Sunday, January 18, 2009

Time to play devil's advocate with Downtown Jackson.

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?

5 comments:

Anonymous said...

It's going to be harder, sure. But what would your alternative suggestion be for those of us who are out there actually trying to make things better? Should we just wank around on a blog for a few years until the economy improves?

A. Boyd Campbell, II said...

short-term it may be cheaper to develop virgin land and leave existing development to rot but it doesn't take very much of that before the pattern of real-estate development starts to look like a brush fire with a ring of activity on the edges and an ever expanding burnt-out core.

Left to their own devices, the real-estate market will continue this process until there's no new land to develop or the ring gets so spread out that nobody wants to drive from one segment to another.

By then, the burnt-out core is so unpleasant that there's few opportunities to re-develop within it, so the whole city dies.

Ya'll are gonna hate this, but the only solution is a public policy that taxes the development of virgin lands to the point where it's as expensive as re-developing existing urban projects.

If you do that, then the pattern breaks up and real-estate starts to develop in a more logical and responsible manner, by re-developing existing areas rather than searching out new pastures to turn into malls.

If we continue the current pattern, then in twenty years the current ring of development in Madison and Rankin counties will begin to rot and developers will push out even farther to develop virgin lands. Your children and grandchildren might work in Jackson, but they'll live in Kosciusko.

Don't think it'll happen? Look at North-east and South-East Jackson. Twenty years ago they were the active ring of development. Now, they're rottin in favor of Madison and Rankin Counties.

Highland colony may be the hot place now, but in twenty years its future will be the same as Northpark and Metrocenter.

Left to their own devices, market forces are both blind and stupid. You can make money that way for a while, but eventually the stupidity part takes over and you find yourself in the same sort of spot we are today with a real economic problem on our hands.

Anonymous said...

But what would your alternative suggestion be for those of us who are out there actually trying to make things better?

Make "things" better? How?

Anonymous said...

kingfish, dig deeper. Your analysis is a bit disjointed and shallow, it would seem.

The financial market crash is affecting ALL developments in Mississippi, not just downtown Jackson. And, speaking of being a "devil's advocate" how about applying the same standard to all of the "cheap" Madison County and Rankin County development, as commenter "A.Boyd C" suggests.

You should also consider that the failure to build (not just rebuild) Jackson into a competitive and vibrant capital city will likely mean the loss of yet another congressional seat at the next census, which is merely a reflection of the brain drain from Mississippi. Yes, the classic old "brain drain" theory we used to talk about is alive and well and is robbing Mississippi of the many of its best and brightest in the 20-30 age bracket of Mississippi. Don't rely on my assertions, check out the facts. You'd be surprised what data the census bureau has online that is relevant to these discussions.

So, rather than wading through these academic exercises and showing everybody how bright you are, why don't you spend your obvious talent and intellect on exploring and crafting creative solutions, rather than, well, babbling. We need you to be an "angel's" advocate right now, not a devil's advocate.

Anonymous said...

How did I miss this? Great comments thus far, so where's the responses?



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In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.


In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

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This is definitely a Beaver production.


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Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

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