Wednesday, December 28, 2011

What Could Go Wrong with a City Buying a Hotel?

Ahhh, yes, more hotel madness, and this time it's not just limited to Wilmington.

Carolina Beach has been bitten by the hotel madness bug, and it's led to allegations of corruption!

What a surprise!

Carolina Beach leaders closed two hotels owned by the town's non-profit CBP3 last week, but one issue regarding the property remains open.
Problem number 1: the town has a non-profit. What is this necessary for?

Problem number 2: they have/had two hotels? Why would they need two? I suppose they like competing with themselves.
Included in the accusation letter that spark [sic] the initial investigation is an signed affidavit from fellow, now former, Councilman Alan Gilbert. The document details Gilbert's version of how the town took over the property.

In closed session, town council originally authorized the Town Manager to bid up to $500,000 on one of several lots that were a part of Arcadius Development and now up for auction.

Gilbert attended the auction, where he said a representative from Republic Bank approached him. The representative said Mayor Macon told him about the town's interest in the oceanfront property, according to Gilbert's affidavit.

Carolina Beach bought one property that day for $475,000, but Republic Bank bought six others for $2.1 million. The bank continued to bid on the property in an effort to raise the price, according to the document.

Gilbert suggested the bank ran up the price of the properties at auction after learning of the town's interest in them from Macon. At a special closed session, Mayor Macon then informed the rest of town council that the bank would sell the property for $3.6 million. Once loans and interest were included, the town owed $4.3 million.
Did you notice how fast that happened? WECT doesn't even go into it. (Great job reporting you guys.) Let's delve into it a bit more.

As far as I can make out, there's the accusation that Macon and Republic colluded to sell this property to the town. Republic seems to have bought the property because they knew that the city would buy it from them at a hefty price. Macon clearly would have to be getting a kickback from the bank here for getting the city to buy this hotel at a later point.

Of course, WECT doesn't go into any of this. It seems like there's a huge story here, but they're just afraid to ruffle feathers (or the feathers of certain people), or whatever the case may be.

And what exactly did Carolina Beach get for $3.6M? This is the picture with the story:

Wow. What a classy joint. I'd gladly pay $60M for that.

Folks, this is an example of why government must be kept limited. You get people in there with no real philosophy about the role of government and they start thinking they have to get involved in whatever is big in the local economy. In this case, it's a roach motel.

We all know government has no roll in the hotel business. Now I wonder if they'll learn that about convention centers?

Friday, December 16, 2011

Wilmington City Council Decides How to Make City Worse

You could have sworn the baseball stadium was dead from the rhetoric on the campaign trail for City Council, right?

Repeatedly, people like Bill Saffo, Laura Padgett, and Ron Sparks all said that they didn't support public money going to the proposed baseball stadium downtown, or some slick-tongued variation of that.

Well, that's not what the new rhetoric is.


Annexation policy, a proposed baseball stadium and the Cape Fear Skyway bridge were some of the topics Wilmington City Council tackled as it prepared for next year.

[...]The Atlanta Braves came earlier this month to talk to city and county leaders about a potential minor league team moving to the city. Elected officials have been in talks for years with different organizations interested in making Wilmington home to a minor league team. O'Grady said the Braves offer is the city's best chance to get a team.

The Braves, according to Saffo and O'Grady, are only interested in putting the stadium on the riverfront on vacant land next to PPD. Saffo said the stadium would seat about 32,000 and could be used for events other than baseball.

Most of the council seemed to agree that a stadium would be a boon for downtown. But Padgett – who repeatable said she wasn't' against the stadium – brought up several obstacles to building it, including money, traffic issues, and if a stadium is the best use of riverfront land.

O'Grady said a partnership between New Hanover County and the city would be essential to secure the necessary funding and debt.

"We have to spread that risk," O'Grady said.

Notice that this wouldn't be an issue if the Braves (minor league) wanted to come here and build the stadium themselves. They could simply buy the land, build it, and everyone presumably would be happy. The only reason that this is an issue for the City Council is because some public dollars are going to go into it.

It's truly disgusting. If you listened to the campaign rhetoric, you have had the impression this was all but dead. Folks, this stadium is going to cost $42M (probably over $70M with debt service), and there's ample research showing the publicly-funded stadiums don't work.

Of course, if the City Council actually cared about research and learning from things other cities did, we'd have no convention center right now.

Then there's more.

Laura Padgett wants more incentives for new businesses that may (emphasis on the may) come here, or for existing businesses that threaten to leave.

Councilwoman Laura Padgett said Wilmington needs someone to focus on economic development and do outreach to attract industry to the city. Padgett said economic development groups in the region tend to wait for things to come to Wilmington. She wants a "performance" spreadsheet to track money spent on economic development and what the return on investment might be.

"We don't look at the business opportunities that are here. We are missing some opportunities and those things take a while to develop. I don't think there is enough effort made to keep business here."
Wowie zowie. What a novel idea, Laura. Actually tracking performance. And it only took you sixteen years of being in office to come up with this.

Let's take a look at actual research on the success or failure (emphasis on the failure) of economic incentives to businesses.

Duke University:

The Lee Act was passed in 1996 in order to promote investment and job creation in the less developed regions of the state [NC]. It separated the counties into tiers, with job creation and investment tax credits increasing dramatically if done in a less developed county. A job created in a prosperous region can bring as little as $500 in tax credit; the same job in one of the poorest counties can in fact bring $16,500.8

The impact, however, turned out to be different than anticipated: two-thirds of the more than $60 million of credit claimed in 2001 were awarded to the top counties, with those at the bottom barely receiving anything.

[...]A survey taken in 2000 by Rondinelli and Burpitt found that international company executives operating in North Carolina placed government tax incentives, agency assistance and financing close to the bottom of the 11-item list of factors that managers felt to be influential in their location decision.
State Journal:

First, MEGA's [Michigan Economic Growth Authority] incentive packages did not improve Michigan's per-capita personal income, employment or unemployment rate.

Second, MEGA did not improve the per-capita income, employment or unemployment rate of any county in Michigan. In each county, the researchers estimated the range of impact somewhere between zero and modestly negative.

[...]The results of the Michigan study are not unique and are for the most part consistent with every other study that has looked at the economic effect of government-subsidized incentives.
And how much are spent on corporate relocation incentives? At least $50B per year nationwide. It's a true disaster.

How much more proof do you need? Let's take a look at one free way to improve our economy: loosen our zoning code and improve our zoning administration.

In 2003, Anaheim, CA took away the restrictions on mixed use downtown (our downtown is mixed use, although the rest of the city isn't.) They "allow[ed] almost any imaginable use of property." Billions in private investment poured in. In 2005, 1/3rd more businesses formed than in the previous year.

Let's not forget that 9 out of 10 downtown business owners say that the city of Wilmington is more difficult to do business with than other cities.

Is it not obvious what we have to do to improve our economy? A truly common sense, free-market oriented approach would actually get results and wouldn't cost a thing. Of course, the current City Council doesn't see that as an option. To them, the only option is for them to plan your life better.

The article then goes on to say how annexation and the Skyway Bridge are still issues for the City Council, and we'll probably be hearing more about this stuff as the year goes on.

It's truly astonishing to me. These people have zero clue. They are going to drive this city into the poor(er) house. The only thing that's still a question is how Neil Anderson feels. To be perfectly honest my expectations aren't high, but he could be the one thorn in the side of this big government juggernaut.

Tuesday, December 13, 2011

More Meddling from the Unelected

Cape Fear Future (CFF), a taxpayer-funded arm of the Wilmington Chamber of Commerce, likes to meddle.

CFF considers itself to be a valuable resource in our region promoting education and trying to recruit the elusive "knowledge sector" in our local economy. Their efforts are hard to quantify in any meaningful way. Most of their news updates consist of regurgitating news and events taking place outside of their sphere. However, recently, the group involved itself with one endeavor on their own.

A proud news release entitled, "Cape Fear Future releases new tri-county education brochure" states:
"In the spring of 2011, representatives from Cape Fear Future and the Chamber Foundation (both initiatives of the Wilmington Chamber of Commerce) joined forces to assist the improvement of K-12 schools by raising awareness and support through marketing."
Interestingly, the two groups who "joined forces" are simply spinoffs of the same umbrella organization, and no outside influence appears to be present in the process of "raising awareness and support". The most noticeably absent entity from the effort is anyone from the public education system; specifically, the New Hanover County School Board. Why is this important? For one, the school board is elected by the people, and their involvement vicariously involves the public in these initiatives. However, one thing CFF has been consistent in, is not involving the public.
The result of this effort is an up-to-date profile with relevant statistical information to be provided to corporate prospects, commercial and residential realtors and anyone looking at our school systems. Our first goal was to create a printed brochure, and the second is to create and expand educational materials on the Wilmington Chamber of Commerce website.
The deep involvement of our Chamber in our public education calls into question their true motives. The specific mention of "commerical and residential realtors" makes perfect sense, given those who our Chamber and its satellite groups are comprised of, and the primary focus of their efforts. However, the idea that unaccountable taxpayer-funded groups operating in the shadows, without any input or accountability to the public; assigning, dictating, and communicating public education policy borders on highly questionable.

The draft brochure available here, may in and of itself seem harmless, and it may in fact be so. However, why are those elected by the public to look after and direct educational policy in our county being excluded from this process? We take our childrens' education seriously (well, many of us) - that's why it is so critical to have real people that can be held accountable for decisions affecting such. However, when a hodgepodge of faceless, publicly-funded bureaucrats, who are appointed by the inner players of the social and political machinery that seems to involve itself in everything, without any accountability to the public, one should be concerned.

Another notable example of what is most accurately described as meddling, is the implementation of a program in public schools, being completely directed and executed by the Chamber:
Shallotte Middle School in Brunswick County has adopted and implemented Project Lead the Way (one of only 3 in the state), a STEM-based curriculum that incorporates engineering, robotics, aerospace and other STEM-related courses... 
The Wilmington Chamber of Commerce’s Cape Fear Future initiative is exploring adoption and implementation of the PLTW program to New Hanover County
While this particular example may seem like a good idea, and in and of itself isn't alarming, the idea that CFF now wields the power to "adopt and implement" a program in our public schools should be alarming.

Another portion of text in CFF's brochure states that:
The Cape Fear region - New Hanover, Pender and Brunswick Counties - features dynamic public and private education choices for students and parents. Programs range from pre-kindergarten to alternative and special needs, early-college curriculums, magnet schools, and a host of other unique courses that produce well-educated and socially responsible adults (emphasis added)
"Socially responsible adults"? In the view of CFF, this is a valid function of our public schools. A more traditional view may consist of it being the public schools' role to educate students in the basic areas of reading, writing, and math - social responsibility is a job for parents, families, and the student's sphere of influence. School plays a role in this certainly - but in an indirect way. This isn't something that should be taught directly in school - who's to say which view of social responsibility is the agreed upon view?

CFF's view of social responsibility could very well be vastly different from that of yours and your family's. However, teaching social responsibility is a very valid activity in public schools in CFF's view, and they are doing their part to ensure their seat at that table - with your children. However, CFF has no accountability to you whatsoever. If you dislike or disagree with their influence over your children, you have absolutely no recourse. Is this the proper role of an unelected board of self-ascribed intellectuals and elitists, funded with your money?

Tuesday, December 6, 2011

It's Good to be the King: Proposal would make Hotel Construction Illegal Anywhere - Except Downtown

The idea stemmed from a roundtable meeting with Charleston's mayor earlier this year when local leaders asked for advise on bringing more hotels downtown. Charleston Mayor Joe Riley told leaders, "that's easy, we made it illegal everywhere else." -
Charleston, South Carolina - the pinnacle to which all of our elitist downtown leaders all agree that we should be so lucky to aspire to, does things a little bit different. The above quote from long-time Mayor Joe Riley of Charleston pertained to the question of how is it possible to attract hotel construction only in the central downtown district?

Wilmington Downtown Inc. (WDI), everybody's favorite quasi-government downtown lobby organization, recently suggested that the clear way to prompt downtown growth is by creating a flurry of hotel construction there - and the way to do that is to limit the free market, and make it illegal to construct hotels elsewhere in Wilmington - exempting of course a couple of the other developments operated by members of the insiders club, such as Autumn Hall and Mayfaire.
The public/private economic group has proposed a text amendment to the city's land development code that would prevent new hotel growth in the city except for in the Central Business District, Mayfaire Town Center, Autumn Hall and along the Riverfront. 
"Moving this proposal forward would limit growth and congestion," Wilmington Downtown Inc. President and CEO John Hinnant said. "This is ultimately a decision that will have a positive impact down the road."
The question is, a positive impact for who? A cursory investigation reveals that the same players involved in the northern downtown development projects in proximity to the convention center, are the same players involved in Autumn Hall and Mayfaire, not coincidentally chosen for protection by WDI. In addition, these firms are also charter members of WDI. In the minds of WDI and its members and benefactors, this proposal has a two-fold advantage - giving downtown Wilmington an unfair advantage in the market, and creating market protection for WDI's most illustrious members' projects. The 17th Street hospital corridor is also given a nod of approval from Hinnant - not coincidentally the hospital board also contains some of the same key players involved in the other areas surrounding WDI.

This proposal represents the very worst about these unelected, faceless, bureaucratic agencies that make decisions for all of us with no accountability or fear of retribution from voters. Spineless city and county leaders often allow free reign to groups like WDI, who receive a fair sum of taxpayer dollars every single year, but have absolutely no accountability to taxpayers.

Possibly an advantage for WDI, Wilmington Planning Commission Chairman Chris Boney's firm, LS3P Architects, just so happens to be a partner with WDI. In addition, Wilmington City Council members such as Kevin O'Grady, Laura Padgett, and Mayor Bill Saffo have shown a propensity for allowing an unfair advantage to downtown in order to support their agenda, such as a vibrant taxpayer-funded convention center, which forecasts now show to operate in the red indefinitely.

At first glance, the proposal seems ludicrous; but it takes a more sinister turn. If private, unelected citizens such as Hinnant, who just so happen to be a part of an organization with lobbying muscle at City Hall can finagle with regulation and zoning for their own personal benefit, and for the financial benefit of those in their camp, then where does it end? If other parts of Wilmington not targeted for their own personal agendas start to show signs of growth that they warrant as unfriendly to their goals, perhaps using the long arm of the regulatory law to shut them down would level the playing field for their own ends.

Again, internal politics at the city level is shown to be quite Soviet in its implementation. 17% of voters gave a nod of approval to the status quo last month, which greenlights this sort of initiative. This proposal is a prime example of the elitist few centrally planning the fate and environment of the masses; without accountability, and without any fear of retribution from the public. Taxpayer-funded agencies such as WDI and WID have for long been a chief planning, policy-making, and regulatory body that operates in the shadow of City Hall, and without the nasty impacts and scrutiny that public officials are subject to. In turn, public officials gladly keep stocking these agencies with cash to do their dirty work.

Despite the shockingly long amount of time this practice has continued to be the modus operandi of city government, voters still by and large sit home at election day, and completely abdicate their duty to hold government responsible for its excesses and creative ethics.
Hinnant said the proposed prevention of building hotels in certain areas is just one possible way to lure more hotels downtown.
He said he expects it to be controversial but that sometimes politics need to be put aside to clear the way for future planning.
"At some point we all have to be accountable for our decisions," he said. "A lack of regulation is how we got to where we are on places like Market Street and Carolina Beach Road."
Flaws in logic aside, given that disallowing hotels anywhere but downtown won't necessarily prevent them from locating completely outside of our city altogether; Hinnant demonstrates his complete ineptitude in understanding the role of government in a free market. His glib statement of it simply being "politics" that would create a controversy is telling. The argument is purely economic - not political. A free market is only free when it is left to its own devices unhindered. The beauty of this system is that it puts you and I - the consumer - at the top of the heap as the final decision maker as to what lives and dies economically; not some second-rate elitist bureaucrat hack, hell-bent on using every resource at his disposal to tilt the entire local economy to spill out favors to his cronies and allies.

Perhaps the most ironic of all, is Hinnant's statement, "At some point we all have to be accountable for our decisions". This - from a man who conveniently operates completely unaccountable to anyone for anything. He receives large sums of taxpayer cash year after year - and has no obligation to answer them for it. He is able to move in the shadows, undetected, without the spotlight of public awareness or impending elections to hold his feet to the fire. This - from a man who used the official WDI credit card account - paid for with the hard-earned tax dollars we contributed to government - to pay for booze, cigars, and groceries, and had absolutely no accountability for it.

Finally, Hinnant laments a "lack of regulation", referring to the vibrant hotel businesses within certain corridors of our city other than downtown. It was a healthy free market climate that offered the prime conditions for these businesses to thrive; but it will be the stroke of a pen from some progressive, "smart-growth" schmuck like Hinnant that will finish it off.

Someone who can point to an economically healthy sector in this current day and age, and castigate it as a negative because it doesn't fit within his scope of a centrally planned laboratory experiment that only serves to enrich himself and his buddies, is no friend to economic prosperity.

However, given the turnout of last month's local election, it seems like these policies will continue to rule the day unchecked, and voter apathy will once again sign over tacit approval for all things corrupt and counter to the basic ideas of liberty and prosperity.

Sunday, December 4, 2011

What Does the New Tax Rate Mean to You?

Yes, there's more discussion of the new New Hanover/Wilmington/beach towns "tax rate." Nevermind that "tax burden" is far more important than "tax rate," because tax burden takes area median income into account, and that Wilmington's tax burden is very high.

That's another issue.

What we're talking about now is how the new rate is going to affect people differently across the county. After putting the revaluation off for years, the New Hanover County tax assessor finally found out that the overall decrease for property values was 14% for the county as a whole and 13% in Wilmington.

Yet this doesn't capture the full story.

As we can see from this graphic from WWAY:

Not every area lost value equally. Additionally, "[t]here are some areas, a few pockets, that are actually seeing an increase."

What this means is that in order to stay "revenue neutral" some people are going to see their property tax bills skyrocket, while others will actually see them go down.

Now, I'm not going to get into exactly how much each area will see their bills go up or down (although if I were a professional journalist, who was paid to do this kind of thing, I would.) I'm just going to try to give the broad strokes.

Firstly, the Fire District as far as I can tell is another word for "unincorporated area." There are roughly 100,000 people or so in that area. But the property values in the unincorporated areas fell far less than in the county as a whole. That means that at the bare minimum, they will see their tax bills increase about 6% to make up for the loss to other people's property in the county.

Again, we're not talking rate; we're talking about what will actually be coming out of their wallets.

If you're a property owner in Wilmington and your property actually gained value, your tax bills are going to skyrocket. You'll be paying at least 14% more in county property tax, and 13% more in city property tax. Since the city's and county's property tax rates aren't too far away from each other, you'll have a roughly 27% higher property tax bill.

Then your bill will also go up according to however much value your property gained.

So, as we can see, even if property tax rates are to be kept at a level so they're "revenue neutral" (as if any of our local governments can do anything but expand,) this revaluation is going to put more burden on some people and take it off of others. I can only imagine that the number of people who are hurt by it will far outnumber those who benefit.

The media outlets around here should be crunching these numbers, and not simply say things like "some neighborhoods will pay less on county and municipal tax bills, and others will have to pick up the tab." These are things that affect people's daily lives.