerly has made a strong case that subsidies don’t create jobs in his classic paper, “The Unseen Costs of Ribbon-Cutting: Losses from Economic Development Programs” (online at www.cascadepolicy.org).
Bandon Dunes is a world-class resort. If it’s making millions of dollars for its owner as the articles state, that’s because he took risks with his own money when “no one else would have invested,” resulting in a golfing experience valued by the tens of thousands of people who go there every year. Rather than attack such entrepreneurs, we should celebrate them, while attacking the subsidies they don’t need and taxpayers shouldn’t be forced to pay.
* Three foundations funded by Michael Keiser made donations to Cascade in 2005 and 2006. No conditions were attached, and no discussions between Cascade and anyone at Bandon Dunes occurred prior to publishing this Commentary.
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