Free Market

Unfair Competition: Government in the Marketplace

Just how much should your local government be involved in? Local governments properly exist to protect the health, safety and welfare of residents. Most cities have determined that this entails activities like paving roads, managing funds and policing crime- but should it mean more than that? It may surprise you to learn that some local governments are doing much more than just offering these essential services.

Some cities in Utah have multi-million dollar recreation centers, clubhouses, marinas, event centers,  and even golf courses. These amenities are not necessarily a disadvantage to a city, the problem is that these enterprises are allowed to compete against private entities that would otherwise fill the need. When the free market is duplicated in this manner, imbalances and injustices are created.

Government funded enterprises use taxpayer dollars to subsidize activities that are controversial and that do not contribute to the health, safety or welfare of all. Instead, these services disproportionately benefit specific groups of people. South Jordan is one of the many cities in Utah that owns a golf course. In the case of South Jordan, the original acquisition of this asset was controversial. On top of that, the city is using taxpayer dollars to provide a service that only people who are interested in playing golf benefit from. For all but the most extreme golf lovers, this is a textbook example of a non-essential service. 

This practice uses taxpayer dollars to subsidize programs that, in many cases, are directly competing with those taxpayers. If the government perceives a demand in the community, it is often the case that a private entity already has or soon will perceive and fill that same demand. When the government involves itself, they are duplicating services at the cost of taxpayers. 

In 2011, the proposal to build a new golf course clubhouse in Cedar Hills elicited several petitions opposing the project and prompted the formation of an opposition group, but the project continued. Cedar Hills now owns and manages an events center where they host weddings, parties and corporate events. Even if you could overlook the opposition to this enterprise, the fact remains that within Utah Valley, there are over twenty other private event centers that offer the same service. Why is the government using taxpayer dollars to duplicate this service?

Not only does the government duplicate services, they also make for some very tough competition. Because these enterprises are subsidized by the government they are able to offer nonessential services at an artificially low price that free market efforts often cannot duplicate.

For example, many recreation centers throughout Utah offer swimming lessons to kids and teens. In Utah Valley, the average price of a swimming lesson offered by a local government funded recreation center is $40. The average price of a lesson offered by a private group is $140. The disparity between these prices demonstrates the fact that private individuals cannot compete with government run services that other residents, and sometimes they themselves, are subsidizing. 

On top of those objections, these competitive activities are not a particularly wise use of government funds. Government enterprises are a self sabotaging practice that offer a service which would otherwise bring in tax revenue had it been offered by the private market. Instead, taxpayers front the money to subsidize expensive programs and costly services. Furthermore, governments lack the same incentives to run an effective business that private organizations have. Because the efforts are paid for by taxpayers, the government is not incentivized to offer an excellent service, make a profit or even make back the money they spend. 

Considering all of these ramifications, a government should meet some basic requirements before they fund a non-essential service.

First, the government in question should evaluate the extent to which their enterprise will affect the local economy, the city’s budget and tax rates. The government also ought to evaluate whether there are any private entities within the state that could provide the same service.

Having answered these questions, they should notify any private entities that would be impacted that the city is considering pursuing the competitive activity; and allow a private entity an opportunity to respond to the city with their concerns. They should also hold a public hearing to present the results of the aforementioned evaluations and an explanation of why the city considers the city’s pursuit of the competitive activity to be necessary.

Those requirements come from Representative Robertson’s bill, House Bill 59, which was introduced in the 2019 legislative session. This legislation was an attempt to hold the government accountable to the people who it is built to serve but who so often it sabotages. Any efforts of that sort ought to be renewed and pursued. Transparency and accountability for new non-essential government enterprises is something Utahns deserve.