Archive for September, 2009

The New York Stock Exchange – Worms In the Big Apple

Tuesday, September 29th, 2009

A while back we promised our readers that from time to time we would revisit failed redevelopment/condemnation projects, so here is the next chapter – the saga of the New York Stock Exchange.

Back in the 1990s the NYSE decided that it had outgrown its present quarters and should build a new facility. But this is modern America, so the way you go about a deal like that is not just to build the new building, but to go schnorring to the government looking for a freebie. In the case of the NYSE, they accomplished that feat by threatening to move to New Jersey. No, we are not making this up. The New York Stock Exchange de facto threatened to become the Hoboken Stock Exchange – or something like that. Of course, few people believed that the NYSE would carry out its threat, but it worked for them. In 1998 it struck a deal with the Giuliani administration, with Mayor Giuliani pronouncing this deal to be a Christmas present for New York. Which only tends to prove the adage that one should beware of politicians bearing gifts, and that Mayor Giuliani was confusing receiving with giving — not the same, even if both are involved in Christmas gifts.

In order to obtain the site for the new NYSE building, the city would acquire a 28-story apartment building at 45 Wall Street, for $160 million, plus a relocation package for the tenants, that was estimated to be worth as much as $15,000 each (there were 435 apartments in that building, so we will let you do your own arithmetic). The city also acquired an office building from J.P. Morgan Chase, and put down a $22 million deposit. The total projected land costs were estimated by the New York Times to come to over $400 million (and you know what we think of the usual government pre-acquisition estimates). But you ain’t seen nothin’ yet. On top of that the city would pony up $480 million in cash toward construction costs, plus $160 million in tax breaks. Altogether it came to a circa $1 billion package of goodies. It doesn’t get much better than that, does it?

Then came 9/11.

As those involved contemplated the smoking ruins of the World Trade Center, it came to the movers and shakers behind this deal, that maybe it wasn’t the world’s smartest move to put up another, high rise, high-profile building that would make another tempting target for Middle Eastern terrorists. So the deal came unraveled.

The NYSE walked away, having spent only $10 million. But it was the City of New York that wound up wearing the barrel at the end of this party. The New York Times reported that, first of all, the city forfeited the $22 million deposit that had gone to J.P. Morgan Chase. Then there was the matter of unraveling the acquisition of that apartment building at 54 Wall Street, where the city had already spent some $6 million. Moreover, under the terms of the deal with the owners of that building, the city became obliged to pay them $1 million per month for lost rents, until the building became fully occupied again. Last time we looked (in 2003) the city was still paying.

 

The New York Times reported at that time that the city’s estimate of the cost of unraveling this deal would come to $109 million, a figure that like other government estimates, was likely to grow. You can find a concise summary of these events in Charles V. Bagli, 45 Wall St. Is Renting Again With Tower Deal Failed, N.Y. Times, February 8, 2003, p. B3.

Your tax money at work.

Stadiums. West Coast Division.

Sunday, September 27th, 2009

         Guess what folks? The Easter Bunny is coming to the West Coast, not to star in the movies, but to bring us a great, big football stadium, at no cost to the local taxpayers. A freebie! In his column in today’s Los Angeles Times, columnist Tim Rutten brings us the dispatch that Los Angeles is about to get a new NFL stadium, and it won’t cost the taxpayers a nickel. Don’t that beat all?

         We are not making this up. See Tim Rutten, An NFL Stadium for L.A., Los Angeles Times, September 26, 2009. http://www.latimes.com/news/opinion/la-oe-rutten26-2009sep26,0,5256719.column

         Mr. Rutten advises that according to the new stadium’s promoters, the ”football stadium project will create 12,000 construction jobs and 6,732 permanent positions in the 1.4 million square feet of office space, 1.1 million square feet of retail and a 100,000-square-foot orthopedic medicine facility that will stand alongside the football facility. [] All of this comes without the investment of a single public dollar.” Wow!

        Of course, being the old curmudgeonly type, your faithful servant will believe it if and when he sees it. So stay tuned.

         In the meantime, if you want a refresher course on how the “free lunch” worked out in other places, check out our posts at http://gideonstrumpet.info/?p=160 , http://gideonstrumpet.info/?p=212 , and http://gideonstrumpet.info/?p=223

          Not to mention Dallas and Miami, which we failed to discuss. 

         Enjoy!

Read All About It! The Associated Press Discovers Eminent Domain Reality

Saturday, September 26th, 2009

        

           The proverb has it that better late than never, so we duly take note of the fact that the Associated Press finally got off the dime and reported yesterday that the vaunted New London redevelopment project, the one that gave us the wretched, 2005 U.S. Supreme Court Kelo decision, has been an unmitigated failure. It has not redeveloped anything, but has only succeeded in destroying a viable lower middle class neighborhood with nothing to show for it, except for blowing at least $80 million (and probably more) in public funds.

         We blogged about that and wrote about it in in the National Journal on line on September 1, 2009, see http://gideonstrumpet.info/?p=290 Check it out.

         We are pleased to hear that the AP story ran in some 250 papers, thus making clear to the populace at large what a disaster that “well planned” project has been. That was the good news.

The bad news is two-fold. First, the AP story does not mention the $80 million-plus in misspent public funds (something we feel is a pretty important aspect of this story). Second, there is stuff in that AP article that makes no sense. We quote:

“Overall, proponents say about two-thirds of the 90-acre site is developed, in part because of a 16-acre, $25 million state park. The other third of the land remains without the promised residential housing, office buildings, shops and hotel/conference center facility.”

          But this arithmetic does not work out. 16 out of 90 acres comes to about 17%, not two-thirds. Also, as far as we have been able to determine, that “state park” is not a part of the redevelopment project. The last dispatch from the New London newspaper, The Day, was that the site of the defunct redevelopment project has become an empty, weed-overgrown tract of land, of interest only to birds and bird watchers. Maybe the AP knows something we and our Connecticut acquaintances don’t know. If so, we yearn to learn, but we have a hunch that the AP is not likely to enlighten us.

         One other thing. The AP reports that the Kelo project promoters are blaming the failure on the economy. Not true. This project was started in 2000, nine years ago, and the U.S. Supreme Court gave it the go-ahed in 2005, well before the onset of the recession and the market/credit crash. And yet, New London’s chosen redeveloper was not able to secure financing for this project. More important, even if they are right (which they aren’t), so what? It has always been our  contention that notwithstanding all the “public use” BS that tends to surround it, redevelopment is nothing more than a private venture that is financed with public money, with land for it obtained by government strong-arm tactics. Which means that when the economy tanks, so do the supposedly “public use” redevelopment projects.

          So the moral of this story is that entrepreneurship — whether called redevelopment, or plain old development — carries with it a risk of failure. As California Court of Appeal Justice Macklin Fleming put it a while back, the landscape is littered with the remains of development projects whose promises of a bigger economic pie turned into pie in the sky. Which is why public funds should not be risked in this fashion. If a proposed redevelopment is as economically hotsy-totsy as its proponents usually claim, let them invest — and risk — their own money. Not yours.

Update. We looked into the confusing part of the AP story, and a kind professional acquaintance in Connecticut has supplied us with pictures and a detailed map, so we think we now understand AP’s confusion. The Fort Trumbull State Park has been there (adjacent to what later became the Fort Trumbull redevelopment project area) for a long time and has nothing whatever to do with the Kelo case or the redevelopment project that gave rise to it. The project area consists of some 90 acres, and nothing has been done with it by way of redevelopment.

          Oh, yes. Looking at that map reminded us. The project was sited on a spot adjacent to the municipal sewage treatment plant. Just where you’d want to build upscale condos and a five-star hotel. Right?

         Also, we were reminded recently that in spite of all the BS about the need to use eminent domain on account of “holdouts” standing in the way of redevelopment, the taking for the Fort Trumbull project carefully left standing a building owned by the Italian Dramatic Club, a local institution that excludes women (except as servants), and is far more renowned as a situs for local politicos doing their thing, than for its theatrical accomplishments. You can take it from there.

Follow up. We recently came across a 2008 article from The Day, New Londion’s newspaper, reporting that the total expenditures on the Fort Trumbull redevelopment fiasco came to $180 million. Fort Trumbull Must Be an Open Book, June 28, 2008.

The Everglades — Your Tax Money at Work

Wednesday, September 23rd, 2009

          Back in 1998 the Army Corps of Engineers proposed its comprehensive plan for replumbing the Everglades, an $8 billion, 20-year project that proponents called the most ambitious restoration of an ecosystem ever attempted. So said the N.Y. Times News Service in an article by John H. Cushman, Jr., $9 Billion Plan to Save Everglades Unveiled, Oct. 14, 1998. “Under the plan, the water [that is now channeled out of the Everglades and flows out to sea] would be stored in massive lagoons and in underground aquifers, some to be released in the kind of sheetlike flow that used to seep across the gently inclined landscape, regulated only by the seasons, until settlement and development interfered.” * * * “Large water reservoirs will be built north of Lake Okeechobee, in the Caloosahatchie and St. Lucie basins, in the Everglades Agricultural Area and along western Palm Beach, Broward and Miami-Dade counties.” 

          Naturally, the project was announced by Vice President Al Gore on his visit to Florida. “This is an ambitious and aggressive plan, but this much we know: The cost of inaction cannot be afforded.”  

         Fast forward to today: “[A]fter South Florida taxpayers invested almost $280 million in the unfinished project, water managers say the reservoir might be in the wrong place.” Andy Reid, Halted Reservoir Construction Leaves South Florida Taxpayers with $280 Million Tab, South Florida Sun-Sentinel, Sep. 17, 2009. 

         Oops! 

          “The 16,700 acre reservoir, planned on old sugar cane fields . . . could have held 62 billion gallons of stormwater. Embankments rising 30-feet high were envisioned to hold a massive pool of water up to 12.5 feet deep. [¶] The work completed so far included a 13.5-mile-long canal to capture water that seeps through the earthen structure. Work crews also scraped away the mucky soil in a 100-foot-wide, 22-mile-long swath of land that was to become the base of the reservoir embankments.”

           Oh, and did we mention that inasmuch as this reservoir project has been stopped, it will cost at least $12 million to cancel the construction contract? So says the South Florida Water Management District. 

          Your tax money at work.

America’s Emptiest Cities

Monday, September 21st, 2009

From Zack O’Malley Greenburg, Forbes.com, February 12, 2009. We quote without comment:

“Las Vegas edged Detroit for the title of America’s most abandoned city. Atlanta came in third, followed by Greensboro, N.C., and  Dayton, Ohio. Our rankings, a combination of rental and homeowner vacancy rates for the 75 largest metropolitan statistical areas in the country, are based on fourth-quarter data released Feb. 3 by the Census Bureau. Each was ranked on rental vacancies and housing vacancies; the final ranking is an average of the two.

* * *

“Cities like Detroit and Dayton are casualties of America’s lengthy industrial decline. Others, like Las Vegas and Orlando, are mostly victims of the recent housing bust. Boston and New York are among the lone bright spots, while Honolulu is the nation’s best with a vacancy rate of 5.8% for homes and a scant 0.5% for rentals.

“Still, empty neighborhoods are becoming an increasingly daunting problem across the country. The national rental vacancy rate now stands at 10.1%, up from 9.6% a year ago; homeowner vacancy has edged up from 2.8% to 2.9%. Richmond, Va.’s rental vacancy rate of 23.7% is the worst in America, while Orlando’s 7.4% rate is lousiest on the homeowner side. Detroit and Las Vegas are among the worst offenders by both measures–the Motor City sports vacancy rates of 19.9% for rentals and 4% for homes; Sin City has rates of 16% and 4.7%, respectively.”

Update: The Wall Street Journal of September 26-27, 2009, devotes a major, front-page story to the fate of Detroit. Michael M. Phillips, In One Home, a Mighty City’s Rise and Fall, at p. A1. It brings the horrifying news that the median price of  a Detroit home is $7100. That’s right, $7100, not $71,000. The author of this story makes his point by tracking the fortunes and misfortunes of a home built on Boston Boulevard in 1917. Your faithful servant lived in Detroit in the late 1950s and can attest to the fact that in those days Boston Boulevard was a spiffy street, the home of big, gracious homes. Now, 100 homes in the Boston Boulevard neighborhood are vacant. The home that is the subject of this story (picture on p. A11) was just bought by the Central Detroit Christian Community Development Corporation in the hope that it may be revived and sold to a new family willing to bet on Detroit, for $30,000 to $35,000. Good luck.

Dams (Cont’d.)

Monday, September 21st, 2009

          Last time we visited the subject of hydroelectric dams, it appeared that no one knew what to do about them without (a) plunging parts of the Pacific Northwest into darkness, or (b) making life nasty, brutish and short for salmon trying to migrate upstream on the Snake River to spawn. See Everybody Wants to Go to Heaven, But Nobody wants to Die, August 12, 2009, http://gideonstrumpet.info/?p=286 

         So as the sun set in the west,  and as we duly reported to our readers, the New York Times folks announced that as far as they are concerened, no solution appears to be acceptable, and therefore — what else? — the matter would be handed to a federal judge who would do what no one else seems able to do — namely, come up with a solution to the insoluble.

          His Lordship, U.S. District Judge James A. Redden, has already rejected a couple of federal plans to aid the Snake River salmon, and now faces another plan, this one submitted by the Obama administration. According to the Times, that plan proposes $100 million a year funding to “improve salmon habitat,” pledges new efforts to control invasive species and other predators, and promises to monitor the potential impacts of climate change, an important factor since salmon are cold-water fish. So is that it? Not on your life. At least not as far as the New York Times mavens are concerned. They want the judge to send this plan back to Washington, and to insist on something better. And what might that be? The Times talls us not. At least not in so many words.

         But if you read this stuff with minimal care, it becomes clear that nothing will satisfy the Times’ environmental armchair generals, secure in the knowledge that their lights won’t be turned off, except the breaching of  four out of the eight hydroelectric dams on the Snake River. Which is why the Times piously recommends that the buck be passed, that Judge Redden should send the latest federal plan back to Washington and insist on something else. “Something”? And what might that be? Will anything other than the breaching of those dams satisfy the Times?

         We don’t think so, but then again, what do we know?

         So once again, stay tuned and find out.

         

And Speaking of Wacky . . .

Thursday, September 17th, 2009

The Cleveland Plain Dealer of September 16, 2009, reports that — who else? — Congressman Dennis Kucinich has called on the city of Cleveland to acquire abandoned churches by eminent domain, and then lease them back to “groups that would operate social-service and cultural programs.” Michael O’Malley, Kucinich Calls on Jackson to Save Closed Church Buildings Through Eminent Domain, The Plain Dealer, September 15, 2009.

http://blog.cleveland.com/metro/2009/09/kucinich_calls_on_jackson_to_s.html

The news item does not mention who would pay the just compensation that would be payable in any eminent domain action, and who would later pay the costs of operation and maintenance of these church buildings.

Those Wacky Hawaiians Again

Wednesday, September 16th, 2009

A while back we had occasion to comment on what’s going on in Hawaii, namely an ongoing, politically correct drumbeat of clean energy promotion on the one hand, and the quaint local custom of upscale Waikiki merchandisers keeping their front doors wide open even as their air conditioning goes full tilt. See What Carbon Dioxide Production?, July 25, 2009, go to http://gideonstrumpet.info/?p=268

Now, the New Yotk Times has taken this stuff a step further by reporting that Hawaii Tries Green Tools In Remaking Power Grids, by Felicity Barringer, September 15, 2009, at p. A17. That article tells us all about the diversity of Hawaii’s approaches to alternative power generation: Geothermal (using hot volcanic rocks ), waves in Maui, wind in Lanai and Molokai, solar panels in Oahu and eventually, if all goes well, biomass energy from crops grown in Kauai, as well as conversion of water into energy on the Big Island of Hawaii. Wow!

“These projects are just a slice of the energy experiment unfolding across Hawaii’s six main islands. With the most diverse array of alternative energy potential of any state in the nation, Hawaii has set out to become a living laboratory for the rest of the country, hoping it can slash its dependence on fossil fuels, while keeping the lights on.”

We stand in awe at all that creative energy at work, but we can’t help wondering: wouldn’t it be simpler and cheaper to give this commendable effort a hand by closing the front doors of all those upscale stores along Kalakaua Avenue in Waikiki, thereby air conditioning only those stores’ interiors rather than trying to air condition the great outdoors? To say nothing of all those upscale hotels with their air conditioned lobbies that are wide open to the outside, and in some cases don’t even have any exterior walls on their ground floors.

And did we mention that Native Hawaiians are taking a dim view of all that haole desecration of sacred ancient sites with their power-generating machinery? It appears that the kanakas seek to prevent desecration of Pele, the native godess of fire and volcanoes. And Pele does not fool around — when visiting Hawaii a while back we were sternly admonished never to pick up pieces of lava as souvenirs. Never, never. Pele doesn’t like that and if you defy her you’re in for trouble unless you come back to Hawaii and replace the volcanic rocks where you found them. Witness the New York Times’ casual reference to “the detritus of past failures, like the dismembered and rusting wind turbines of a defunct wind farm near the southern end of the Big Island.” That’s what you get for defying Pele. So our advice is: don’t screw around with Pele. Just close the front doors and enclose the interiors of air conditioned buildings — it will save energy and propitiate Pele.

Oops! Sorry Folks.

Tuesday, September 15th, 2009

Apologies to our readers who joined us during the past 48 hours, only to discover several warnings, followed by a bunch of geeky stuff comprehensible only to computer types, appearing over our masthead. All is well now. The technical “issues,” as they put it these days, that caused that have been resolved and we are back in business as usual.

Plowing Under Detroit – Take Two

Sunday, September 6th, 2009

         According to an article by Olga Bonfiglio, entitled Delicious Detroit, which you can find at p. 31 of the August/September 2009 issue of Planning, a magazine published by the American Planning Association, Detroit has some 70,000 vacant lots, which is hardly surprising because it has lost a million residents since the early 1950s. Bonfiglio urges that the city take advantage of this situation and encourage large scale community gardening by the remaining city inhabitants. This, she argues, will provide the remaining population with wholesome food replacing all that fast food that’s bad for you. Check it out.

         We are not making this up, but this article also refers to Greening of Detroit, an organization that is described as promoting “a reforesting program for the city’s neighborhoods, boulevards and parks.”

          For our earlier take on this subject, go to http://gideonstrumpet.info/?p=255 For the latest update by the Wall Street Journal, see http://gideonstrumpet.info/?p=300

          What a sad, heartbreaking comedown for the once thriving Motor City.


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