Lavonia's Bonfire of Vanities

Image: Cafe Risque courtesy of Online Athens

The city of Lavonia, Georgia decided that $997,000 was not too great a price to pay to stage its own Bonfire of the Vanities. Using the subterfuge of an unnamed third-party, the city officials succeeded in purchasing the Cafe Risque, a local strip club which the council has tried to shut down since it opened in 2001.

According to the City Council, Jerry Sullivan, the deceased owner of Cafe Risque, had obtained their approval for a family-style restaurant. However, once the establishment opened, it was advertised as Cafe Risque and seven years of legal proceedings by the town could not put the club out of business. When the owners of Cafe Risque announced their intention to sell the property, it was no secret that the owners refused to sell the property back to the city. Fearing that the weaknesses in the zoning ordinances would allow another adult business to operate in the same location, the city officials decided to buy the land and building through the guise of a third party. When the first transaction was completed, the city immediately purchased the property from the third party.

By that night, Lavonia's council members were having a victory party at the cafe, burning the business' signs in a parking lot bonfire. On Wednesday, Fesperman and city officials giddily began gutting the building

"We all took turns daring each other (to slide down the strippers' poles)," Fesperman said. "But nobody would actually go through with it."

You can read the entire article in OnLine Athens here

While the residents of Lavonia are celebrating the demise of Cafe Risque, here are some facts to consider.

• The population of Lavonia is less than 2,000.

• For 2003 Lavonia's crime statistics, according to city-data.com, were: 1 murder, 4 rapes, 4 robberies, 23 assaults.

• With a population of less than 2,000, Lavonia has a small tax base to support its annual expenditures of $1.8 million (based on the 2004 budget).

• The financial statements for the year ended December 31, 2002, which are the most recent statements available online on the city's website, indicate that Lavonia held $1.9 million in cash and certificates of deposit in the fund established for its water treatment operation. The water treatment facility had been financed through the issuance of long-term bonds totaling $4.1 million. According to City Manager Gary Fesperman, the $997,000 used to purchase the Cafe Risque came from the city's reserve fund which was slated to pay off those 1997 bonds used to build that water treatment plant.

The investors who hold the debt securities issued by Lavonia and the bond rating agencies will not be as jubilant as its citizens when they learn that $1.0 million of the liquid funds set aside for retirement of those obligations had been used to invest in an illiquid asset, i.e., real estate, during one of the worst markets in over a decade. While I do not know the specifics of Lavonia's debt covenants, I hope that this city will be able to meet its obligations to investors and creditors. But in the event that Lavonia defaults on its scheduled debt repayments, I would not be surprised if the city's use of those funds earmarked for the retirement of the long-term debt could be construed as fiscal mismanagement.

After looking at this information, I have to ask this question. What was so abhorrent about the Cafe Risque, its employees and patrons? Why would the public officials of Lavonia, a town with a very low crime rate and a small tax base, spend the money to file five lawsuits in the span of seven years and then jeopardize their town's bond rating just to get rid of a strip club?

Seems a shame, doesn't it?