Why are local governments competing with private business?

The following op-ed was published this weekend in the Salt Lake Tribune.

Golf courses, theaters, pools, recreation centers — the list of government enterprises that are built for the sake of recreation and entertainment goes on and on. The problem is that each of these are examples of government unfairly competing against the private market, using taxpayer dollars, in order to provide non-essential services to the public.

At a time when we have multiple tax increases on November’s ballot and constant discussions about the perceived lack of funding for education, why are local governments competing against private providers who could be supplying additional property tax dollars?

Just this month, South Jordan city officials decided to purchase a second golf course. As government-run golf courses in Salt Lake County struggle to break even, what is South Jordan’s plan to make sure this doesn’t become a burden on taxpayers?

A golf course is a great example of a non-essential service that is frequently also provided for by the private market. Local governments directly compete against private providers, typically using taxpayer dollars to subsidize their struggling enterprise. Too often, local elected officials and groups of overly eager residents lose the perspective between the “needs,” which should be provided for, and the “wants” of a community.

As in the South Jordan example, residents are clearly divided on this issue. And that’s the concern: Compelling all residents to pay for what only some residents want does not make sense, especially when what’s proposed is not an essential role of government.

To add insult to injury, government enterprises don’t operate on par with private businesses. They can be subsidized, avoid business taxes and don’t necessarily have to respond to market signals when it comes to prices, services and even their continued existence. Even worse, these government-owned businesses are afforded legal immunity, meaning they can be shielded from liability for damages or reckless behavior by employees that occur on the property.

Government should maintain a level playing field for private industry — not compete with it. State, county and city governments need to find ways to divest themselves from businesses that should instead be privatized.

In order to help local officials consider other options Rep. Justin Fawson introduced House Bill 271 in this year’s legislative session. The bill would have required local municipalities and counties to commission a market impact study prior to approving a new government enterprise tied to recreation or entertainment. This study would include finding and notifying private companies in the state that could provide the service instead.

This study of the local economy and the responses of these local businesses would then need to be presented to the public via a process similar to “truth in taxation.” Only then would the government entity be able to proceed with starting or taking over the proposed business. This process would better inform local officials and make the public more aware of an important decision-making process taking place in their local community. In addition, local governments might actually begin to conduct a “yellow pages” test prior to getting too far down the road with a new government enterprise.

It’s important to realize that this need not apply to occasional events like “movies in the park” or a firework show (which often are fulfilled by a private provider anyway). And don’t be surprised if House Bill 271 returns next session with a different sponsor now that Fawson has left the Utah Legislature. The problem hasn’t gotten any better.

If true demand for any of these recreation or entertainment activities actually exists, then private providers most often will respond if given the opportunity. Competing against dozens of government enterprises puts these private business ventures at a disadvantage, often out of business, and the local community loses out on those tax dollars for education.

It’s time Utah governments started to better prioritize their budgets to avoid competing with the private market by focusing on providing essential services.