Jackson Jambalaya

The mantra in Jackson lately has been downtown, downtown, downtown. The Clarion-Ledger, Jackson Free Press, the tv stations, all discuss the great projects going up downtown and how Jackson will benefit from them. There is no question Jackson has declined for some time and any good economic news is definitely welcome. Downtown has seen a constant migration of businesses to the burbs, taking employees and tax dollars with them. Some short-sighted individuals such as Marshand Crisler and Todd Stauffer want to recover the lost tax revenue by imposing a commuter or occupational tax for those working in Jackson but living in surrounding counties, forgetting the remaining businesses also can move. There is no question it costs more to develop property downtown as the tax rates are higher and let's face it: it's easier and cheaper to clear a pasture than a downtown block of obsolete buildings.

However, the question must be asked if the tax breaks and focus on downtown is justified or will Jackson see the same fate as did other cities who followed similar strategies. Ridgeland fell for the Harborwalk spiel, spending a great deal of money and aggravating its residents when it rebuilt the road in front of the project. Years after the Dock (a GREAT source of tax revenue) was torn down, there is no development taking place at Main Harbor and Bumbling Burwell has repeatedly made claims about obtaining financing for the project which turned out to be false. Given the current commercial real estate lending climate, it is very doubtful Harborwalk will become a reality in the next few years, if ever.

Every one of the downtown projects has been affected by the deteriorating lending environment. The Clarion-Ledger reported on January 11 the Standard Life Building has been held up due to financing issues:
"Developer David Watkins said his Standard Life renovation project, a $35 million effort, was approved for $23 million in bond financing. However, the credit crunch that began squeezing the economy after the September stock market crash has prevented Capital One from issuing money for the project.
"We were right on the doorsteps of closing when the bank all of a sudden put a stop on everything," Watkins said. "If we had had a month before the crises hit, for sure we would have closed."
Although approved, bonds for Standard Life project have not been issued and therefore are not included in the totals MDA provided to The Clarion-Ledger, MDA spokeswoman Melissa Medley said.
Watkins expects to close on the Standard Life deal with Capital One in the next 30 to 45 days.
"Every other developer I've been talking to around the country ... over the last few months is experiencing some kind of problem," Watkins said. "They are getting the same push back from all of their creditors...."

Such statements should come as no surprise, as the commercial credit markets did freeze up last fall. The question must be asked is will this project and others be able to obtain financing as several experts (who have been accurate in their forecasts during the current crisis) predict commercial real estate markets and lending will further worsen sharply in 2009. It should also be noted the costs of issuing bonds for cities is rising as well:
"Wall Street is raising fees it charges municipalities to sell bonds at the fastest pace in more than 20 years as institutional investors abandon the market for state and local government debt (This is something the candidates for mayor should remember.)
The higher expenses are another blow to governments already burdened by the highest interest rates in eight years, declining tax revenue and budget deficits amid the worst economic slump since World War II. Banks say they need to charge more because they have to work harder to sell a greater proportion of the securities to so-called retail investors......
Municipal bonds lost 8.17 percent this year, including reinvested interest, according to Merrill Lynch & Co.’s Municipal Master Index. That’s the worst showing since the indexes were created in 1989. Sales of the debt have slowed to $51.1 billion in the past three months from $82.9 billion in the same period last year, Bloomberg data show......" Rest of Bloomberg December 12, 2008 story (The rest of the article is worth reading.)

In addition to rising municipal bond costs, the track record of some cities which have adopted a "core-first" strategy has not exactly been successful as Jerry Bowyer recently pointed out in the Wall Street Journal:
"Baltimore, Philadelphia and Pittsburgh were prototypes of the economic development fad of the 1990s: government-financed "investments" in economic development. They all practiced what was called "tin cup urbanism" -- the belief that the rest of society owed large taxpayer transfers to the urban cores from which most of us have fled. They all supped from the same cup: center city stadia, aquaria and subsidized retailia.
Philadelphia practiced "the core, the core, the core" as a development strategy while perfecting the art of the tin cup under the guidance of then Mayor (now Gov.) Ed Rendell in the late 1990s. The feeling in Philadelphia was that the city was being crushed by economic forces outside of its control, and that the country owes cities, owes them big, and should pay up.
We did pay up, although Philadelphia's population declined 4.3% in the 1990s. And we will likely pay much more under Barack Obama's "stimulus" plan to spend hundreds of billions on new infrastructure. But based on experience, we won't see much renewal.
Baltimore's Inner Harbor development was the leader. Huge sums of government money poured into a very small patch of territory. Especially notable was a pricey public aquarium. Development officials claimed that by reviving the urban "core," economic health would return to the region. It didn't. The dawning of the Age of Aquarium has yet to appear.
On my last trip to Baltimore, it didn't take more than a three minute drive from the Inner Harbor before I could see burned-out neighborhoods. When I stopped for gas, I was aggressively panhandled by a man with a gold tooth in which a black ace was etched. Didn't see that guy in the development prospectus.
Pittsburgh followed the pattern, explicitly basing its development model partly on Baltimore and partly on Cleveland (from which Baltimore's football team had fled). The promises -- of "Renaissance III," "turning Pittsburgh back into a major league town again," and "creating a world class city" -- were grandiose. When city officials put the plan -- to spend taxpayer money on rebuilding downtown and subsidizing a stadium -- on the ballot, it got sacked. The referendum was rejected in all 11 counties in the metro area. It was a complete shut-out. Pittsburgh might be a drinking town with a football problem, as they say, but voters said no anyway on that one.
It didn't matter. Despite the referendum results, the city built it all anyway with public money. Then Mayor Tom Murphy and other city officials, as well as state legislators, went ahead. By 2003, two years after the project's completion, Pittsburgh faced bankruptcy ....." Rest of op-ed
Make no mistake, I'm not opposed to downtown development as there is a need for it and I don't have a built-in bias against Downtown Jackson Partners as others do. Jackson needs nicer and more capable venues than the Ag Museum and the Trade Mart. Jackson cannot compete with Brandon when a developer can obtain a few permits, clear some pasture, and start building as opposed to building in downtown Jackson where he must first check if the area has a historical designation and if asbestos removal is required, pay higher taxes, pay for building demolition costing hundreds of thousands of dollars, and face other obstacles.

There is nothing wrong with giving a developer tax breaks if the project will generate more revenue for Jackson through sales and property taxes. There are some cities where such projects have worked. Baton Rouge has experienced a downtown renaissance as The Shaw Center and other projects have led the way in making its downtown a premier cultural and entertainment destination in Baton Rouge (when it's not football season). However, when none of the local media asks certain questions about the future of Jackson and certain projects given the dislocations in the bond markets and commercial real estate, it is left up to a hayseed from Louisiana who knows no Greek to play devil's advocate. So thus it must be asked, how much will the bond market dislocations and costs affect Jackson's finances and how much will the adverse commercial real estate lending environment affect Downtown?