Many of us have sold lemonade at one point or another in our childhoods. My parents taught me how to mix the ingredients, but I had to use my own allowance to shoulder the startup costs of my stand. I bought the supplies, set a price, and worked hard to sell my product. My parents wanted to instill in me the importance of hard work, and when the stand turned a profit, the money was mine: my risk, my reward.
Imagine if a neighbor opened up a lemonade stand next to mine, with one difference: His parents gave him the lemons, sugar, and paper cups — all free of charge. My stand would be at a significant disadvantage — assuming, that is, that friendly adults wouldn’t bail me out by purchasing my lemonade at a higher price.
That, in a nutshell, is currently developing in the Springfield fitness center market. In July, Springfield will begin building a taxpayer-funded $7 million fitness center that will compete for the same customers that existing private fitness centers already serve. The proposed taxpayer-funded fitness center is unfair to those businesses that took the risk of opening up a shop in Springfield without government assistance. It also shortchanges the majority of Springfield’s taxpayers, who likely won’t use the new center’s services but will have to subsidize the membership of others.
According to the Springfield Business Journal, the city’s Park Board claimed that “‘citizens strongly advocated’ for a facility east of U.S. Highway 65 and cited a 29 percent growth in population” to further justify the project.
“We’ve been asked for years to have services past 65 because we actually service all the way to Rogersville,” Parks Director Jodie Adams told the Business Journal. “We’re in charge of all the unincorporated areas of the county.” The fitness center, Adams believes, would serve those constituents. Not only is there a private fitness center already located in Rogersville, however, but the proposed site for the Dan Kinney Family Center is on Blackmann road, nearly a 20-minute drive from Rogersville.
Residents in the outermost ring of the Park Board’s jurisdiction already have fitness center services. If there were demand for more services there, the private market would provide them. The fact that it hasn’t suggests that a market for a new center doesn’t exist.
This kind of government-funded displacement has forced many other profitable private fitness centers to go out of business, or see a significant reduction in costumers. In Tucson, Ariz., for instance, a city facility forced a private club into bankruptcy. In Breckenridge, Colo., three private facilities were forced out of business within six months by a large city facility.
Government subsidies are able to drive out private industry because they entail less risk and opportunity cost. Subsidized fitness centers not only collect membership fees, they’re gifted with the initial capital required to build the center and have access to further taxpayer subsidies if the center becomes unprofitable. The center can also charge lower initial prices in order to drive competitors out of business.
For the Springfield proposal, taxpayers will shoulder the initial burden of $7 million, and even those residents who are already members of another gym in the area will pay the costs. Members of the YMCA and Ozark Fitness Center, for example, will have to pay for both gyms. “For the government to use taxpayer money to add another facility is, I think, a big waste,” said Dan Martin of Ozark Fitness, quoted in the Business Journal.
Entrepreneurs would take on the risk of failure if Springfield’s 29-percent population growth truly provided an incentive to build a new fitness center. Springfield’s government should not subsidize yet another competitor in a market that already adequately supplies such services to its community.
This proposed facility has an unfair advantage over people like Dan Martin and the other private owners who are pursuing the American dream. Unlike their new competition, they don’t have benefactors to help subsidize their costs. Even if many customers choose to remain loyal to existing fitness centers, the subsidized competition will have a far higher profit margin and take away much-needed business.
Chad Carson is an intern with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.