Category Archives: Belief in Capitalism

The Budget and Reorganization

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The City of Stuart has begun planning for next year’s budget. The good news is that there is no anticipated increase in our millage rate. So it appears we, as a state, county and city, are beginning to see a recovery in the value of our homes and business properties. That is a very good sign. Increased property values (especially for commercial properties) will bring more money into government coffers. Government at all levels will have two choices – either do what was done in the past and foolishly use the money to increase salaries, staffing levels and perks or continue to be fiscally prudent as it has been during the lean years. I am sure the taxpayers want the latter.

In order to accomplish that, we must look at what services the City of Stuart should provide. Those services are Public Safety (Police and Fire/Rescue), Public Works (Water, Sewer, Roads, Trash and Parks), and Development (Building, Planning and Zoning).  There are also support departments that mainly serve to make sure that those listed above can provide the services. They include Finance, IT and Human Resources. Then, you have departments that are both external and internal such as the City Clerk and the City Attorney. Except for the attorney who reports directly to the city commission, all city employees report to the City Manager, who then reports to the city commission.

As part of the budgetary process, I have been speaking with the city manager about eliminating one department known as the Community Redevelopment Agency or CRA, and looking into downsizing our IT Department which currently consists of four people. The CRA is a geographical area that is part of the city that has its own funding source which is dedicated for specific projects within it’s boundaries. In the past, it was not a separate department but only a dedicated fund for use within those boundaries. I want to see it returned to being a dedicated fund only. Any specific projects that would fall within the CRA boundaries could be accomplished by using our existing departments to oversee the work as similar projects in other parts of the city are now done. An example would be the Public Works Department which now successfully accomplishes certain duties and projects by using different dedicated funds. I see no reason why a distinct separate department is necessary to administer a fund.

I believe the city needs to more fully engage the private sector for certain functions in technology, collections and finance. No technology department of our size can keep abreast of the latest and most cost-effective solutions and systems. As a business person, I have found that it is better not to buy systems because they change and become obsolete so rapidly. I rely on renting space on outside servers to store records and using internet-based programs to perform accounting and other functions. This cloud computing is done by every level of government including the CIA.  I am not saying that every technology function should be outsourced, but I am saying that all systems should be continuously evaluated to see if it can be done better and more cost effectively by the private sector or in other ways.

Let me be clear.  As a commissioner, I believe that the overall city workforce is dedicated to providing excellent service to the citizens. We need to reorganize that workforce to better serve the public. In some cases, I will be looking to increase the number of employees.  For example, the Police Department during the economic downturn has had a reduction in the number of officers patrolling our streets. The biggest complaint I hear from people is the lack of enforcement for minor quality of life offences such as traffic control, noise and code enforcement. This needs to be addressed so we can have a better city.

Now is the time to make sure that Stuart’s foundation is in order. We can’t truly build our future if the blocks are missing or not plumbed. What government tends to do is add people to fix problems that are created by keeping systems and people that should be replaced. As someone who has managed literally hundreds of commercial properties with thousands of employees over the last 40 years, I know that you need to continuously review and adapt your organizational chart to be successful in a changing world. If you are tied to past practices, you are doomed to expensive future failure. I do not want that for Stuart’s residents and taxpayers.

How Far We Have Come From The Founders

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Some days, I wake up and I am optimistic about the future. This is not one of those days. Today, I worry about the continued steady march of All Aboard Florida and the degradation of our lagoon. It seems the deck is stacked against the citizens and residents of the Treasure Coast. Our elected representatives in both Washington and Tallahassee pay lip service to our environment and quality of life but then sell us out for a campaign contribution from Big Sugar or AAF or anyone looking to get their subsidized corporate welfare payment.

Hamilton, Jefferson and Madison never envisioned a system where government dollars would be spent subsidizing agriculture or industry.  Alexander Hamilton never asked that the Bank of New York or the New York Post, both of which he founded, be given a subsidy. Thomas Jefferson and James Madison never encouraged the passing of farm bills so they would be paid by the Feds to grow or not grow tobacco.

Our founders were men looking to limit government influence on daily life not encourage more. They had just fought a war to get the British off their backs. It was obvious to them that monopolies and crony capitalism were bad. Government was to be an even arbiter for business and citizens not the deciding factor of who should get tax payer dollars.

But now we see the harm that Big Sugar and AAF are doing and will continue to do is only made possible by our elected representatives. The land south of Okeechobee would be useless if sugar and other agricultural products weren’t subsidized. The private market won’t finance AAF. That is why both Washington and Tallahassee are using public dollars, our taxes, to allow something the people do not want.

The Pols tell you that it is about jobs and affordable food, but the U.S. sugar price is double that of the rest of the world and nothing AAF is doing even remotely resembles high speed passenger rail. More and more, the system favors the well connected and well-off over the rest of us. The people are ignored and deceived so that the gravy train can continue.

It is wrong and we must hold the elected representatives responsible for their actions. We need to stop arguing as if the blather on Fox or MSNBC amounts to anything more than amusement. Whether one is a Republican or Democrat is meaningless in the government today. It is a convenient way to divide us so that the powerful can continue taking more and more and giving less and less. There is no right or left…only the connected and then the rest of us.

We need to wake up and think about actualities not the spurious arguments being made by the news media. When was the last time giving billions in tax breaks and handouts to a sports team resulted in a dollar in your pocket? Since we are giving payments and subsidies to “Big Agriculture,” how come the cost of food is so high? Government’s role is to be the arbiter and make sure the field is level for everyone. They should not choose which business receives the people’s largess.

Amendment 1 was passed by 75% of the voters. Those voters assumed that they were doing so to make sure the sugar land and other strategic parcels were purchased. They didn’t vote for that amendment to fund government agencies or as a big give away to the friends of the governor and legislators. Either the Pols in Tallahassee respect our wishes, or we should vote them out. This is not a Republican or Democrat issue. Because when our rivers are dead and our treasury is dry, no one will care if a liberal or a conservative philosophy resulted in this coming to pass.

Business, Taxes and Government

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I was immersed in the “business” of Martin County one day last week as part of Leadership Class sponsored by the Stuart/Martin Chamber of Commerce of which I am a member. One day a month, we examine a slice of county life such as criminal justice or non-profits. This month it was business. Many people may still believe we only have retail and service businesses in the county, but that is far from the truth.

We have a strong and growing manufacturing sector.  Unlike the factories of several decades ago that had assembly lines of workers, these newer versions have far fewer employees and rely more on computers than wrenches. Manufacturing has high paying jobs and contributes proportionately more in taxes than other types of businesses. This is the good news. The bad news is that, like every tax payer, they also have their gripes about our county government.

As individuals, most love being situated in Martin County. They like our schools, amenities and life style. As business owners and leaders, they wish the county government was more business friendly. When I asked for specifics on what the county could do to help, their answers in most cases were more about attitudes than actual problems. I agree that perception, attitude and fair implementation are important to a business-friendly government.

I think much of the frustration lies in not being able to get concrete answers to questions. As someone who has been in the private sector his entire working life, what I want is answers to my questions. I can’t plan on maybe. The county commission needs to have definite enforceable policies so that the different departments can give exact answers when asked specific questions ranging from what can be built on a parcel to whether a use is allowable.

At the same time business needs to stop acting as if they are persecuted by our local government. It accomplishes nothing and business people begin to sound like a bunch of whiners. The very life style the business people applaud is the one that our current commissioners want to maintain. These are the commissioners and the vision that the majority of Martin County voters want. Voters don’t want a change in western Martin County. Voters don’t want to go above the 4 story height limit. Voters want things to remain like they are regardless of whether, in the long run, these policies are good, bad or indifferent for the economic health of the county.

The real problem with our county is the percentage of income that is generated by for-profit businesses. For example, in the Leadership Class I mentioned earlier, 80% of the participants either work for a non-profit or the government. This is no entrepreneurial bunch. How can we, as a county or a nation survive, when so much of our economic activity is based on taxes or donated dollars? This ironically includes the Business Development Board which receives the bulk of its funding from taxes.

Private business is no stranger to receiving governmental handouts either. Several of the businesses that presented that day stated that they receive either government grants, loans or subsidies and are looking for more. This is far from capitalism as it is supposed to be practiced. While we may claim to want to be free of government constraint, we as a nation have embraced the culture of government handouts. Business is so use to relying on government money that perhaps AAF believes they really are a privately funded scheme instead of one counting on federal loan guarantees.

We need to re-evaluate this crony capitalism on the local, state and federal level. We have become a country where nothing can be done unless the government gives you a tax break, subsidy, grant or loan. I would contend we need a government that helps needy individuals with tax dollars but not businesses or nonprofits.  A free society is not based on every citizen’s ability to carry a gun to protect their freedom.  A free society happens when government stays far from economic development and allows the market to control economic destinies.

Own Versus Rent Even Government Has To Decide

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In the near future, Stuart will be offering the Triangle Property to developers. I believe the city is on the right track. Possible developers will ascertain uses for the property that are market oriented and not tied to any bureaucratic interpretation of what should be on the site. While a public component is not out of the question, there is no mandatory one. I am also encouraged that the city is not insisting that we net lease the parcel but is open to all possibilities.

That does not mean that the eventual developer will have no restrictions. The parcel still must meet current zoning and building codes. This will result in the developer having the same freedoms and restrictions that any owner of property would have.  It is truly market driven and not subject to bureaucratic dictates such as providing public parking. When placing any property out to bid, the city’s only interest should be whether the proposed buyer can close on the agreed upon terms.

The CRA can then take any proceeds and re-invest in other properties in the district to foster development. The purpose of a CRA is to help and promote private development in a designated area of the city. Government should not dictate and demand restrictions and uses to a buyer of city owned property simply because government was the seller of the property.

When government perverts the market by insisting on what should be built, it can result in adverse consequences not only on that property but also on the entire community.  Business should be left to the private sector. Government is notoriously bad at picking economic winners as witnessed by Digital Domain.  That is why I am, on principle, against Stuart being a landlord in almost every instance. If there will not be a public use for a property within a foreseeable period of time, it should be sold.

For many years, life insurance companies built and owned large real estate developments so that they would have predictable cash flows in order to pay claims.  Several centuries ago, Gompertz developed what became known as the “Law of Mortality”.  This is a mathematical formula that actuarially predicts how many people of a certain age will die each year. By owning these income streams, insurance companies proved to the regulators that they would have the money available to pay claims. Government is not an insurance company which needs streams of income. Government should not be in the private sector.

Being an owner of commercial real estate requires nimbleness and flexibility that governments, by their nature, do not possess. For argument’s sake, I will assume that during the course of the lease the tenant and assigns will make all rent payments as stipulated (with a lease of 50 or 80 or 99 years, this is a huge assumption). While land cannot technically become obsolete, the improvements upon it definitely do.  So even under the best case, the government will receive back an asset that is economically or physically obsolete. Which means it will have very little residual value.  You must have collected the correct amount of rent during the course of the lease or a loss will have occurred. The parties to this lease agreement are agreeing to rent terms for an economic future that is impossible to forecast.

I have been in the real estate business my entire career. I currently manage 500,000 square feet of commercial space and I have two non negotiable items. The first is that no lease term is for more than 15 years (the overwhelming majority of leases are for only 10 years) and the second is that there is a minimum percentage increase of rent every year with a CPI. Even after all these years I can’t predict market conditions for more than about a decade under the best of circumstances. Long leases lessen the value of the real estate if and when it has to be sold. Should the government have different requirements for the people’s real estate?

 

We Are Now #3!!!

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The New York Times reported that Florida has officially overtaken New York State in overall population. We are now #3!!! As a transplanted New Yorker (like10% of Florida’s population), I was a little sad. When I was born, New York had the largest population with California a distant second. Texas and Florida were not even in the top ten states. New York had industry and large companies, not only in my hometown of New York City, but throughout the state from Niagara Falls to Buffalo to Rochester to Syracuse, Troy and Albany.

Unfortunately, New York did not pay attention to the basics. The state and local governments thought they could tax and regulate industry indiscriminately without end. Both local and state governments looked at business and productive individuals as “marks” for the taking. These companies and individuals would pay and pay and the politicians would take and take.

At first, the government used those funds to build roads and infrastructure. An enviable state university system took shape. Some needed programs for the poor and even for the middle class were instituted. But politicians are politicians, so they began buying the votes of public employees by generous contracts, regulating businesses in every minute aspect and providing unsustainable welfare benefits to the poor. By 1975, when New York City was teetering on the brink of bankruptcy, close to 40% of the population was either on the dole or had government jobs.

Today New York is the Empire State in name only. Through governmental policies and a changing economy, the state is no longer considered an economic powerhouse. New York City has survived and even thrived in spite of its prevailing governing philosophy due to its uniqueness. But now, New York City is more and more a place of the very rich and the very poor. The working middle class that I grew up as part of is becoming less and less of the population because the businesses that would employ them have left the state.

Florida is now the third most populous state in the nation.  It has no income tax and comparatively few social programs. What it does have is an overabundance of government and nonprofit organizations – neither of which produce more national wealth. There is transference of dollars received from taxes and donations from the wealth-producing members of society to governmental and nonprofit employees in salaries and benefits. Both governmental and nonprofit employees now earn more than their counter parts in private industry.

Just like New York did in the 1960’s ‘70’s and 80’s, Florida by transferring dollars from one group to another without creating any new wealth will arrive at the same place. The state and our country cannot continue on this course without eventually bankrupting us. There is a place for both philanthropy and governmental service, but the bulk of those dollars cannot be used to pay employees and not build sustainable infrastructure, an educational system for our future economy and necessary social programs that lift the poor out of poverty by increasing their employment opportunities. Simple math tells us that a decreasing private sector cannot fund a larger and larger public one.

Why Is All Aboard Still Considered A viable Project?

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Why is All Aboard Florida still considered a viable project? The DES is nothing more than a cruel joke. It is supposed to be a serious study on the impacts that will occur if All Aboard is allowed to move forward. When will Tallahassee and Washington finally say enough and make them go away? Well don’t hold your breath waiting for that inevitability.

All Aboard Florida is an example of our capitalistic system run amuck. It is a story of the power of the lobbyist…the campaign contribution…the good old boy network at its worst. What is so galling is the fact that the company won’t even make an effort to mask their disdain for the process while we, the residents of the Treasure Coast, make an effort to decipher the DES and come up with alternatives to trains racing through our downtowns. The folks at All Aboard Florida couldn’t care less. They know that they have the politicians right where they put them.

These are neither bullet trains nor truly high speed. Those run through sealed corridors and at speeds not even anticipated by AAF. This is a sham perpetrated on all Americans but especially devastating to the Treasure Coast. Nothing that the company can do will change the insanity they want us to accept. Anyone who believes a stop in Stuart or Fort Pierce will ameliorate this destruction must be dreaming.

All Aboard Florida is a scheme in search of a reason to exist. Even with a stop in Stuart it is unlikely that I would use the train. Last week, my wife and I drove to Miami to catch a flight. In an hour and forty five minutes and for about $20 in gas and tolls we were there. No humping of bags up and down staircases or trying to get from our home to the station. A few days before that I drove to Orlando for a conference in a little less than two hours at about the same cost. There is no way that the train will be faster or less expensive or more convenient.

No, All Aboard is not a rational proposal. It is not a sound business model. It may be an excellent way to develop real estate in Miami but that could be accomplished without the havoc that this will wreak on the residents of the Treasure Coast. The company is willing to spend billions of tax payer money in order to build their properties. It could be in loans or government backed bonds or through subsidies, but in the end, there is no justification for this nonsensical scheme.

All Aboard Report

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I have just finished browsing the All Aboard Florida impact study. Rich Campbell of the Stuart News is correct that the study was bought and paid for by the All Aboard folks therefore how impartial are the results? The Feds allowing FECI to pay for a report and providing the consultant the “facts” to convince our government to give the company our tax money to prove its plan is feasible is worthy of a Koestler or Kafka novel.

The report highlighted the myriad ways that already exist to go from Miami to Orlando. There is Amtrak and busses and planes and, of course, cars. If you believe the purveyors of this new train fantasy, their train will be the optimal way to go between those two points. Maybe it is true, but is it worth spending tax payer dollars to find out?

The U.S. is not Europe or Asia where high speed train travel is a viable alternative. Since the AAF fare rates are not published, we have no way to judge whether it makes sense to take their train or just drive. Before moving to Stuart, I lived in Connecticut and had the option of taking the train or driving when I went into Manhattan. During the day, there was a train every half hour to and from Grand Central Station, and it took just about an hour. After rush hour the train ran every hour.

Most times, whether for business or pleasure, I would drive. Several factors went into my decision. If I was going to Manhattan, the train was quite convenient if my plans kept me in the vicinity of Grand Central Station.  If I would have to take a subway or a bus or a taxi to reach my ultimate destination from Grand Central and then do the same to return to catch the train home, I would drive.  What AAF never mentions is that going from Miami Station to Orlando Station in three hours does not take into account where you actually begin your journey and where the journey actually ends. A trip seldom ends at a railroad station.

If you have to drive to the station and pay to park and then when you reach the other station either rent a car or take a taxi or get on another train, where is the savings in time? Ultimately, that is why train travel in the U.S. is a non- starter. We are not a station to station nation. Stations are only one part of the travel equation.

If you look at what the existing Amtrak and inter-city busses charge, no family will pay about $100 per person to reach Disney. All they need to do is pile into the car and go from home to the theme park without any intermediate steps and it will cost less. That leaves the business traveler as AAF’s target audience. Even if you captured every business person in both directions and all other busses and Amtrak service were eliminated and those business travelers would pay what you charged, could AAF still be profitable? I doubt it. The advances in technology have made business travel a shrinking market not a growing one. As a business person, the last thing I want to do is sit on a train for three hours in each direction (not counting getting to and from the stations) unless I absolutely had to make the journey.

If all of AAF’s dreams come to pass, will it be successful? Past history regarding schemes like this would say no. The free market has rejected train travel except in large commuting metropolitan areas (where it is heavily subsidized) for the past seventy years. Let the market decide whether All Aboard Florida is viable but the market should do so without the aid of taxpayer dollars.

 

The Razzle-Dazzle of All Aboard Florida

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How do you sell an old tired product? If you are All Aboard Florida, you take an antiquated and money-losing idea and make it seem fresh and alluring. You tell the public that it will bring jobs and tourists. You will proclaim that the product is needed and that it is a demand waiting to be fulfilled. You commission a few bogus studies and send some campaign contributions to the right people. You obfuscate and mystify facts and truth. Your mantra is that you are privately funded at the same time you go to the government and the taxpayers for the capital to modernize your infrastructure. That is in spite of the fact that your company has $64 billion in capitalization. Chutzpa is my way to describe this type of veracity.

I assume that All Aboard Florida thought they would have some opposition to this plan. They believed they could just steam roll over the locals because of their corporate power and connections. With a little public relations effort, they knew that we on the Treasure Coast would fold with the inevitability of their blitzkrieg. Well, it hasn’t happened that way. A grass roots effort was begun and residents didn’t quite see themselves as being powerless against this corporatist onslaught. Most elected leaders for our area at the federal, state and local levels sided with their constituents instead of that very special interest.

This entire idea of the return of passenger rail is shrouded in nostalgia. For that notion reminds the American people of a time that is generations removed from how we actually live today.  It reminds us of a time before interstates and airplanes. A time when autos did not dominate because they were unreliable and the roads did not allow for fast and speedy travel. In effect, a time that ceased with the end of World War II and modern America. To AAF the future is here in an early 19th century mode of transportation.

AAF wants us to believe that we citizens are standing in the way of progress. That it is we who are nostalgic to keep our way of life in spite of all the good things that the train can bring as it speeds at 70 or 100 or 110 miles an hour through our towns. If that is the way that AAF measures progress, then please let us not be part of their modernity. We are not asking that the Treasure Coast remain frozen in time, for change is inevitable. What we are saying is that we do not want to face the future by subsidizing an un-needed passenger rail service because that mode of transportation has not been profitable in almost a century. The costs in our money and way of life cannot be justified.

 

Thinking of Stuart’s Future

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As we think about how to re-develop our city for the future, it is important to keep in mind what we want to accomplish. Are we planning for the future using the assumptions of the past? Who will be our residents and what will they expect next year and next decade? Too often, our thoughts are ingrained in that past instead of seeing the needs of our future.

How and where will our residents work and live? A recent survey from the Pew Research Center of the millennial generation (those born in the 1980’s and 1990’s) shows that they want to live in an urban environment. This is an ideal development for cities. But in order to keep and attract that generation to our city, we need to examine what they want that urban environment to encompass.

They are against government intrusion into their lives whether dictating who to marry or how to earn a living. Instead of expecting a “job” by either big government or big business, they are entrepreneurial and expert at selling their own brand. They expect to form loose alliances of associates that come together to complete one task at a time. They don’t want to commute to work or be in an office 9-5.

So as Stuart re-writes the Land Development Regulations or develops Sailfish, we need to take into consideration the residents that will be living in our city. We need to make sure that home occupation is not unduly burdened with antiquated notions concerning parking, for example. During the 19th and 20th centuries, artisans and farmers became office and factory workers travelling to a central destination. It now seems we are returning to an earlier time when there was not a distinct place to live and another to work. The most important thing we can do as a city is not be an impediment to these developments.

We must let the market decide what is needed. Ten years ago, who could have foreseen that millions of people would be able to act as hoteliers by renting out rooms in their homes to strangers through the use of airbnb. It is fruitless to try and stop this and other uses from occurring, and instead we should promulgate sensible and not overbearing rules to encourage the payment of taxes for these new uses.

Cities, such as Stuart, will also need to think about re-purposing their half empty retail centers. It is important that we do not stand in the way of zoning and use changes to allow apartments or offices to be built within the center. We are probably at least 20% overbuilt in the retail category, and because of changing shopping patterns, absorption is not likely.

The best we, as a city, can do is to not get in the way of our own future. That does not mean we allow anyone to do anything. Builders and developers still need regulation. It is up to government to make sure that whatever is built is sustainable so it can contribute to our tax base.  Our height limit does not need to be changed in order to accomplish this. In fact, it would be detrimental to our old Florida “brand.” Stuart needs to cultivate the right mix for today and, more importantly, for tomorrow.

Our House With The Leaky Roof

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Peggy Noonan’s WSJ column of July 12th was regarding our current immigration crisis. In the column she compares how Washington sees the crises as political and everyday citizens in a much more alarming way. We never imagined that America would have refugee camps housing thousands of children? Then who would have thought that our political system would become so dysfunctional? She compares the nation to a house where the owners can’t both make their mortgage payments and keep up the property.

The metaphor continues that on top of that you wake up one morning to find that there are people standing on your property just looking at you. They begin to gather in your garage and crawl through a window to your cellar. You call the police and when they finally come they take a few people away, always to be replaced by so many more. Your elected officials can’t stem the tide and the news media after a day go on to the next story. Our political leaders shout that the other party is to blame. It appears no one is in charge. No one will take responsibility.
I not only feel that no one is responsible about immigration but that no one in Washington will take charge and will take responsibility about anything. The adults have fled and the children can’t come up with solutions from our failing tax system to social security to our roads and so many other things. The other party or political opponent is to blame. Our elected representatives whether in their first term or tenth say they are powerless to correct what needs to be corrected. It is reminiscent of Pogo’s “we have met the enemy and it is us”.
Closer to home we have AAF that wants to barrel through our community after getting our tax dollars to build their new track. The summer rains will result in the Corp releasing water from the lake again devastating our lagoon. Our governor now claims to be with us except when it impedes FEIC or Florida Crystals. Our former governor, who wants to be our next governor, panders to those he once called liberal Democrats when he pretended to be a conservative Republican.
Our nation and state are not political board games where politicians get to manipulate and move citizens as if they were pawns. We elect people to office and send to Washington or Tallahassee to solve problems and fix things. They are not there to collect money for the next campaign or rig the system against the people to enhance the coffers of big business or labor.
We need a change and that must begin with us. We need to vote and not leave elections to the extremes on either side. We can’t be so dogmatic in our beliefs that we would encourage our leaders to destroy rather than fix the system. As citizens is it too much to ask, that we sacrifice and work with all our fellow citizens, whether we disagree or not. We all need to help America pay the mortgage and fix the roof.