Wednesday, October 6, 2010



In this bastion of small government conservatism we call Naperville, our Republican dominated City Council yesterday approved the purchase by the city of the land beneath and the building housing the DuPage Children’s Museum. This “urgent need” came about when the Museum, run by a non-profit, non-government group, developed trouble paying a $9mm loan from Chase Bank after top-ticking the market when it purchased the property and doing so with a loan that the Museum’s managers apparently did not understand. So the small government crowd came to the rescue with the following package:

$3 million from the city of Naperville
$2 million from the state of Illinois
$250 thousand from DuPage County
$700 thousand from private contributions
$3,050 in loan forgiveness from Chase.

Those of us who actually believe the platitudes the Republican Party establishment mouths at election time, are troubled by this use of public funds to bail out a private enterprise. After all, aren’t the Republicans at the national level castigating the Obama administration for the same type of thing?

The local small government acolytes in the Naperville City Council justify this purchase by saying that:

--The $3mm the city is coming up with is being raised from $2mm in capital projects that came in under budget and $1mm from the Burlington parking lot fund.

--The City will recoup its investment by stopping its $200,000 per year subsidy to the Children’s Museum and charging more than $60,000 per year rent after charging $1 per year for the first five years.

--$2.25mm is not from the city at all, but rather from the State and the County.

--The Museum sits on a nice piece of real estate that will foster economic development in Naperville regardless of its use. So if the museum does fail, the land could be used for other purposes that will benefit the City. As Councilman Jim Boyajian said, in justifying the purchase while promising that this does not mean that the city should go out and buy “every piece of property in this city,”

I look at the underlying value of the property and where it sits in proximity to our train station and the payment mechanism to get us repaid. And above all, I preserve an enterprise that brings 330,000 people a year to our downtown.”

Talk about easy arguments to destroy! Piece by piece:

--If the City has saved $2mm in taxpayer money in capital projects, where does it get off using those savings to speculate in the real estate market? That money belongs to the taxpayers and should be returned to the taxpayers in the form of lower taxes or, at the very least, of some kind of rainy-day fund to be securely roped off to avoid a tax increase for use when times get bad (or the politicians have blown too much money) and the city fathers come to us looking for more money. The same goes for the $1mm from the “Burlington parking lot fund.” If there is no specified use for the money in this fund, and hence it can be used to fulfill the Trumpian dreams of the City Council, why does it exist in the first place?

--If the city does indeed eliminate its $200,000 subsidy and the Museum can make the $60,000 per year rent beginning in year 5, it will take the city between just short of 13 years to recoup its $3mm “investment.” Taking into account time value of money, it will take the city just short of 15 years to get its money back at a discount rate of 2%. At 3%, it will take 17 years. At 5%, it will take 21 years. These aren’t short paybacks, and they assume, of course, that, somewhere down the line, the Museum will not come back for a renewed subsidy or rent abatement.

--The money that comes from the State is government money, is it not? Is speculating in real estate somehow a legitimate function of state government? And since when is the State of Illinois so flush with cash that it can take a flier on a piece of real estate in one of the state’s wealthiest communities? Isn’t Governor Pat (no relation) Quinn telling us we need a big tax increase because the state simply can’t pay its bills? Is big government a bad thing when it ostensibly benefits poor people but a good thing when it ostensibly benefits at last relatively well off people?

--This might be an attractive piece of real estate purchased at a good price, but it might not be. Who knows if we have hit bottom in commercial real estate? In any case, is real estate speculation a legitimate government endeavor? Should the Councilmen be making such prognostications with our money? Certainly, those who pound their chests and piously proclaim their fealty to limited government should answer with a resounding “NO!” But one guesses big government is fine with them as long as the money flows in the direction of the right kind of people.

--The “if the Museum fails, we end up with an attractive parcel that can be used for other purposes” argument is a perverse one, even though one can be quite sure that the councilmen were trying to sound like financial wunderkinds when making it. We are doing this to save the Children’s Museum, not to speculate in real estate, the town fathers tell us. But if the Museum fails, we should make out like bandits. This argument has a certain logic to it, but a perverse logic.

--The Museum may or may not bring 330,000 people to downtown Naperville each year, as Councilman Boyajian argues. One who has been around longer than a week or so learns to distrust such numbers when thrown around by politicians and the consultants they hire. But assume the Museum does bring in that many people. Then the bars, restaurants, and night spots that have made downtown Naperville the night life center of the western suburbs bring in at least as many people, probably many more. So do we buy them out when they fail? The “logic” employed by Councilman Boyajian and his fellow enthusiasts for the bailout of the Museum would certainly dictate that the City should do just that. And when, by the way, is downtown Naperville in such poor shape financially that it needs such taxpayer subsidies?

--Thank God that our City Council did not propose that the City take over the operation of the Museum; owning the land seems to be more than enough government involvement. However, the same management that got the Museum into the financial mess from which we are rescuing it remains in charge. Does that make any sense? Shouldn’t the City of Naperville, as the biggest investor in the Museum, demand some changes?

One can almost excuse the Democrats on the City Council (Yes, there are Democrats on the City Council.) for going along with this deal. There are, in general, few and porous boundaries around what a Democrat would call legitimate government functions. Apparently, the modern Republicans who inhabit the City Council in Naperville, and doubtless who occupy offices across our country agree…but they just won’t say so. Is it any wonder that rank and file Republicans are fed up with the hypocrisy the leaders of their Party display at the local, state, and national levels?

No comments: