Into the hazard: Government Taxpayers have $5-million stake in Moncton’s Royal Oaks Estates & Golf Club

The move, approved last November but revealed in freshly released government documents, has critics howling.

The Royal Oaks Estates & Golf Club currently owes the province about $4.8 million, stemming from a loan guarantee issued in 1998.

The Liberals have decided to convert that debt into preferred shares in the company, meaning the province has a stake in any profits.

The government will now receive 50 per cent of the club’s net profits – until the debt is paid back.

The club’s general manager says the debt reduction will allow Royal Oaks to expand its facilities.

In fact, that expansion will require the club – which includes an 18-hole golf course and condominiums – to borrow more money.

Critics say the whole situation is a waste of government dollars.

John Williamson, of the Canadian Taxpayers Federation, says a province with over-crowded classrooms and rising health-care costs should not be fronting money for a golf course.

“That’s hardly an activity that is in need of government support,” he said. “It’s about as frivolous as it gets in terms of spending.”

The province’s dealings with Royal Oaks began in 1998 with a $3.3-million guaranteed loan, meaning the province would cover that amount if it couldn’t be paid back to the bank.

In 2002 the government paid off the loan and resulting interest. So instead of owing a bank, the club was now in debt to the province. Including interest, the original sum has grown to the current $4.8 million.

“This is just a fine example of public policy that was bad from the very get-go,” said Williamson, who doubts the province will get a return on its investment.

“It’s another example of corporate welfare and of (a losing situation) for taxpayers.

“On this one the province teed-off and the ball ended up in the hazard.”

Vince MacDonald, the club’s general manager, said the fiscal flexibility will allow Royal Oaks to borrow additional funds.

Those will be used to build a new clubhouse, part of the club’s attempt to become a year-round facility – with cross-country skiing, skating and room for business meetings.

MacDonald said the expansion will mean a doubling of the club’s workforce, to 40 employees

“We’re in the business of employing people. It’s not just folks going out to play golf,” he said. “It’s generally good for Royal Oaks and its good for Moncton.”

The club, which has additional debt outside of the government loan, houses 26 condominium units near the golf course’s fourth hole. Another 40 units are under construction, said MacDonald.

Charles Cirtwill, of the Atlantic Institute for Market Studies, a think-tank, said the Liberal move is better than simply writing-off the loan.

Still, he stressed that governments are poorly placed to judge sound business cases in the first place.

“This is a trap that almost all governments fall into – once you’ve started supporting businesses with direct cash, you just keep going,” he said.

“The question now is: how quickly can they sell those shares and recoup the money for the people of New Brunswick?”

Business New Brunswick Minister Greg Byrne was unavailable for comment Tuesday.

The par-72 course at Royal Oaks opened in July 2000. According to the club’s website, it features “bent grass fairways, tees and greens, strategic bunkering (and) challenging approaches.”

In 2002, Score Magazine named Royal Oaks the best new course in eastern Canada. A club membership costs between $1,600 and $1,750. A daily green fee runs $70.