Hotel In Nation’s Hottest Market Getting Big, Fat Federal Loan Guarantee

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Written By:
Rob Port

Jul 3, 2012
9:33am

Williston, the epicenter of North Dakota’s Bakken oil boom, has a problem with having more citizens than housing. Housing shortages are so bad, because of the influx of workers, that people have taken to living in their RV’s in the streets. There aren’t enough homes, apartments or hotel rooms in the city to satisfy demand.

So, obviously, that means Williston is a pretty good investment right now when it comes to building a hotel. So why, then, is a big hotel chain getting a cushy, taxpayer-backed loan to move into this hot market? And why is it coming from the Department of Agriculture?

The U.S. Department of Agriculture is helping fund a new hotel in Williston.

According to a release, the USDA is providing a $7.3 million loan guarantee to 26th Street Hospitality, LLP to build a MainStay Suites Hotel.

The hotel will have 89 extended stay rooms with large sleeping areas and full kitchens, Choice Hotels spokesman Rocco Loverro said.

“It’s very residential style,” he said.

The hotel will be at 200 26th St. Anticipated opening is Oct. 13, Lovero said.

It’s hard to imagine what the justification for this loan is. One could argue that building a hotel in Williston is risky. It’s a big boom in the market there, but if the bottom drops out of oil prices or something else happens to slow or stop growth there the city could quickly find itself with an excess of hotel rooms. That’s a risk, but is it a risk that must be supported by the taxpayers?

And if that isn’t such a big risk, then why do the taxpayers need to be involved at all? We can make too assumptions about this. Either the project is too risky for private lenders to get involved without federal backing – in which case the taxpayers shouldn’t be exposed to that risk – or the project isn’t risky at all in which case the taxpayers needn’t be involved.

This is crony capitalism. If the hotel is a success the owners get the profits. But if it’s a failure, the taxpayers get the risk.

Meanwhile, our nation is running a budget deficit over $1 trillion for the 4th consecutive year.