Local governments need watching, too
When it comes to the topic of governments overstepping their bounds, much of our attention is directed towards the federal and state levels — and with good reason. The last century has seen the size, scope and purview of the federal government gestate far beyond anything envisioned by the framers. Even as most of their tax base and much of their authority has been swallowed up by Washington, D.C., states try mightily to play catchup under whatever areas of authority they have left. Meanwhile, we tend to convey considerable sympathy to local governments in fealty to the proposition government closest to the people is generally best.
Government, however, is government. And municipal authorities ought not be let off the hook when their delusions of bureaucratic grandeur have them acting out the sort of presumptive arrogance more commonly attributed to their federal and state counterparts than as community conscious neighbors.
The City of Lamar in Eastern Colorado, for instance, is burning through thousands of taxpayers dollars pursuing a lawsuit to try to absolve itself of debt that it freely agreed to enter into with a local power authority to fund the refit of a power plant that ultimately turned into something of a misadventure.
Think about that. The next time you go into debt to buy a car that breaks irreparably down a mile after the warranty expires, wind up under water on your mortgage or find yourself with tens of thousands of worthless student loan debt because lo and behold the market for undergraduates with degrees in 15th century Indo-Chinese lesbian feminist poetry has unexpectedly dried up, ask yourself how much success you might encounter in trying to sue the bank to free yourself of the financial burden. Exactly.
Let’s recap the background. In 2004, the Arkansas River Power Authority decided to refit a local natural gas-fired power plant facing age-related maintenance cost increases to a coal-fired plant. This is back when natural gas cost more than a few bucks per Mcf and coal was considerably less expensive. Behold, the Lamar Repowering Project.
Lamar — which not only happens to be a member of ARPA, but also was named operating agent for the project and responsible for its day-to-day operation — agreed alongside the other five members to enter into $87 million debt funded by municipal bonds to finance the ill-fated project. Ill-fated, because before long it experienced technical problems, cost overruns and other misfortunes resulting in additional debt being issued — all approved by Lamar — until the cost of the project hit $155 million. Despite this, a defective boiler ended up failing an emission standards test.
Enter our good friends the WildEarth Guardians. Ever conscious of the economic plight of rural towns, WEG leapt at the opportunity to sue ARPA over the failed emissions test. That pretty much put the final nail in the coffin for the woebegone Lamar Repowering Project and the plant was decommissioned.
One is entitled to feel somewhat sorry for everyone involved — except WEG, which considers every economic blow delivered to rural America a reason for a victory dance. ARPA was the victim of a bad vendor and all-to-common environmental bullying from a litigation-happy organization. Lamar now holds a ton of debt without a power plant to show for it.
ARPA did what it could to try and make it right with members. ARPA re-worked electricity delivery deals to make sure electrical rates were kept reasonable and offered $600,000 settlements to each member municipality to help defray some of the
debt-servicing costs. A far better deal than our broken car owner, upside down homeowner or embittered undergrad could ever hope to receive.
But Lamar decided to refuse the offer and instead follow the lead of WEG and sue ARPA in an attempt to get out of all of the debt to which it had previously agreed. The sense of presumption is bad enough. But it is also helpful to bear in mind the amount of tax dollars being spent to find a legal excuse to renege on its obligations. That’s not to mention the risk to any future funding. If Lamar sues its way out of repaying debt, what lender is going to look twice at the city in the future?
This sets a bad precedent. Worse, it could encourage poor fiscal decisions by other municipalities. Grand Junction, for instance, is considering going into millions in debt to build a broadband fiber network — something the private sector is doing quite well on its own. Experience around the country shows that all municipalities get by pretending to be broadband providers is a mountain of debt and an inefficient government monopoly. If Lamar is successful, will Grand Junction be the next? Will litigation become the new excuse for local governments to overstep their authority and be reckless with taxpayer money?
We expect WEG and their ilk to abuse the legal system in their quest to bully others. Our local governments should not follow suit.
Kelly Sloan is a Centennial Institute fellow on energy and economic policy. He specializes in public policy and political communications.