The Wall Street Journal reported that the town of Buena Vista, Virginia defaulted on bond payments for the local 18-hole golf course. The town of 6,500 people had grand visions in 2004 when it borrowed $9.2 million for the golf course while visions of money-plums, I mean, homes, retail and hotels danced in their heads. The bonds were enhanced with insurance from ACA Financial Guaranty Corp. Now there are fewer golf rounds and the course has fallen into disrepair. But the biggest oops is that the police and town hall buildings secure the bonds. Their cops and city staff could end up homeless. What lessons can be learned from this borrowing fiasco?
- The good times do not roll forever: It is wise to plan for a contingency like lower business sales, paychecks or sale tax revenue. The fool plans to spend to the last penny of income.
- Work with what you have: If you earn a blue collar wage then budget for beer and pretzels until you make enough money to budget for wine and caviar.
- Be who you are: If your organization is solidly meat and potatoes don’t try to emulate your competitor who is solidly pheasant under glass.
- Do what you know: If you are a great carpenter, don’t try to be a great pianist. The accomplished and polished pianist will eat your lunch and make you pay for it.
- Keep a close eye on the person in power: Humans tend to fog the part of the brain that regulates empathy and decision-making when they get great power. Someone needs to keep their egos in check and bring some sanity to the planning meetings.
- Va. Town Offers City Hall as Collateral, Defaults (abcnews.go.com)