My Discussion with Greg Leatherman on The Harrison - Part 1
I had an opportunity to speak with the city’s director of Redevelopment, Greg Leatherman, last Monday regarding the situation at The Harrison. Recently it was reported that the city was considering using the space next to Harrison Square as retail/office space instead of the original plan of retail/condominiums. This caused quite a stir in the community so I wanted to hear from Leatherman directly to figure out what was going on.
Before I get to the details of our discussion I wanted to make a quick statement regarding Leatherman’s role in this project. He’s clearly been the lightening rod for project delays but some of the attacks, such as calling for him to be fired, are unwarranted in my opinion. Keep in mind that this entire project was not his idea - in fact the people most responsible for it are long gone. He was simply selected to execute the project and follow the administration’s plan. Do you really think that if he was fired and John Kalb was hired that anything would be different? Well, the meetings might be more lively but other than that nothing would change because the ultimate decision is made by the mayor and he has no interest in pursuing legal action against Barry Real Estate.
That’s not to say that Leatherman has no input into the process, he most certainly does, and he agrees with the mayor’s position that legal action is not the appropriate step to take at this time but there are other people around the table with the mayor’s ear and some of them do want to take a more militant stance towards Barry Real Estate. If the mayor changed his mind tomorrow then I’m sure Leatherman would execute the new plan to get rid of Barry. I guess this is just a reminder that typically when a non-elected government official is speaking they are not necessarily giving their opinion but are stating the opinion of their boss who is the elected official.
Having said that, let’s get to our discussion:
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The City of Fort Wayne is so stupid sometimes…
I have put off posting about this topic for a couple of weeks because it angered me so much at the time.
The City of Fort Wayne has committed the taxpayers to spending millions of dollars downtown; even when everyone knows that a majority of Fort Wayne citizens opposed the Harrison Square project.
Recently Aunt Millie’s Bakeries wanted to expand their downtown operation. As part of this expansion they wanted to close part of Pearl street. Basically the expansion would have made it easier for the company to load and unload their delivery trucks. Supposedly 1000 vehicles use this street per day during the week; 700 of them are connected with Aunt Millie’s.
As part of their proposal the company was going to handle the landscaping and pay for the project entirely.
The City Administration and a few local people opposed this project. The City Administration increased the landscaping requirements so much that Aunt Millie’s ended up withdrawing their petition.
What a load of (fill in the blank)…
Democratric Congressional Corruption on display again
As the readers of this blog know I despise corruption. I detest corrupt Republicans every bit as much as I detest corrupt Democrats.
Recently both major political parties have had high profile corruption cases.
I feel that power corrupts and that corruption is likely to be more prevalent in the party that is currently in power…
The Democrats are now in power and I think they are more likely to be plagued by corruption scandals.
I have previously posted about Democrat Charlie Rangel. He is the House Democrats who is in charge of writing tax policy in the United States. He has had to amend his tax return repeatedly after he has been caught underpaying his taxes. You should read my previous posts here and here.
There is no doubt in my minds that Charlie Rangel is a crook.
My property tax assessment appeal
I previously posted about my the 2008 assessment on my house that is payable in 2009.
I felt that the Allen County Assessor placed a value on my house that was too high by at least $10,000.
With that in mind I hired a residential real estate appraiser and asked him to appraise my property. I learned something during this process; I knew that the 2009 assessment was for the appraised value in 2008; however, I did not know that the assessment was based on the value of the property on 3/1/08.
The assessor I hired came up with an estimated assessed value that was in line with the assessment.
I now will obviously not appeal my property tax assessment.
Mike Sylvester
The Difference Between Me & “Them”
Citizens are no doubt celebrating all over the city as the council approved by a vote of 6-3 to purchase the Renaissance Square building. The dissenting votes, as usual, were Shoaff, Smith and Harper.
As I was listening to the speakers during the public hearing, who were 2-1 in favor of the ordinance, I had a moment of clarity that I guess I already knew about but it was really solidified this evening. The difference between me and “them” is that I believe government has too much money and should let me do the economic development by allowing me to have more of my money to spend. “They” do not think that government is over-funded and in fact “they” think the government needs to provide more services, requires more space and in general needs to spend more money every year.
I guess the apex of this moment of clarity came when I realized that I was in the minority and probably by such a margin that it’s almost unrealistic to think the system can change…
Public Hearing Today on Renaissance Square
If you have something you want to say to city council regarding the Renaissance Square acquisition then today is your chance. There will be public hearing at the beginning of tonight’s city council meeting at 5:30pm in the council chamber of the City-County building.
Tuesday’s Stuff Worth Reading
- In today’s “you can’t make this stuff up” edition, the same organization that is largely responsible for the current financial crisis is now proclaiming their actions have saved the world - I’m speaking of the Federal Reserve Bank and you should read
Mish’s post in its entirety:
Both Greenspan and Bernanke have fostered an environment that threw money at every problem. The worldwide credit boom and housing bubbles were a direct result of Central Bank policies. Thus, giving credit to Bernanke is like giving credit to a doctor for amputating a cancerous limb after mistakenly cutting off three perfectly healthy limbs.
[...]
MSNBC: With the facts he (treasury secretary Henry Paulson) knew at the time, was it (the $750 Billion bank bailout) the right call?Warren: (struggling to be polite) “You know, let me say it this way. The question about whether or not the world as we know it has ended, depends on what you think the world is as we know it. If you think the world as we know it, are a handful of huge financial institutions, the dinosaurs that roamed the earth, then you’re right. They are not going to exist without huge infusions of government money. On the other hand if what you really believe is that our economy and our world is 115 million American households you start to see it very differently. And you say, you know if the dinosaurs are gone there are still a lot of stuff to be done.
A-fricken-men…
- Krugman on our current
state of economic purgatory (hint: this relates to the city’s motives moving forward with office space at The Harrison - more on that later):
“We’ve got a problem with terminology because we usually say either the economy is in recession or the economy is recovering. Either you’re in hell, or you’re in heaven. And the trouble is we’re actually in purgatory. We’re actually in a situation almost for sure GDP is growing; almost for sure the business cycle leading committee will eventually decide that the recession ended this summer. But almost surely also we’re still losing jobs. The unemployment rate is going to continue to rise. So we’re in that infamous jobless recovery state.”
Renaissance Square - At Least Pay Cash
I’ve made the argument against Renaissance Square numerous times over the past few months. Just to rehash:
- The purchase price is way too high
- Not a wise use of economic development dollars
- Provides too much room for government to grow
- Removes building from the property tax rolls
- Eliminates a potential private sector investment from downtown
- The building would be an extremely lame city hall (this was recently brought to my attention and I agreed)
Now having said that, I think we should still consider how we can maximize taxpayer investment if the city were to buy the property. For me, this is quite simple - stop paying massive amounts of interest and fees by bonding every project. For example, the acquisition and renovation costs for Renaissance Square are estimated to be $14.5 million but the total debt service would be $26 million. That means taxpayers will be forking over an extra $11.5 million and getting nothing in return.
One might argue that this is akin to a mortgage and thus a reasonable approach to take when purchasing a large capital asset like a building. However, most people take out a mortgage because they do not have the cash on hand to buy their home outright - the city does. They are sitting on approximately $50 million in cash reserves and only require roughly $9 million for a solid bond rating.
So the question becomes how much reserve is enough? Keep in mind that reserves are an extraction of private sector wealth that would otherwise be available for investment in our economy. The city controller wants to maximize the cash reserves as that makes her job easier - I can’t blame her for that - but as citizens we must ask why we can’t buy this building outright and save $11.5 million in interest? Do you really believe the city has plans for that money that would provide more than $11.5 million in direct taxpayer savings?
If the city wants to maintain the long-term reserve level they have now then let’s borrow the money from ourselves. We can pay ourselves back over the next 10-20 years instead of paying interest to somebody else. This would be similar to borrowing from your own 401(k) in order to make a down payment on a house.
Think of it like this, if you believe the administration’s line that the building will generate operational savings of $9.3 million over 20 years then the real cost to the taxpayer becomes $5.2 million or $260k/year. That number looks a hell of a lot better than the alternative of $835k/year doesn’t it?
Foreclosures set a new record
President Obama spent a lot of political capital and time trying to convince America that his administration was going to unveil numerous programs that would immediately save many Americans from foreclosure.
At the time when he unveiled these programs I opposed them on this blog; feeling that he was just going to throw good money after bad money.
I was right.
According the the Mortgage Bankers Association the foreclosure and delinquency rates in the United States hit another new record high.
According to the survey 4.3% of the home mortgages in the United States are in the foreclosure process. An additional 8.86% of home mortgages are at least one payment behind. This means that a whopping 13.16% of the mortgages in the United States are at least one payment behind on their mortgage.
This is amazing and discouraging. This means that more than one in every eight families with a mortgage is behind on their payments.
This problem has the same root causes that I have been posting about for the last two years.
Only two of the root causes have been addressed. Interestingly enough neither of these root causes was addresses by the Government!
First of all banks and mortgage companies have tightened their loan requirements. They are checking borrowers out more thoroughly and they are turning down a lot of people for loans.
Second of all no one is securitizing (bundling) these loans together and selling them on Wall Street. There are currently no investors who want to purchased securitized mortgage loans.
Some interesting facts from the study:
- California, Florida, Arizona, and Nevada account for 44% of the foreclosures.
- In Florida 12% of the mortgages are in foreclosure, an additional 5% are at least 90 days late, and an additional 4.8% are at least 30 days late. So in total in Florida 22.8 % of mortgages are at least 30 days late,
- In Nevada 21.3% are at least 30 days late.
- In Arizona 16.3% are at least 30 days late.
- In Michigan 15.8% are at least 30 days late.
- The number of FHA foreclosures are up.
The survey concludes that these rates will not improve significantly until employment improves.
I further conclude that Fannie Mae and Freddie Mac (Which are now owned by the taxpayers) are going to incur even larger losses and will require infusions of hundreds of billions of additional taxpayer dollars. (In other words we will continue to throw good money after bad money).
Mike Sylvester
City Benefits Debate
Liz Brown tried to bring forward an ordinance that would cause certain City retirees to have to pay a small fee to get their benefits after they retire.
All of the other members of City Council voted against the ordinance.
Liz Brown is 100% right. This is an issue that needs to be addressed for Federal workers, State workers, City workers, County workers, school district workers, etc.
20 years ago private sector workers were paid paid higher compensation than public sector workers once you consider hours worked, holidays, benefits, pensions, wages, etc.
Now several recent studies have concluded that over the last several years public sector workers now make more than private sector workers once the above factors are considered.
The benefits packages of public sector workers need to be brought in line with the private sector. Almost every Government organization in the country is in serious debt and needs to cut costs significantly. SOME public organizations have started to cause their employees to pay more for healthcare benefits, this is a trend that needs to continue.
Private sector employers have laid off millions of workers and slashed compensation and benefits. The public sector needs to do the same.
Liz Brown is 100% right on this issue and it is extremely disappointing that the other members of City Council voted the way they did.
Mike Sylvester
