Summer has come and gone, and the planned Clocktower Inn is now several months behind schedule. That’s largely due to problems the developer is having with securing all the funding for the …
Summer has come and gone, and the planned Clocktower Inn is now several months behind schedule. That’s largely due to problems the developer is having with securing all the funding for the hotel side of the project; the conference center portion of the project has already secured funding thanks to a grant from the state.
While the delays are unfortunate, the project is still moving forward, and it still stands to bring a lot of value to the community of Powell.
There are a lot of unknowns as well, and the ribbon cutting at the end of construction will be no guarantee of success. By a considerable margin, economists predict the country will be in the midst of a recession by 2021, and tourism tends to take a substantial hit during economic downturns. The early years of the Clocktower Inn, which are often the most precarious for any business, could be impeded by a slower economy.
More people are offering their homes for short-term rentals through services like Airbnb, which will further increase competition with the new hotel.
These are just a couple things that present risks to this investment. Of course, all investments have risks, some of which pay off big in the end.
But the risk explains why securing funding through a private lender has been much more of a challenge than it was getting a grant from the state. People are much more careful with their own money, whereas governments investing taxpayer money don’t face bankruptcy if they make a bad decision.
Consider what happened with Cody Labs. The company partnered with Forward Cody to secure a $2.53 million grant from the Wyoming State Loan and Investment Board — the same entity that provided funding for the Clocktower conference center — to construct a $3.7 million warehouse.
In terms of payroll, sales tax, property tax, and lease payments, Cody Labs fulfilled its obligations on that grant before it ceased operations and laid off all its employees this year. The state also approved a $23 million loan in 2017, which Cody Labs decided not to take. You could say Wyoming dodged a bullet on that one.
This is not to say public-private partnerships don’t ever pay off. It is to say that in some cases, private entities seek public funding support for their projects because they can’t find private funding approval or financing at affordable rates, both of which are directly related to the risk of the investment.
Of course, that’s one of the very reasons public funding was sought for the ambitious Clocktower Inn project: Economic development leaders are earnestly trying to get a new hotel and conference center in Powell, and they believe it would not happen with private dollars alone. We continue to hope the hard work of the Powell Economic Partnership and developer Steve Wahrlich pays off with a completed project and a host of new opportunities for this community.
But as mineral taxes dry up in the collapse of the coal industry and the state feels more pressure to diversify the economy, more companies might come looking for state dollars to support risky investments. Let’s just hope the state, stressed with budget shortfalls and eager to find new revenue streams, doesn’t start getting too generous with its support for private businesses. Public investment in private ventures should be cautious.