Should governments buy businesses just to close them?

A situation in Lavonia, Georgia raises an interesting question about how far government entities should go in regulating businesses. The town recently spent more than $1 million to buy Café Risque, a strip club along an interstate. Its goal? To shut it down. And it did exactly that.

The strip club was operating since 2001, and the town had tried several times to close the business without success. The town enacted a ban on "adult-oriented" businesses, but the club was grandfathered because it existed prior to the ban. A change in ownership, however, would do away with the grandfather clause, so that's why the town bought it.

Supporters of this move by the town say that closing the strip club and removing its billboards will help the community. Yet the business was apparently operating legally, and so the move raises the question about how much the government should interfere in our lives.

On the one hand, the government should look out for the best interests of people, which include quality of life issues. Economic development is important, and a business that appears to be hurting the local economy should be studied closely. On the other hand, so long as a business is operating within the law, how far should the government really go in trying to shut it down?

I wouldn't want my tax dollars spent to buy a business in order to shut it down. Although in this case, hopefully some of that money can be recovered by selling the real estate to a developer who will bring in a business more suitable to the town.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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