On Friday January 6 I had an op-ed published in The Denver Post entitled "Government loans bring trouble," which explores a failed economic development project known as the Lowenstein Project in Denver, Colorado. The Lowenstein Project is enabled by special tax increment financing loans and demonstrates the folly of having bureaucrats take risks with taxpayer money that private banks aren't willing to.
This issue came to light last month when Jeremy P. Meyer of The Denver Post reported that, "About 15 percent of the loans in the Denver Office of Economic Development's $127 million portfolio are in arrears or default..."
The piece continues:
One of these loans, known as the Lowenstein Project, illustrates how local officials have been gambling with taxpayer money on dubious urban renewal initiatives. The Lowenstein Theatre, located across from Denver's East High School on East Colfax, had been essentially vacant for 20 years. In 2006, former Office of Economic Development (OED) Director John Huggins proposed the Lowenstein Project, which would target the area for a $14 million redevelopment effort to build a movie theater, bookstore, music store and restaurants.
Denver officials loved the idea and helped private companies buy the Lowenstein property by handing out tax increment financing (TIF) loans of $475,000 each to Charles Wooley; Denver-based real estate firm St. Charles Town Co.; Twist & Shout; and Neighborhood Flix Cinema and Café.
By 2008, Neighborhood Flix Cinema and Café was bankrupt, taking taxpayer money that had been loaned to the company down with it. Then, in February 2011, the Lowenstein Project developers defaulted on their $2.4 million TIF loan.
Fast forward to now: On Dec. 19, the Denver City Council amended the $2.4 million TIF loan sitting in default so that a separate, more senior $1.5 million TIF loan can be paid off first.
The piece concludes:
Government-issued loans amount to taking money from productive taxpayers and wasting it on politically connected insiders. Politicians interested in urban renewal might instead look in the mirror and see if their own policies are stifling economic growth.
For more, read the full piece available online here.