Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / Why Government Grants Pay for Private Golf Course Renovations
Transcript
- Lucas: So there's a small town in Ohio that used federal money to renovate a private golf course. And that's not a one-off. It's part of a pattern that runs through one of the government's oldest community development programs. Luna: A golf course? With federal dollars? I mean, I've heard of grants going to weird places, but that seems like a stretch. Lucas: It is, and it's not. The program is the Community Development Block Grant, CDBG for short. It's been around since 1974, and it sends about three and a half billion dollars a year to local governments. The stated goal is to benefit low- and moderate-income people, but the rules are loose enough that a private golf course renovation can qualify. Luna: How does that happen? I mean, who signs off on that? Lucas: That's the thing. The money goes to states and cities, and they have a lot of discretion. The federal government sets broad categories — housing, infrastructure, economic development — but the local government decides what specific projects get funded. And the oversight is mostly about paperwork, not outcomes. Luna: So the golf course was framed as economic development? Like, it would create jobs or something? Lucas: Exactly. In that Ohio case, the city argued the renovation would help attract tourism and events. Whether it actually did is another question, but the money was already spent. And that's the thing about these grants: the evaluation happens on paper, not on the ground. Luna: I guess I always assumed there were stricter checks. Like, the federal government would audit specific projects before cutting the check. Lucas: Not really. The audits happen after the fact, and they're mostly about whether the money was spent on eligible categories, not whether the project made sense. So you get golf courses, but you also get luxury hotels, even a water park in one case. The Government Accountability Office has flagged this repeatedly. Luna: A water park? That's got to be a heck of a community development project. Lucas: It was in a town that had a struggling downtown, so they argued it would draw visitors. But the GAO found that the economic development justification was thin, and the primary beneficiaries were private owners, not the low-income residents the program is supposed to help. Luna: So what's the actual ratio? Like, how much of this money goes to things like housing or infrastructure versus these questionable projects? Lucas: It's hard to say precisely because the reporting is aggregated. But the GAO and the HUD Inspector General have done spot checks. In one review, they found that a significant share of the economic development projects had weak justifications. And it's not just golf courses — it's stadiums, convention centers, even a private marina in one case. Luna: I get that local governments want to boost their economies, but isn't there a tension between that and the program's original goal of helping low-income people? Lucas: That's the core tension. The program was designed to give local flexibility, but that flexibility gets abused. And the metrics used to measure success are often just job creation estimates, which can be inflated. A golf course might say it'll create fifty jobs, but those are often part-time or seasonal, and they don't necessarily go to low-income residents. Luna: So the accountability is really on the local level. Who's supposed to be watching there? Lucas: Mostly the local city council and the public. But the public often doesn't know about these grants until after they're awarded. And the applications are dense, full of jargon. It's not like a typical citizen can easily parse what's being proposed. Luna: Have there been any attempts to tighten the rules? Like, banning golf courses or something? Lucas: There have been proposals to require more detailed reporting and to ban specific uses. But the lobby for local government is strong, and they argue that one-size-fits-all rules would hurt. So the reforms have been pretty modest. The most recent change was to require that at least seventy percent of the funds benefit low- and moderate-income people, but that's a program-wide average, so it still leaves room for golf courses. Luna: Seventy percent average. So you could have a golf course here, a water park there, as long as the overall numbers look good. Lucas: Right. And that's the thing. The numbers are often based on census tract data, which is a blunt instrument. A project in a wealthy part of town might benefit low-income people who live nearby, but that's not always checked. So you get a lot of 'but it helps the community' justifications. Luna: And those justifications are rarely tested after the fact, right? Lucas: Exactly. There's a great example from a few years ago. A city used CDBG money to build a parking garage near a new stadium. The justification was that it would create jobs and bring in tax revenue. But a follow-up study showed that the garage mostly served wealthy visitors, and the surrounding neighborhoods didn't see any improvement in employment or income. Luna: That's exactly the kind of thing that makes people frustrated with government spending. It's not just the amount, it's the waste. Lucas: And it's a small part of the budget, but it's a symbol of how incentives can go wrong. The local officials who make these decisions are often well-intentioned, but they're under pressure to show they're bringing in federal dollars. And the easiest way to do that is to fund visible projects, not necessarily the most effective ones. Luna: It's funny, we talk about this kind of thing on the show, and I imagine listeners sometimes think, 'Why should I care about one golf course?' But it's really about how the whole system works. Lucas: Yeah, and that's why we keep having these conversations. If you're someone who's been listening and it's made something click, and you want to help us keep doing this, you can support the show at buy me a coffee dot com slash fexingo. It helps us stay independent and ad-free. No pressure, just if it's been useful to you. Luna: Yeah, we really appreciate that. It's listeners like you who keep us going. Lucas: So back to the golf course. The interesting thing is that this isn't a new problem. The program has been criticized for decades, but it keeps getting funded because it's popular with local officials. Luna: Why is it so popular? I mean, if it's wasting money, why not just cut it? Lucas: Because it's a direct source of federal money to districts. And it's flexible, which local politicians love. They can point to a new roof on a community center or a renovated golf course and say, 'I brought this to you.' It's harder to explain why you cut a program that sounds like it's about community development. Luna: So the political incentives are misaligned. The people who benefit from the program are the ones who vote for them, so they keep it going. Lucas: Right. And there's a real cost to that, beyond just the money. When a grant goes to a golf course instead of, say, affordable housing, it's a missed opportunity. And it also erodes public trust, which is maybe the biggest cost of all. Luna: What would you do if you could fix it? Hypothetically. Lucas: I'd start with the data. Require each project to report actual outcomes, not just estimates. And then make that data public in a way that's easy to search. If a city knows it'll be compared on outcomes, it'll make different choices. Luna: But wouldn't that be expensive? Like, setting up a whole new reporting system? Lucas: It would, but it's a drop in the bucket compared to what's already being spent. And you could phase it in. Start with the largest grants, the ones over a million dollars, and require independent evaluations. That would catch the worst cases. Luna: I wonder if there's a way to make it more market-based, like, let communities compete for funds based on outcomes. Lucas: That's an interesting idea. But it would be a big change from the formula-based allocation that exists now. And it might favor larger cities that can write better proposals. So there's a trade-off. Luna: So what do you think actually happens next? With the golf courses and the water parks. Lucas: I think we'll see incremental reforms, not a big overhaul. Maybe a few more restrictions, a bit more reporting. But the fundamental tension will remain, because it's built into the design. Local flexibility and national priorities are always going to be in tension. Luna: And that's the story of a lot of government spending, isn't it? Lucas: It is. And the golf course is just a vivid example. The next time you hear about a federal grant for something that seems odd, it's worth asking who really benefits. And whether the metrics we use to judge success are actually capturing that.