Category Archives: Belief in Capitalism

Does It Matter?

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At Monday’s CRA Meeting I was the only board member who voted against extending the “Paint Up Program”. The program using TIF funds gives grants to individual homeowners and businesses to paint the outside of their properties within the CRA. The last time this came before the board, I did vote for it. I thought it was a good program and in many ways it is a good program. Upon further reflection this program came into conflict with my philosophy of using public funds to subsidize work to improve private property.

This program does comply with all applicable laws and regulations governing CRA’s in Florida. My objection is not the legality of the program but the philosophy behind it. I know that to governments $17,000 is not even a drop in a bucket. The amount is not what is critical. it is whether public funds should be used to a enhance private party. There is a noble goal attached to the project but the principle is much more important.

Will the funds being spent in this way add to the value of the property thereby increasing the amount of tax that is being collected? Maybe…and that is the reason CRA’s are created to end blight and ultimately increase tax collection. This program is open to anyone regardless of income. Would I feel differently if there were income limits? Perhaps…But should I?

A noble purpose for having a program does not in itself make the program acceptable (the ends justify the means.) Since I believe that public funds should not be used to enhance private property then logically I could not support this program. If the funds had been used for street paving or sidewalks, I would have no problem.

Does that mean in the future I will always uphold that principle? I hope so. However, as I admitted, I did vote for the project in the past. To some this may seem like a small matter. if you believe something is right, you should uphold it. I promise to try and do just that in the future.

RailRoads Different Yesterday and Today

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If you are an American, you can’t help but be nostalgic when you hear a train whistle. It is in our DNA to wonder where that train is bound whenever we hear that plaintiff hollow tune.  How many old men become young boys when they remember Christmas and their Lionel Train sets?

For over a hundred years beginning in the mid nineteenth century, trains meant freedom. It was the way America travelled. Our everyday mundane life was swept away.  White coated waiters were synonymous with dinner in the diner and nothing could be finer. Trains not only took you from hearth and home but brought you back to your loved one. Some of us can still remember taking a trip on a train, dressed in our Sunday best. Some spent the night sitting up because we couldn’t afford a berth never mind a private compartment.

The railroad was what gave life to Stuart and all the towns up and down the line.  It enabled growth and economic prosperity. The train connected the town to the outside world when there were no phones and no highways. The tracks coming down the center of town meant progress and served as a statement of arrival. Civilization, convenience and conviviality all met at the depot. Anyone coming or leaving had to pass through. News was gathered and sometimes made. Children dreamt of an outside world that perhaps someday they would see by hopping aboard the 11:33.

But we no longer live in 1850 or 1900 or even 1968 when the last passenger train went quietly away. The Stuart depot is long gone, and I can’t even imagine our city ever having one again (even though the promise is sometimes hinted at by railroad officials). Passenger trains have always been money losers. Even in the Wild West days, the railroad made their money by freight and by selling the land that they received free from the government to new settlers and immigrants along their right-a-way.

Perhaps BrightLine or All Aboard Florida or FEC or the Fortress Group have found a secret way to make people moving pay. I suspect not. I suspect like so many things that modern Stuart faces…it is really all about greed. They claim that they own the land. They are private. They are a capitalistic, free market enterprise. But in truth, they are just one more pig at the taxpayer trough. It is easier to buy political acquiescence and influence than to have a truly great new idea. Like all crony capitalists, they are looking for one more handout…one more welfare check.

The railroad whistle no longer has the romantic sound that it once had for me. The train will not take me to faraway places or introduce me to new and exciting adventures. I have grown up. What is also true is that Stuart and the rest of the Treasure Coast have grown up as well. This venture will only cause us harm. It brings nothing but expense, inconvenience and will act as a noose around our necks. We need to make sure that those in Tallahassee and Washington pay a price, regardless of party affiliation, for their actions.

This is not a done deal.

Government, Markets And Parking

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Last week, I wrote concerning West Palm Beach’s City Place and how we could avoid making the same errors. I am a proponent of the government not becoming more involved in the market than is absolutely necessary. Governments do not understand the true nature of free markets. In my experience, when government seeks to have more than a minimum involvement, it corrupts market forces.

In the U.S. today, real estate is as perfect a market as possible . What is a perfect market? It has to have certain characteristics such as no participant in the market can set prices. Another characteristic is that there are no artificial boundaries to entering or leaving the market. There must be opportunity to fully maximize profit from one’s investment.

The one factor that can truly influence outcome without contributing to the general equilibrium of the market is government interference. The moment any government entity enters the market with any expectation of a desired outcome that is in contradiction to market forces, the market becomes imperfect. One of the biggest problems for the market is when government owns the means of production (i.e., the land or building). When government sells or leases property, it tends to have other motives which pervert not only that one parcel but the entire market which is unduly affected.

I am not suggesting that building and zoning codes are not needed. Our citizens and residents do need to have a community that reflects their desires in the place they want to live.  However, that being said, government should tread very, very carefully when becoming the Owner of income-producing property.  The irony is not lost on me that Stuart will continue to be the ground owner of the Triangle Property, and as such, has contributed to just what I am saying I am against. At the present moment and with that particular property, it would not have been developed because of earlier government involvement.

The City of Stuart’s next construction venture may be building a parking garage. Before even contemplating spending tax dollars on such a project, a few questions must be thoroughly vetted. This week, I learned from senior staff that within the downtown area, there are approximately 1700 parking spaces of which 1450 are public. Without being a traffic engineer or expert, I can’t believe we do not have adequate parking at present.

I am downtown almost every day and several evenings per week and have found no problem finding a space. During peak times in the evening, I will park at the Sailfish lot which is less than a 2 minute walk from the Lyric or The Gafford. With the tram and now valet parking, it is convenient for everyone to use either that lot or the Kiwanis lot and be at your destination within minutes.

For argument’s sake, I will assume that a garage is needed. Where should it be built? The most likely places for construction would still be on the present parking lots or at least in a location just as far away. Therefore, how many spaces would we actually gain? If we acquire private property to build a garage it would still be in the general areas where we now have lots, and we would be losing the ad valorem tax revenue by the taking of private property and converting to a public use.

Wherever we locate a public garage, the city will be perverting the market today and in the future. It is evident that there is no private market for a parking structure or it would have been built using private dollars and then charging the users. This then leads me to the conclusion that even if the city built a garage, the cost of construction and the continuous maintenance would fall on our taxpayers and not the users. Is it the city’s place to subsidize a perceived need for the private businesses in our downtown area using the tax dollars of all taxpayers?

For the next half century, the location of the garage would determine the direction and shape of development for the entire corridor. Depending on area and height, the garage could end up being the largest building in the district. Both aesthetically and economically, the garage will have an enormous impact on the real estate market for years. Once again, by insinuating itself in the private market, government would most likely have an outsized say in the future of downtown development and all of Stuart.

Before Stuart spends millions of dollars of taxpayer money on a perceived solution in search of a problem, much more objective sturdy would be needed. Societal and technological trends also should be taken into account. Thirty years ago we needed to go to a physical store to buy every conceivable product. Today, I ordered two hats, office supplies and a new kitchen blender without leaving my office. As society continues to evolve perhaps thirty years in the future, children will look to an empty parking structure (that Stuart will still be paying for) and ask “What’s that, Mommy?”

Avoiding the Mistakes of City Place

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City Place in West Palm Beach is once again facing foreclosure. I predict that it will continue to experience problems now and in the future. I am basing this on my nearly 45 years in the commercial real estate business. There are several reasons why repeated threats of and/or foreclosures will continue. Though we in Stuart will never see a development anywhere near this size, there are lessons we can learn.

City Place does have bustling crowds. However, crowds do not translate into economic success for the myriad of businesses located there. The overwhelming majority of retail establishments are composed of chain stores. There is no differentiation in product from any other enclosed or outdoor mall. A Macy’s is a Macy’s is a Macy’s.

Restaurants are also chains with rather high prices for the average person. How far does one drive to go to a Ruth’s Chris Steakhouse or Brio’s Tuscan Grill? There are less expensive alternatives at City Place such as Auntie Anne’s pretzels or Moe’s Southwest Grill, but these are not destination restaurants. This is a “Potemkin Downtown”. There is nothing organic in its design or makeup to entice continued repeat visitors that will actually buy the goods and services offered by the merchants.

A Hilton Convention Hotel has opened. My question would be is there enough convention business to fill this hotel? Why would someone stay there? This entire project is a 1970’s concept trying to fit into the world of the 21st century. It is outmoded and not what people, especially millennials, want in a downtown.

Unlike Stuart’s downtown, there is nothing original in City Place’s mix of retail shops. While we have two chain restaurants, the others are all unique and distinct eating establishments that have loyal followings. Stuart’s downtown area is a magnet for visitors because of this originality that cannot be found elsewhere. Our rejuvenated downtown grew out of a “place” where bricks and mortar already existed. The question going forward is how do we expand on Stuart’s success and not become a failed “City Place?”

One of the keys to continued vibrancy is to expand the residential component of historic downtown, the Colorado corridor, Ocean Avenue and Dixie Highway. We have made a tentative start by the proposed Triangle residential development. For Stuart to be a city with a promising future, residents must live throughout every neighborhood. With people comes the need for other commercial activity from dry cleaners to bagel shops. Stuart’s current downtown merchants will do better because there are more customers within walking distance.  The entire city will be enhanced because of more tax dollars being generated without much additional municipal cost since the infrastructure is already in place.

A mistake that we can make and have made in the past is to not allow the market to dictate outcomes. The city commission and staff too often decide what the project should be and then look for the private sector to carry out its wishes. Is there any wonder why so many conceptual plans amount to nothing? Government is not an expert. The best that can be hoped is that government does not impede the private sector. The government should not play “Sim City.”

Our governmental responsibility should be to help the necessary and continual development of an expanded downtown through good policy. Through our zoning and development code, Stuart can have height limits and other important elements that will allow for us to control density and maintain our “Old Florida Charm.” Another important point to remember is that we should not let any single developer amass so much property that we end up making the same mistake as West Palm Beach made with City Place.

The Jefferson’s and other downtown stalwarts had it right. Allow redevelopment through as organic a process as possible. Let the private sector decide what will work and what will not. Government is a facilitator not a partner. Let the people actually investing their money decide on the desired outcome.

“Just Leave Me Alone!!!”

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Having been a teenager and then having parented teenagers, I remember saying and hearing the words, “Why can’t you leave me alone?” As an elected official of Stuart, I am using those same exact words when I speak to legislators in Tallahassee. Though they are not my parent and I am not their child, I do feel a certain loco parentis relationship in our respective roles. What has become one of my main responsibilities as a commissioner is making sure that the legislature does not saddle us with unfunded mandates and rules which would have an impact on the city and you.

The Florida constitution enshrines the principle of “home rule.”  It states that municipalities can write their own laws and ordinances except for taxation as long as it is constitutional and the legislature does not pre-empt the municipality’s right to do so in a matter. The legislature has no problem in using that pre-emption authority every session. Little by little, Stuart’s rights (which are your rights) to self-determination are more and more infringed upon. Instead of leaving you and me to decide the manner that we want to live our lives, state government exerts its will and its judgement over ours.

So far this session, there have been a number of bills discussed and passed in the legislature that would dictate to us when to hold our local elections and the terms of our office holders and prevent us from deciding how to best regulate rentals, cars for hire and fracking. Take a simple thing like the term of a commissioner, there is currently a bill in the legislature that would pre-empt when that term begins and ends and even when we hold our elections. Why does the legislature care what day local elections occur and the term of a commissioner?  What is the purpose except to say that Stuart and the other 410 cities in the state need the legislature’s guidance in this matter and in dozens of other matters? To the gods of Tallahassee, the charters that were approved by our voters are pieces of paper and not the will of our citizens.

In the instance of fracking, the proposed legislation would prevent a municipality from regulating the procedure. Whether you think fracking is a good or a bad thing, is it possible to have an operation with trucks streaming down our streets and using large amounts of water needed in a way that would not disturb our residents? Every time either Washington or Tallahassee passes a law that restricts what and how we can regulate on the local level, a little more of our freedom to live our lives is taken from us.

It is true that we need federal and state laws to solve problems that do cross county and municipal boundaries. We do need far away Tallahassee and Washington to pass laws to prevent the devastation of the Indian River Lagoon. Give us back the Everglades by creating a flow way south. Clean up the pollution that is or has killed our wonderful springs. Stop rewarding Big Business, Big Ag and Big Labor at the people’s expense. Don’t tax us to give incentives and subsidies to your friends and contributors. Just do the right thing on that level. Your job is to protect us from things that we cannot protect ourselves from. You are not currently doing so.

We can decide for ourselves whether we want to vote for local government in March, August, November or December. Do we want fracking, our Uber drivers to have criminal background checks, and our neighbors to be able to rent rooms in their houses on a nightly basis?  Those decisions should be our choice not your mandate. Tallahassee let my fellow citizens and I decide these things. We are your voters, citizens and tax payers…we are not your children.

The Triangle Parcel Finally Moving Forward

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For several reasons, I decided to vote in favor of moving forward to develop the Triangle Property with New Urban Communities. Staff has vetted their qualifications extensively. I met early in the process with the principals of the company and their CFO not to speak about this particular project but rather to learn about their underlying philosophy. I researched the firm and looked at some of their other projects. I spoke with a variety of people who had worked with the company in the past, and everyone confirmed my initial feeling that they were able to complete a project and, just as important, ethical in their business dealings.

Using my own commercial real estate experience and CCIM training, I analyzed the financial numbers of different project scenarios. Their projections were based on market research from national firms plus a local realtor’s focus group and advice. The presentation to the CRA and Commission was thorough and informative. After questions, public comment and our deliberations, we voted unanimously to have staff negotiate the final terms. The project is for 48 new rental apartments with parking spaces in excess of our code.

As I have written in the past, I believe that the free market should determine what is built at any particular site. I am also a proponent of the city selling its non-municipal used real estate. In this case, because of the economics involved, New Urban Communities has demonstrated that a sale would scuttle the project. I further took into consideration what the market price as stated by a current appraisal is which is less than what we have invested in the parcel. Therefore rental would be best to recapture our investment dollars.

Some have suggested a structured parking garage on the Triangle lot. The construction cost for anyone to build is $17,500.00 per space without land costs. A garage for 100 cars with the land would cost over $3,000,000 dollars on that site. If you project what the ROI (return on investment) is, the garage would never pay for itself. In this instance, I believe the free market has spoken.

Others wanted to see a retail component to the project. The research, financial numbers and logistics of a mixed use building on the site prove that is less feasible than the proposed residential-only development. One of the important things to all of us is that the project be constructed and in scale with our codes and our “Old Florida feel”. The development will be 3 stories in height which is below our maximum height restrictions.  Once again, the free market has spoken and to our advantage.

A few people wanted a condominium development instead of rentals. After looking at the price to construct a project with the amenities necessary, it becomes obvious that the sales price would be higher than what research dictates people would pay for the units. There has been no new residential construction downtown in a dozen years. In order to secure construction financing, the banks would insist on a cash flow to pay the loan. A dedicated stream of rental income does that. Again the free market has spoken.

If this was an entirely private deal without Stuart being a party to the transaction, this project could go forward as a PUD. Our commission would look at the proposed plans and make our comments as we do all the time. We will be doing the same thing when this comes before us to receive final approval. Stuart still exercises the same amount of control over the project. The only difference is that we will be the land owner and will rent to the developer the use of that land. This is the free market in action.

Currently I see our downtown streets as a “Potemkin Village.” Without more residents, we will never truly live up to our potential as a downtown and a city. This project jump starts revitalization of Dixie Highway. It will spur more new construction instead of the current patchwork of empty buildings and vacant lots. What Stuart needs is additional residents who will expand our tax base. More full time residents will bring added vibrancy resulting in more jobs and commercial development. Projects like this will allow our “Millennials” an affordable option to remain in Stuart until they are ready to buy that first house or apartment, hopefully within our boundaries.

The proposed rent that New Urban Communities would pay would result in our land purchase cost being paid by 2028 and our soft costs in the project around 2036. The project beginning in 2019 is projected to pay the city $90,000 in TIF initially, and as value increases, so too will the yearly amount of real estate taxes. This does not take into account the various fees and other taxes that the residents and building will pay. I see it as a win for New Urban Communities and a win for the City of Stuart. This is an example of what the CRA does by allowing the free market to work.

There will always be those who believe something different should go on the Triangle parcel. Everyone has ideas and thoughts and opinions. Ideas, thoughts and opinion are meaningless in the marketplace unless you are willing to risk your money. New Urban Communities and their backers are doing just that. For the Triangle property, the free market has spoken.

How Economic Freedom Translates To Our Personal Freedom

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In his first inaugural address, Jefferson stated that “a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government… ” All levels of government have strayed from that principle. But that Jeffersonian truth is as true today as it was in 1801.

In the 2015 Heritage Foundation Index of Economic Freedom, the United States is ranked 12th in the world. This falls between Denmark and the United Kingdom. The US, a supposed bastion of free enterprise, has descended into the land of commercial subsidy and nihilistic crony capitalism. The individual’s needs in our society have been pushed aside to make room for our largest private companies to graze at the government trough. This has resulted in less political individual freedom in order to insure the special interests of government bureaucrats, politicians and corporate welfare recipients.

The U.S. needs to stop subsidizing business in any way, shape or form. The unforgiving free market should decide. In a truly free society, there will be individual economic dislocation. People will lose jobs, businesses will close and towns and regions will suffer. If the economy is left to market forces, any dislocations will be brief and temporary. Governmental interference with the markets only prolongs economic downturns.

What should be the role of government in our economy? First and foremost, similar to a doctor, it should do no harm. Government should do nothing to impede business from operating in a fair and responsible manner. There is a place for regulation, but it should be limited to providing an open environment for businesses to compete in an unfettered market place. Government should stop predatory behavior so that markets do not become corrupt. Taxation policies should be transparent and simple with the sole purpose of raising revenue not dictating policy and outcomes. There should be no governmental subsidies of any kind to business.

Free markets are efficient but ruthless. Therefore, government needs to protect individuals by having a social safety net. The countries listed ahead of us on the Economic Freedom Index have not sacrificed the individual for the corporation. In fact, just the opposite is true. Singapore, Canada, Australia, Switzerland and Chile, which ranked ahead of us, all have better health care systems than the U.S. Each of those nations has a stronger individual safety net than the U.S.

Beginning in the late 1970s, the United States mistakenly began to believe that we could curb governmental power by cutting taxes alone. This did not happen, and that policy has resulted in increasing the deficit but without any societal benefit. Government didn’t get smaller, it has grown increasingly larger. Individuals who were most in need were seen as “loafers” and “welfare queens”. The government cut individual benefits. At the same time the amount of money needed to run for office became larger and larger. The average American has less influence on the process because of the ever-increasing contributions from big business, public sector unions and the very wealthy.

Our national and state elected leaders are beholding to those special interests. The politicians began to enact policies that harm the individual but maintain the status quo of their contributors. New business formation is half as what it was in 1978. The World Bank has ranked the U.S. 46th in new business formation with New Zealand #1 and Canada #2. An article in the Atlantic proves that a safety net allows people to take the economic risks necessary to start a new business because their families will have their basic needs met in case of failure. Since we do not have that, entrepreneurship in the U.S. has suffered.

Our government needs to return to the basics. It should look after the welfare of people rather than companies. The government needs to go back to transferring risk to business instead of individuals. Tax policy has to be neutral and simple. Regulations should be written not to keep new businesses from forming but to make sure the field is level for all.

In the world’s most successful and freest economies, there is a free flow of capital, labor and goods. The building of walls to try and keep those elements in or out of a country is doomed to failure. Tariffs, corporate subsidies and any price supports do not work. They inhibit the necessary destruction of the old and the creation of the new. Stasis is the enemy of government and economies. Ultimately our individual freedoms depend on it.

Tom Campenni has been a small business owner for over 40 years. He has had ownership interest in real estate and other businesses during his career. He currently serves as an elected commissioner of Stuart, Florida.

(this is from an article written for Ezine)

 

Stuart CRA Expansion

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As many of you may know, Stuart is looking to expand the CRA (Community Redevelopment Area) to other neighborhoods.  When the idea was first mentioned I was in favor, if the expansion resulted in infrastructure projects moving forward in the new incorporated areas. I further wanted to see the operation of the CRA treated as a fund and not as an independent department or division within city government. This is not a reflection on the city staff, but in a city of our geographical and population size, I don’t believe that we need to have a government within a government.

In order to have an effective CRA (or for that matter a city), the citizens who reside within those boundaries need community outreach and resident input. The time has come to have the city focus on more than a few blocks of historic downtown. The many neighborhoods that make up Stuart should have more attention paid to them. Plans and goals are fine, but without a dedicated funding source and a desire of the residents to move forward, nothing will happen.

The CRA fund or TIF is created by keeping the increased taxes that result from increased value on a property. Those funds do not come from any additional tax being levied as another taxing unit. That increase amount collected would have gone to the county and city general funds. Not one more penny is collected from property owners who are in a CRA. However, the increased taxes generated because of an increased property value must be spent within the CRA. The fund is a catalyst for infrastructure improvements and economic development within the district.

It has been my observation that change is inevitable. Ideas blossom, technology improves, the economy develops and societal norms become different.  Whether any individual desires changes or not is immaterial to whether change occurs. It is government’s role to guide those changes to produce outcomes that benefit their constituents. As a commissioner and a member of the board of the Community Redevelopment Agency, it is my responsibility to provide the city staff with the tools and direction to implement the changes.

Therefore, for greater citizen involvement with the proposed expansion, the Community Redevelopment Board should now consist of 9 members from the present 7 with at least 6 members (including the chair) being city residents and no more than 3 members being non-resident business owners within the CRA.  The two non-commission members of the Community Redevelopment Agency Board would be appointed by the Community Redevelopment Board from their board members who are residents of the city.

The city staff must also be reorganized to best carry out the CRA objectives. I would like to see a Department of Community, Tourism and Economic Development. In a city our size, no tourist or economic initiative undertaken doesn’t impact the entire community. This department must know what the residents of the city want in order to attract those businesses and tourist dollars that are desired by the citizens. The Community Development division would be charged with holding workshops within the different neighborhoods. This process will ascertain what the residents needs are within their neighborhoods and then to incorporate those needs within the CRA plan as a whole.

Once the priorities of the projects are set by the boards, the implementation is done by the city departments in place to best execute the projects. For example putting in a side walk is the responsibility of Public Works whether it is in the CRA or not. There is no reason to reinvent the wheel or add a layer of bureaucracy to accomplish it. If we can simplify the lines of communication, responsibility and make the entire city government as transparent as possible, then our residents can see where Stuart is headed. We will then not only have a successful CRA, but also a prosperous and growing city.

Economic Development and Government

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In Sunday’s Stuart News, Eve Samples asked business people to join the newspaper’s sounding board on the subject of economic development. I have been a business owner for many years and have some level of expertise on the subject. As an elected official, I would be ineligible to belong to that sounding board. That doesn’t preclude me from expressing an opinion. I will just do so here instead.

The News editorial is quite right that we need further diversification from the trio of Florida business mainstays of agriculture, tourism and construction. The paper correctly insists that when taxpayers’ money is used by government to fund incentives, the three principles of transparency, accountability and proven performance by the companies should strictly be adhered to. However, I would go further and categorically state that government or their agents, such as the Business Development Board, has no right using taxpayer funds to assist certain companies while ignoring others. This type of favoritism is nothing more than crony capitalism.

What we owe any individual or business is a simple non-bureaucratic means of opening or moving to our area. The City of Stuart, Martin County and Florida should look at ways to advance economic development rather than hinder it. Permitting of any new enterprise can and should be simple with as few barriers as possible. What I would like to see for Stuart is that when a larger business is looking to open or move to the city, a point person from our economic development department act as an ombudsman to all departments on the applicant’s behalf. This would avoid the frustration that many business people face when dealing with the bureaucracy.

Over and over again, we have seen the Digital Domains and the Torrey Pines story played out.  They are given millions in tax payer dollars that result in heartache instead of jobs and taxpayer debt instead of additional tax revenue. Government should stay out of the way of the private sector. What government can and should do is provide the basic infrastructure to have a great quality of life. Schools from pre-k to graduate school should be the best when compared with others in the nation and in the world. Amenities such as parks and libraries should be well maintained and free to the public. Our rivers should be able to be enjoyed. Roads, water and sewers should be first rate.

Elected officials and bureaucrats are not very good at picking winners and losers in the economic sphere. So why we continue to allow the same patterns and practices to continue is a mystery. What we, as government, can do is remain neutral and only pass regulations that further the public good. Let the market determine the feasibility of a particular business entity to prosper and survive. As taxpayers, we need to insist that government stop using our money to back bureaucratic-inspired schemes to allow slick characters to drink at the people’s trough. Government is never going to be smarter than the market.

Stuart Real Estate, Government and Politics

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For some odd reason, the City of Stuart believes that being a Landlord in the private commercial real estate market is beneficial. This belief is wrong for both philosophical and practical reasons. While it is an allowable practice under Florida law for municipalities to own and lease real estate to the private sector, I believe the city has taken it to a level that is detrimental to our further economic development as a municipality.

The justification of a municipality owning property and then leasing that property to the private sector is that the municipality will have a “predictable stream of income” from the rents. What we have seen in Stuart is that a Tenant makes an initial deal with the city at one rent and then subsequently comes in and pleads that the rent is too high and wants a reduced amount. This negates the “predictable stream of income” theory.

This most recently has occurred when the tenant with a 50-year term lease for a city owned lot on Monterey requested a reduction in rent from $31,500 to $9,000 per year. The lease which commenced January 1, 2007 has already been modified once from the initial rent of $52,500 per year. If the new rent is accepted by the commission, the city will have $43,500 less per year than originally anticipated not including any cost of living adjustments. This “predictable stream of income” has proven less so.

We can see this “voodoo economic” principle at work over and over. The proposed NorthPoint hotel project where nothing has been built after ten years and the initial rent has already been cut in half even though nothing has yet been paid. In addition once the lease finally commences there will be an abatement of the first 7 to 10 years of rent. This demonstrates why this practice should be called “the unpredictable stream of income” theory.   On a very practical level, this shows why being a Landlord does not work. City staff and the commission have demonstrated an inability to manage a function that belongs in the private sector.

No government entity in a free market capitalistic society should believe it is acceptable to compete with the private sector. It is socialistic when the government owns the means of producing wealth – i.e., real estate. By owning and leasing property, the City of Stuart helps determine what rents are in the private sector. Any appraisal would have to include how much the city charges its tenants. It has an undue influence on our real estate market.

I do not mean to suggest the city should not influence development through zoning and building codes. Further, there is a very valid reason for the city to buy a blighted or underutilized property and then re-sell that property to a developer.  We should work with and encourage beneficial development through the private sector. A good example of this is the city buying the blighted “triangle property” and working with the private sector to build a good and needed project on the site.

Stuart now has millions of dollars invested in the ownership of supposed income producing properties. If the city collects every cent of rent projected in 2016, it would be only a million dollars (1/3rd of which is generated by one property, the Sunset Bay Marina). The city should begin selling some of this surplus real estate.  It could then take the proceeds and buy blighted and underutilized properties, for example, those on Dixie from Sailfish Lot to Colorado Avenue. Then the city, working with a private developer, can do the same thing it is doing with the “triangle property”. The property management fund should be used to make our city more productive by encouraging private developers not by holding desirable properties in-house.

Our current strategy is doomed to failure. It preserves the status quo. It does not use city funds to achieve the highest return. There are only so many dollars Stuart has to work with to improve the city. In the name of keeping ad valorem taxes down, Stuart holds onto and leases property. That very premise results in a false conclusion. By not using our leverage efficiently, the city depresses Stuart from developing into a vibrant place for the creation of jobs, homes and businesses. Without those things happening, ad valorem taxes will increase because our base is not growing. Surplus properties should be sold.