Assisting The Good Life

BANDON, Ore. — Mike Keiser, who made a fortune selling greeting cards on recycled paper, turned this remote spot on the southern Oregon coast into a golfing mecca that attracts wealthy people in private jets from around the world.

The Bandon Dunes Golf Resort has created 325 full-time jobs, but much controversy swirls around the subsidies and tax exemptions it received. More Photos

To many in this hard-luck town of 3,000, Mr. Keiser is an economic hero. Work became scarce after the timber and fishing industries collapsed a quarter-century ago, and his Bandon Dunes Golf Resort, a few miles north of town, has created 325 full-time jobs, plus hundreds more part-time jobs. Mr. Keiser earns millions of dollars in profits each year.

But beneath this model of enterprise, largely hidden subsidies from airline passengers, state-lottery players, taxpayers and company shareholders support the benefits that the owner, workers and visitors at Bandon Dunes enjoy.

Airline passengers and lottery players are paying for a $31 million airport expansion to serve the 5,000 business jets that arrive each year, filled almost entirely with golfers. Many of them are executives of publicly traded companies flying at a small fraction of the real cost of their trips; taxpayers and shareholders bear nearly all of these costs.

Much controversy swirls around the subsidies and tax exemptions state and local governments offer expressly to attract businesses to a community. But far less attention has been focused on the many kinds of indirect favors that are showered on places like Bandon Dunes through government policies that influence the flow of money from the public to private interests and often serve to reinforce benefits for those who are already successful.

In every situation, governments need to ask what the necessary public role is, said Irene S. Rubin, a public finance expert at Northern Illinois University. Why is the government even involved in this activity? What is the public good?

No official tally of business subsidies exists, but in separate studies Peter S. Fisher of the University of Iowa and Kenneth F. Thomas of the University of Missouri estimated that state and local subsidies aimed at creating jobs total about $50 billion annually. More subtle subsidies like those that benefit Bandon Dunes are not counted in those figures and may be even larger.

Such government subsidies have been challenged as inefficient by a broad spectrum of critics, from the libertarian Cato Institute and the conservative Heritage Foundation to liberal groups like Good Jobs First.

To be sure, said Martin S. Feldstein, a Harvard University economics professor and a former chief economic adviser to President Ronald Reagan, some government subsidies can be beneficial for society.

A subsidy for flu vaccines is good, he said, because if you are vaccinated I am less likely to get flu by contagion. But job subsidies are a drag on the economy, he added, unless the local gain exceeds the loss in the rest of the nation.

In the beginning, there were no subsidies at Bandon Dunes. That stands in contrast to many projects where state and local agencies compete to attract investments in factories, corporate headquarters and other developments that claim to create or retain jobs.

I am the sole owner — no one else would have invested, said Mr. Keiser, who paid $2.4 million, half the asking price, for his first parcel of scrub land in 1990. The country may seem overrun with golf courses, but Mr. Keiser had something else in mind. He calls it dream golf, modeled after the age-old seaside links in Scotland where the game was invented.

Tens of thousands of golfers now come each year, many in corporate jets, to play on three courses, all considered among the best in the world. They lie on the sandy bluffs above the Pacific Ocean, with no power poles, no traffic and no whine from electric golf carts, because players must walk, carrying their own bags or relying on caddies to help them navigate the course. Stiff winds carry balls unpredictably; wet weather is common.

Bandon Dunes has become extraordinarily popular. This year about 120,000 rounds of golf will be played, at a typical cost in season of more than $200 a person. Lodging and meals add hundreds more to the expense. Among the visitors have been Bill Gates, Michael Jordan and Don Johnson.

After the resort was built without government aid, the first subsidy was put in place only after Mr. Keisers lawyers succeeded in eliminating for three years the larger property-tax bill that would normally accompany new construction — a tax break worth $99,000 this year.

John Griffith, the Coos County commission chairman, complained that the tax cut had been sought after the decision was made to invest. It is supposed to be an incentive to attract new investment, not a reward for an investment you have already decided to make, said Mr. Griffith, who was almost alone among public officials in opposing the subsidy. The incentive was supported by the others as a means of rewarding Mr. Keiser for his investment in the area.

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