Throwback Thursday: SBA Guarantees Loan for Water Slide
In 1981, the Small Business Administration guaranteed two loans totaling almost $1 million – about $3.2 million in 2023 dollars – to a waterpark to build a giant water slide and start on other construction projects.
Sen. William Proxmire, a Democrat from Wisconsin, awarded the SBA his Golden Fleece Award for this ridiculous loan guarantee at taxpayers’ expense.
According to Proxmire, the SBA approved two loan guarantees for Waterworld USA in the Sacramento, California area. Two local private banks loaned them $560,000 each, and the SBA agreed to guarantee 89 percent of those loans, the maximum allowed under SBA rules.
The first of these loans went toward the construction of a water slide, and the second went toward paying off other construction and machinery costs.
A loan guarantee means the federal government agrees to pay off the full value of the loan, including principal and interest, in the event the borrowers can’t make their full payments. This reduces risk for banks, but leaves taxpayers on the hook for failed projects.
A water slide may seem like a foolish project to guarantee, but according to an SBA official, that is exactly why the loan guarantee was granted. An official told Proxmire, “The reason was the fact that it’s a water slide … It’s a recreational facility, and it's considered in the interest of the public.”
Unfortunately, delays and cost overruns plagued this project, with costs exceeding projections by over $1 million, causing Waterworld to delay its opening date.
Proxmire correctly notes that the government should not be a lender of last resort, because it exposes taxpayers to risk and crowds out loans for better projects with higher success rates. When the government does make these loan guarantees, Proxmire quips, the result “may be the taxpayers taking a bath.”
The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com
This and all other original articles created by RealClearInvestigations may be republished for free with attribution. (These terms do not apply to outside articles linked on the site.)
We provide our stories for free but they are expensive to produce. Help us continue to publish distinctive journalism by making a contribution today to RealClearInvestigations.
Support RealClearInvestigations →
