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Just a fun sidenote

8/30/2014

As most of you must be aware by now, my politics run to the conservative. I'm not wild-eyed about it, but I run to the right of center. With that in mind, I am sure you know what my feelings would be about the New York Times columnist, Paul Krugman. We would probably not enjoy having a beer together. He would consider me white trash, and I would consider him an elitist snob. On the other hand, the meeting might be fun for bystanders with a flair for the game of chance. In any event, Mr. Krugman wrote a particularly offensive column and it was re-printed by the Dallas Morning News a few days ago. Today, any Letters to the Editor responses to Mr. Krugman's column appeared in the DMN. My letter didn't make the cut.

I still like what I wrote. It has nothing to do with Rowlett, however it does reflect my love and loyalty to Texas. I have lived a very long and enjoyable life without Mr. Krugman. I think I can get thru the rest of my days without any advice from him. My letter to DMN is copied below.

_________________________________________________________________

August 27, 2014 To: Dallas Morning News (Viewpoints@dallasnews.com)

Re: Paul Krugman’s Perry Wrong: Affordable Housing the Key

I wish to thank the Dallas Morning News for providing its subscribers some insight into the continuing career of Paul Krugman. I had no idea he was in training to become a joke writer. Of course, this is after he completed his studies in Economics. He is training with such conviction that one is assured that, instead of providing comedy, he dupes the reader into accepting that he actually believes what he writes. For example, in his recent column about migrations of population to the south, he attempts to convince readers that he believes the price of housing is the major motivating forces inspiring the moves. He claims that housing in Texas is much cheaper than housing in New York City. Furthermore, he writes that wages in NYC are 12% higher than in the “low wage areas” of the south, and that housing is 60% higher than in Houston and 70% higher than Atlanta. Clearly, Mr. Krugman appears to feel these facts are the causes for the largest mass migration since the gold rush days of the 49ers. It takes a minute to catch on. Nobody can be so stupid to accept those facts, which they probably are, as the primary motivating factors in the migration. Clearly, his analytical skills are intended to be a ruse to keep the reader interested. However, his comedy is good enough to make others want to finish reading the column to see what other “facts” are presented. Alas, not much more substance is offered. Although Mr. Krugman did not identify the school in which he received his training in Economics, I presume it was the well-known Fred and Ethyl’s College of Economics and Sheet Metal Shop. This is the only school that produces graduates that can offer economic theory that no business publication, economist, or financial planner has ever thought about after months of study. They probably didn’t know Mr. Krugman’s thoughts existed.

Just as an aside, if all the wages in NYC were adjusted to achieve the wages/housing ratios enjoyed in the south, NYC would soon be a ghost town. Atlanta, Houston, and Dallas would double in size in about the time it took to return the U-Haul trailers after each trip south. There would be no jobs in NYC. Those nasty old business people would have to move their jobs down south, where their labor pool went. Of course, Mr. Krugman could always write a blog for the 200 people left in NYC.

Paul Krugman is uproariously funny. He has developed sarcasm into a high art form. To say anything other than that would probably be a cause for Mr. Krugman to be admitted somewhere……..hopefully, it would be in NYC……not anywhere down south.

Ron Miller

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Popurri

8/29/2014

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Before we tackle our more well identified development areas, we ought to spend a little time visiting the most difficult type of planning there is. That would be, the out-takes, the in-fills, and the small lots you drive by every day, but really don't recognize them as development potential. You quickly see the commercial lots along Lakeview Parkway. Do you see the many lots along Rowlett Road, Dalrock Road, Miller Road, and some of the interior streets? Most are too small to be meaningful subdivisions, but too large for a single residence. Many have languished for years. I have lived in Rowlett for 39 years, and many of the lots I see today were, of course, there when I moved to Rowlett. Why haven't they been built upon?

The reasons are legion. There is no hard and fast rule about why development passed around a vacant lot, whether commercial or residential. Many are vacant lots because of poor business decisions made many years ago. Some are vacant because of legal or estate problems. Some are poorly located, and some the owners just don't want to sell for whatever reason. Vacant lots don't really hurt anything. For example, when I was a kid growing up, a vacant lot was an automatic baseball diamond.   Every kid, regardless of age had a ball park. The smaller the lot, the younger the kid. As we grew up, we could hit the ball farther and needed bigger vacant lots. There were always some available. Now things are much different. We have organized leagues, real uniforms, and real ballparks with bags at the bases instead of cardboard.  I came too early for bags on the bases until I got into American Legion and High School baseball. I remember when I received my first uniform, I had to figure out what purpose the sliding pads served.

In a good economy, miscellaneous and scattered vacant lots can be the source of new business which can become new additions to the tax base. I have had some experience with vacant lots or "out take" lots. Mostly, they were left over lots after residential development was long since completed and the commercial lot "hold out" never enjoyed a commercial market that could absorb them. They often sit for many years. In general, I think most owners of these scattered lots would like to sell them. In general, almost every time someone approaches P&Z or the Planning Department for the appropriate zoning, someone will object. They object because they just don't want change. Oh, a lot of reasons are given, but they generally just don't want change. I think that's an abuse of private property rights. There's only one owner of that lot........not 20. If it is desired to develop these "in fill" lots, it requires common sense of everyone.

Any seller or any purchaser of a lot that wishes to install a business with an unsavory nature should know without explanation that this community would not accept such a business. They're just wasting everyone's time. However, there are a myriad of businesses that could contribute to Rowlett's life style. A small strip center could house a few different shops as computer repair, pet salons, insurance offices, etc.   Larger lots on well traveled roads could support much more variety of businesses. What's important, once again, is that common sense prevails. The buildings must be compatible with the neighborhoods. They need not be brash and bold fronts. They need to be tasteful and attractive. However, they must be allowed enough signage for people to see what service is available without causing "rear ending" incidents in front of the place.

Good judgment of the seller and the purchaser of a lot goes a long way toward developing a vacant scattered lot. Furthermore, some understanding by surrounding residents can help. After all of any emotional outcry is exhausted, some time must be taken to consider any good that comes from the proposal. If for no other reason, some service businesses will be brought nearer the neighborhoods.    However, the best aid to developing "in fill" lots is a Planning department that understands business and is business friendly.

It is reasonable to assume that most people reading this blog have never approached any city hall and discussed the development of a vacant lot into a functioning building that houses a business. You would be absolutely amazed at the differences that a sampling of city halls can present. I have met with two cities in the same day. One was just a few miles down the road from the other. In one city, we can only say we received a "cold shoulder." We heard every reason why certain things we presented were unacceptable to that particular city. They weren't particularly nice about it and didn't present much of a friendly face. Just about 45 minutes down the road there was another city in which a comparable presentation was made on a similar "out take" lot. The difference between the two cities was like night and day. The staff of city two expressed what seemed to be serious interest in what we wanted to do. They told us about miscues that they wished we wouldn't do, but quickly offered other solutions to achieve the same result. They seemed to really want to help. When I offered my genuine thanks for helping us out, the planning director just smiled and said, "Thanks okay. Its just good for the tax base." We were underway with construction in 3 months with the second city. I don't know if the project in the first city ever got built. I left that company and took another position with another lender.

All the points of the above post are these:

1.  Scattered lots, or in-fill lots, are the most unspectacular of a city's development plan. They don't make headlines. They vary widely in size and location. However, they can be very beneficial to a tax base if nurtured. It requires common sense of everybody......sellers, buyers, citizens and staff.

2. The most help can come from City Staff. They must be business friendly and try to help when they can. No one knows the rules better than staff. The developer is simply trying to learn the rules. If city staff elects to withhold information or fail to explain  their needs, it will not take long for word to get around that the city is hard to deal with. This is not good for tax base nurturing.

Is Rowlett business friendly? If you know anybody in the construction or development business in the DFW area, call them and ask them if Rowlett has a good reputation with developers. Ask other business owners in Rowlett. Over a period of time, your inquiries would begin to take form. You will know if Rowlett is business friendly.

If you decide the city is business friendly, its good for the tax base.

.

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Blacklands Corridor negotiations

8/28/2014

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I have just learned that the contractors for the Blacklands Corridor is meeting with officials of Rowlett today to discuss the features of the new proposed toll way that will cross Rowlett's Northshore area.

I have learned that the contractor is wanting to build the Blacklands very similar to the Bush toll way. That is, without service roads and access ramps. All they want to do is cross Rowlett without building the features that would provide any benefit to Rowlett. They don't want to spend the money.

Do you have to think longer than an instant to know what I think about that idea? Essentially, the Blacklands contractor wants to use Rowlett land to benefit themselves, but not offer Rowlett any benefits for crossing our municipality. They don't want to offer Rowlett anything because it costs additional money. Hell, with the Bush Toll Way, we didn't even get a road sign announcing that the driver was in Rowlett.

I wish I was setting at that negotiating table. If all best efforts of reasonable negotiations failed, I would inform the contractor (who apparently has imminent domain powers) that he is not going to like me very much. He would not like me because I would team up with the land owners and keep him and his Blacklands Corridor in the court house for many, many years. I would send them straight into interrogatory never-never land. They would have morning coffee with their lawyers for years. Be assured, the contractor would not like those words. Time is money to the profit motivated. A few years cooling their heels in the courthouse would chew up a lot of profit. Most assuredly, they really would not like me.

I can't believe they're trying this nonsense again. I hope Rowlett sends a good negotiator. It is time to send in the starting team.

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A little detour

8/22/2014

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There is a new "hot topic," as reported in the Dallas Morning News. The new Blackland Corridor is finding traction. It is topical because it involves Rowlett's land values across the north part of town.  Land values reflect desirability of businesses to develop sites ultimately helping the tax base. It all fits. Basically, the Blackland Corridor is a toll road from Greenville to Garland.

In today's NeighborsGo of the Dallas Morning Times, the "Sounding Off" section gave some reader's opinions of the Blanklands Corridor. eight opinions were presented. There were opinions in favor of, and opinions against the tollway.   They were all right.

Each opinion focused on only a narrow slice of the issues that something like the Blacklands Corridor presents for consideration. There is no single "right" or "wrong" answer, but a consideration of all the potential, and most probable, pros and cons should produce the "best" answer.   It is the "best" answer we should strive for.

I, like most responders to the NeighborsGo article, do not like toll roads. Once upon a time, they went away after the bills were paid. Now they don't ever seem to go away. I think it should be TxDot's job to find state and federal funding. However, a case can be made that the users of the tollway should pay for the structure.   Which is the best answer? Make no mistake, you are paying for the new highway, anyway. It's just how many people are delivered the bill........all taxpayers in the USA, just in Texas, or just the users of the new road? Which is the most fair?

Judging from some scuttlebutt I have been picking up, Rowlett "officialdom" thinks the proposed Blacklands Corridor is a really great opportunity. Well, maybe. Maybe not. What I have heard most is that the proposed highway will open up Northshore and north Rowlett to development. I would suggest that such dreams are a little premature.  There is too much that has not been determined regarding access roads and entrance ramps, and fees. For example, our own experience with the Bush Tollway suggests that our previous leaders could not tell the difference between a tollway and a freeway. They still can't, as evidenced by the enthusiasm for a new tollway. With all the "hype" we generated with the new GBTW, It has been nearly three years since completion and I have yet only identified The Villages of Rowlett as having been influenced by the Bush tollway. First, Bush tollway is not free. It costs money. Second, it has no service roads north of Merritt Road, and third, there are not enough entry ramps because there are no cross streets north of Merritt Road. I know that freeways and toll ways look exactly the same.......but they are not. Stated simply, one costs money to use and the other does not. That simple fact makes a difference to business managers.

When I first started asking questions about who negotiated the Bush toll way deal for Rowlett, and I was wondering about access, I was told that TxDot and NTTA wanted limited access to keep users on the toll road. It was argued that fewer exit ramps kept the vehicles on the toll way longer and helped keep fees up. I thought that was a bizarre answer. In almost every case, and exit ramp is accompanied by an entrance ramp. For every car that gets off the toll way, there's probably a car entering. This piece of logic seems to have fallen thru the crack. The above answer was pure poppycock. It was all about money (cost). Fewer service roads cost less money.

One of my best friends is a location manager and warehouse manager for a very large and well known American company. We talked about locating his operation in Rowlett, somewhere along Bush toll way.   We discussed land cost, employee costs, and operating costs. His facility is a relatively large warehouse with about 30 employees, and trucks entering and leaving the facility 24/7. His view of available land along Rowlett's tollway is: The land is too expensive and has topography and drainage problems. Also, private access roads would probably have to be built. His entry level employees earn about $40,000 a year, but he would have to raise all their salaries about $1 per hour to compensate for additional cost of getting to work, and that his trucks and his supplier's trucks would have to pay fees to get to the new facility. All of this represents much higher development costs and operating costs. He said Rowlett would not be a good choice for him.

Yet, our consultants deemed our Northshore land as most suitable for office and warehouse space and should be an industrial park. No solid marketing evidence to support this use was presented. Our Planning Departmant and City Council bought into this "analysis" hook, line, and sinker. This is in spite of overwhelming evidence that Northshore should be substantially high cost residential land.  Two $80 million deals were presented and denied.  Residential usage is further evidenced by the new announcements of Toyota and other new large businesses in North Texas. It is this same level of competence (or lack thereof) that is decreeing Blacklands Corridor as the next best thing. For one thing, they need to keep quiet until they learn something. Does "officialdom" know something we don't know? I would think it would be smart to share some information.   I still think the decree about land usage of Northshore was a desire of our previous city manager, not the result of in depth investigation. But, what do I know?

Well, I know that if there are no frontage roads on Blacklands, and no access ramps, a condition similar to our Bush toll way is duplicated. That means Blacklands would be good for the two terminus ends........Greenville and Garland. Not much in between. There will be business development at the ends. The balance of the 50 miles, or so, will depend on access. As with Bush toll way, if you can't access the land, there isn't much market demand from the business world. If the business world isn't present, the tax base is certainly not improving. In fact, the tax base can be hurt. If the land taken for the right of way is taken out of income production, the tax base loses.

One of the negative commenters on the NeighborsGo page was worried about Rockwall business losing because of traffic diverted from I-30 onto the proposed Blacklands Corridor.   I really don't think that is a problem. Anyone from Greenville wanting to go to the area serviced by Blackland would not use I-30, anyway.   It would probably be too far out of the way. There are other pluses and minuses, as stated above. All are correct, but something that wasn't touched was the anticipated growth of North Texas. If Texas continues to conquer the world, we will be well inside the growth areas. I can see traffic increasing by huge amounts because of development of towns and cities north and east of Rowlett. Good planning suggests that I-30, highway 66, and highway 78 are going to fall far short of handling the increasing traffic. Of course, that changes the complaints. NeighborsGo will then be filled with traffic complaints.

Here's what I think. I think the Blacklands Corridor could be a good thing. I emphasize the word "could." If the designing of the access to Blacklands is not better than done on Bush toll way, the new toll way will not bring much development to the area. The toll way, standing alone, does not bring business to an area nor add to the tax base. In fact, it could hurt.  If the new toll way is only designed to transport people from Greenville to Garland, nothing much will happen.   Rowlett "officialdom" need not get overly excited. Going thru Northshore does not do us any good. Only access to Blacklands helps Rowlett.

So.......is Blacklands Corridor good for Rowlett. It could be.

Is Rowlett's "officialdom" up to the chore? Evidence suggests it is not.

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Irrelevance of politics

8/20/2014

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I am sure I have political opponents. There will be members of Rowlett "officialdom" that disagree with me no matter what I write. If I wrote the sun was coming up in the East tomorrow, someone would disagree with me. The fact that the sun has been coming up in the East every day for more than several weeks in a row has nothing to do with it. Politics has nothing to do with the sunrise. Neither should it have anything to do with good business decisions.

There will be some elected officials and some city hall flotsam and jetsam that will have disagreed with everything I have written. That's okay. I presume they have the facts to support their conclusions. If they have the facts, they owe you, the tax payer, some explanations. I have just challenged their decisions. They owe you a rebuttal. It should be something more than, "Oh, he's just bitter." Well, I have just produced $29 million of "bitter" and I could have made it a lot worse. I have just spent five months setting out my logic for the numbers I ultimately presented. All of my facts and observations are documented in the previous posts. I feel I have assembled enough information to allow me to comfortably conclude that Rowlett's "officialdom" is grossly inexperienced in real estate matters. If you prefer the word uninformed, that's fine.

As I have said many times on this blog site, all I write is about tax base, nothing more. Why tax base? Because I think tax base is a full 50% of the business of running a town or city. Good tax base management provides a level of reasonable tax bills, home values, and lifestyle that cities with lesser tax base skills could ever hope to achieve. An "overachieving" tax base manager will have the money to provide an excellent lifestyle and keep the per capita tax bill lower than underachieving cities. All of these characteristics contribute to increasing real estate values without increasing tax rate. This would actually put real estate value on your balance sheet....tax free. Plus, a tax base that is increasing faster than the city's expenses can potentially cause tax bills to remain the same.......or even go lower.

Now, if you have elected a person to office that disagrees with me, you should ask them, Why?" If they can't tell you, or won't tell you, you've just elected the wrong person to office. I have built a case that permits me to say that Rowlett's "officialdom" is inexperienced in real estate negotiations and that flaw, in spite of perhaps other redeeming features, is costing the tax payer a whole bunch of money. It is incumbent upon our elected officials to provide information and demonstrate why they are searching out the information to make intelligent decisions regarding our tax base.

So..... where do we go from here? Some of the damage is already done. Can't change what's done. Fortunately, the potential jewel of Rowlett is still relatively intact.......not trouble free, but intact. That would be the Robertson Park land and I will get to it later.

There are several areas in Rowlett still remaining that can provide the development that can enhance the community's life style, contribute to the overall value of real estate, and provide excellent tax base growth. If done properly, the tax rate, thus each individual property's tax bills, should not be unreasonably excessive.

We have time to get it right.......but, I think we have wasted a lot of time and a misapplied a lot of raw material.

Besides the areas that we have discussed so far, other important areas are the "outtakes" or "infills" that exist all over Rowlett, the "Wellness" area (which is a horrible name), and the combination of private land and the adjacent Robertson Park land highly visible from I-30. By far, the most important development decisions will now be the Robertson Park developments. The addition of the Robertson Park land into Rowlett jurisdiction will be the most important transaction to ever happen to Rowlett. It is the one piece of land that can put Rowlett on the map.......really on the map. It's big. It can accommodate nearly all kinds of real estate development, and the water is close to everything. It can all be seen from I-30. Anyone traveling from Memphis to Ft. Worth will see Rowlett......and know it when they do.

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Some more numbers

8/16/2014

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In my last post, I suggested that perhaps the nurturing of our tax base has been a little neglected over the years.   Let's take a look at some recent numbers. Certainly these numbers are not all inclusive of real estate transactions over the past five years, but certainly representative.  Many much smaller deals are not represented.

Northshore has lost $1,200,000 per year for many, many years. This loss was incurred by turning down two developments that should be well underway by this time. This loss was only incurred on 117 acres of the 1,000 acres in Northshore. These two deals were partially turned down because of protecting The Homestead, which was much more palatable to our ex-city manager. The main reason cited for the denials were that the land was to be saved for office and warehouse development. The Homestead had the Form Based Code. You can put any number you want on the other 883 acres.

The proposed partnership agreement with a developer on the 100 acres east of the Community Centre would have lost a minimum of $2,800,000 on the land value, plus the income difference between land valued at $200K vs land valued at $3 million..........calculated at 6% equals $168,000 per year loss in income for 95 years. This would total $15,960,000 plus the $2,800,000 lost on the land value.    The loss of $18,760,000 , plus any tax abatement is not real good long term planning.   This deal did not quite make it to a city council vote.......but it sure was close. It was the structure of the deal that demonstrated just how shaky the real estate expertise used to structure Rowlett's deals had been. It was a scary revelation to a real estate person.

The Villages of Rowlett is a good project, but we will lose $11,000,000 spread over 15 years, and the meter is still running. Yes, you read correctly. It will be 15 years before Rowlett receives any tax revenue from this project. The hope is that this project will sire other development. Which is okay, if the tax abatement guy doesn't get stupid again. However, it must create a lot of new business to overcome a $11 million give away.

That leaves us with The Homestead of Liberty Grove.  This should be a pretty nice subdivision, and the city doesn't have much invested. To the best of my knowledge, the only "give away" is the forgiveness of the impact fees for each house. This amounts to about $3,000 per house, but we'll have the money back in about three years per house. I can live with that deal. However, the gamble here is marketability.  This is a new product with new rules. It will be nice, but may not appeal to everyone. How many? Don't know. The jury is still out.  However, if the product is not well received by the marketplace, this experiment will cause additional woes for Rowlett, not to mention the loss of income from projects that were turned down in favor of this one. At this early point, no losses are contemplated for this project.

So, what is our recent history of tax base nurturing?

Project .                                                           Gains            Gifts               Losses

Northshore     (only  117acres)                                                               $1,200,000

100 Acres east of Community Centre                                                 $18,760,000

        (never approved, but worked up)

The Villages of Rowlett                                                     $1,600,00     $9,400,000

Homestead of Liberty Grove                         $0.00                $0.00               $0.00
                                                                                                       $0.00          $1,600,000   $29,360,000

The above is not exactly what the city is out of pocket, but it's certainly indicative of the real estate logic that's going on around here.

So......what's the hot topic around here, now? Tax increases and lowering Senior exemptions. Well......no s*#t, Dick Tracy.!!! Imagine that!! Who would have ever thunk it?

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Addressing "Why?"

8/15/2014

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From a tax base point of view, from last February to the present, we have been making an approach to addressing the questions of "Why?" More specifically, I have been making the argument that we have made serious mistakes in nurturing our tax base, and subsequently demonstrate no evidence that we would improve in the future.

It is time to try to quanitfy the problems. First, if you disagree with me, that is fine. It is presumed you've researched your own facts and reached a different conclusion.   There is certainly nothing wrong with that. However, it is hoped that you did your own research instead of blindly following someone else's lead. If you disagree with me, it is probably okay to stop reading at this point. From this point forward, I build on the basis that my analysis is correct, based on my research of the facts and my experience as a real estate professional.

I have often criticized the actions of Rowlett's "officialdom," but tried to take no shots at individuals. I may have stung them a little, but nothing serious. My sole exception was our previous city manager, who I consider to be an awful real estate analyst.

Let's clear the air of some "stuff." First, I have absolutely no evidence of any clandestine behavior, nor do I suspect any untoward behavior. I think our appointed and elected officials work as best they can for the city of Rowlett. Some are just better at it than others. Secondly, I don't think anyone in "officialdom" is dumb or stupid. They are all intelligent. However, I think personalities play a part in some of the real estate decisions effecting our tax base. Some are more bold, adventurous, studious, shy, and manipulative than others. You should expect that.

Now, lets look at some things. In Northshore, I think the consultants we had totally "blew" the analysis of Northshore. Much of this mistake I lay right at the feet of our previous city manager. I think we citizens got the study the previous city manager wanted, not what a real  in depth study supported. By pure chunzpa, she hammered this concept right down the throats of "officialdom." The consultants didn't have much choice. Our previous city manager had the check book. Intimidation was a comfortable tactic of hers. For this mistake, I fault the previous city manager, the consultants, P&Z, Planning Department, and of course, City Council. Part of this blame should be placed on me. I allowed some of this to happen without speaking up. I attribute some of this to trying to get along, but that's a cop out. I should have taken a more public stand. However, I was not totally quiet. I spoke up loud and clear many times to the mayor about my true feelings. I was not nice. I felt the mayor was "boss." I was brought up to take your problems to the "boss." Almost my last comment from the Dais was to mention to another City Councilman that I would fire the city manager, and who to replace her with, fire another official and who to replace that official with. One of the two is still there. In any event, the mistake on Northshore was made. Cost to taxpayers every year so far.............$1,200,000 per year.

The next large piece of land needing city guidance was the 100 acres east of the Community Centre, I think called Pecan Grove. This piece never did get to a council vote, but boy was it close. Although all the hoopla called for an "exclusive" development, I think it was just a plain old apartment project. It doesn't matter. It didn't fly. However, the eye opening jolt was caused by the Staff Report, authored by the previous city manager and the proposed lease reviewed by a committee of three city councilpersons. My goodness, it was horrible. Land value was calculated at $200K, when in fact, it was worth $3-$4 million. There was no escalator clause in the lease.......elementary lease provisions. No knowledge of subordination and assignment agreements. This is all very elementary and entry level real estate leasing. Just awful.   Thank goodness it never came to life.

The next project is The Village of Rowlett. This is a project I am in total support of...........as a project. It would be good for Rowlett. However, the cost to taxpayers is astronomical. If the information I have is correct about 380 Grants, I have added up costs exceeding $11,000,000 and all the costs aren't in, yet. Compare that to the cost to Plano of $14 million and got Toyota. Or, the cost to McKinney of $9 million and they got 1450 jobs. We get a nice apartment complex in which we won't receive any tax revenue for 15 years.

Lastly, so far, is Homestead of Liberty Grove, and it's attending Form Base Codes. This should be a pretty good project. It's one I think I would like. I would not buy a home in there because I like larger lots, but I think a lot of people would. It is a nostalgic look.......one that I like. The homes would be reminiscent of the 1920's and 1930's. However, in this development, Rowlett is experimenting with Form Based Codes. FBC is okay in intercity urban areas. I don't think they have proven themselves in a cow pasture. That is precisely where Rowlett put them.....a cow pasture. I would have been much more comfortable with them downtown, or maybe over by the Community Centre, but totally unsure about a cow pasture. This is highly experimental. I would have not turned down two proven marketing concepts nearby to protect this one. In fact, I think nearby upscale development would have helped this development. Now we have to wait for years to see if the market accepts this product before we know if it was a mistake. We have a red hot residential market right now. This might disguise market acceptance to be better than it really is. Right now you can sell a Montgomery Ward pup tent for top dollar.    Higher, if it's already erected.

So, the above are the projects we have discussed to date. A lot has been written about them to get us to this point. Why write about them at all?   These projects represent the collective thinking of current Rowlett  "officialdom." It is indicative of where we are in cultivating our tax base and where we can expect to go with it. Why tax base? Tax base is, in my opinion, the single most important ingredient in the annual tax bill, and a barometer of Rowlett's life style. The higher our per capita tax base, the better our lifestyle.

Nice shops, new business, higher real estate values, and new jobs all feed on themselves. Success breeds success.   Why do you think Highland Park has such a low tax rate? Because it's some of the most expensive real estate in the Dallas area. Look what's happening in Frisco and Murphy.

Now, the all important questions. Why did we construct the developments above the way we did? Why did we mis-analyse the Northshore market? Why did we miss so terribly the math and structure on the land beside the Community Centre? Why are we forfeiting $11 million to build an apartment complex? Why forgo $1,200,000 in annual income to date, for an experiment on unproven Form Based Codes?

The assignment of this blog last February was to discuss Rowlett's tax base. We have not wavered. The re-occurring question that continuously emerges is "Why?"

In an earlier post, I referred to my best friend. He was a brilliant lawyer. I have seen him often on network TV being interviewed about a case. He was intelligent, self assured, and dedicated to his profession. However, as smart and dedicated as he was, I would never let him take my appendix out. He would have made a lousy surgeon.

We have Rowlett's "officialdom" made up of intelligent and dedicated people. I do not deny that. However, how many of them have ever "cut" a real estate deal more complicated than their house?    Rick has a real estate license, but I think he has primarily worked in property management. Carl sometimes says he is a real estate lawyer, but more accurately, he is a title attorney. He is in the insurance business, insuring customers against defects in title. These are the two councilmen with more real estate exposure outside of "officialdom" that Rowlett has. To the best of my knowledge, none of the rest of "officialdom" has done a deal larger than their house; certainly not in the multi-million dollar category.

In my opinion, we have made some very serious mistakes regarding Rowlett's future. It is at a most important time in Rowlett's history. It will effect Rowlett's future for the next 100 years.   The question that emerges all thru these blog posts since February remains "Why?"

In Northshore, no one challenged the results of a consultant. Consultants aren't bosses. They are consultants. They need to be challenged. In Pecan Grove, unbelievable misunderstanding and lack of knowledge of basic real estate contracts and deal making were displayed. In The Villages, the city gave away $11 million, which compared to other cities deals were way over the amount needed to make a deal. In Homestead the city is gambling on an unproven zoning concept at the expense of turning down other developments that would have helped in the marketing, and certainly provided more revenue for Rowlett.

Our "officialdom" is intelligent. They are dedicated. So......Why?    The simple answer is our "officialdom" is incompetent or inexperienced about real estate matters. They probably make lousy surgeons, too. However, they are probably good at other stuff. The most danger is made up of people that are incompetent, but think they aren't.   It's council's job to find them and challenge them. It's council's job to seek expertise they need.

So, where do we go from here? Stay tuned. We may go to real estate school and conduct some polls.

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Where we've been

8/12/2014

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We've covered a lot of ground since February. Let's try to tighten it up a bit. Below is the basis on which to ponder where our future leads.

Northshore: We have approximately 1000 acres on the north side of Rowlett that is pretty much open land. A brand new 4-6 lane highway cuts right thru it. To a casual observer, this is an area that would be ripe for development, particularly since it is located in the North Texas market area, arguably the best real estate market in the USA. That is true, but it has to be the right real estate. It can't be just any real estate. The market won't absorb 1000 acres of 10-story office buildings.........anywhere, let alone Rowlett. Located on a toll way doesn't help as much as you might think. Our previous consultants recommended, and it was accepted by Rowlett "officialdom" that the 1000 acres should be developed into office and warehouse industrial park. I have seen no hard evidence that supports this assertion. However, I have seen hard evidence that supports residential development of "high dollar" homes in the $300K and up price range. Our City Council has turned down two of these proposals, each of which would have contributed $600,000 per year to tax revenue. That is $1.200,000 that other tax payers would not have to make up. The question is, "WHY?"

Land east of Community Center: This land never made it to a City Council vote, but it almost did. The concern here is the almost complete absence of good real estate analysis. It was some of the worst underwriting I have ever seen. For example, the land was values by "staff" as worth $167K, based on 6 point cap rate. The land is worth $3-$4 million. There was NO escalator language in the lease proposal. For 95 years Rowlett would not receive an increase in rent. The "tenant" could sign a lease with Rowlett based on $10K income for first five years: $20K a year for the next 95 years, and the tenant would be free to sign a sub-lease with another party based on land value of, say, $3,000,000.....or $180,000 per year........and never do a thing. In addition, our then city manager proved she new nothing about real estate loan structure. She didn't know about lien priorities, subordination agreements and assignment agreements. Thank goodness, this deal didn't go thru. How did all this happen? WHY?"

The Villages of Rowlett: This is a project I support, as far as real estate product is concerned. However, I am not delighted with the real estate deal offered to the developer. It costs too much. The product and the deal are two completely different issues. In my opinion, one is good for Rowlett and the other is not. I think the product will be a marketing success and will bring people and additional business to the downtown area. However, the deal is too expensive to the Rowlett taxpayers. I have added up over $11,000,000 in costs, and all the costs are not yet accounted for.

Plano taxpayers are putting up $14 million and getting Toyota, and all that the new jobs and housing needs mean to local merchants. McKinney (I think) is putting up $10 million and getting a firm out of San Diego and getting 1450 jobs and all the economic support that those jobs will need. Rowlett is putting up $11,000,000 and receives no revenue for 15-17 years. There is some modest expectations of additional business downtown.......but nothing in the way of tax relief to the balance of the town in general. Who negotiated this deal? When I ask who negotiated the terms, I get no satisfactory answers. WHY such terrible terms for Rowlett?

Homestead of Liberty Grove and Form Based Codes: The fourth, and perhaps the best underwritten project, is Homestead. This is another project I support........but I'm a little apprehensive. This project has been slow coming out of the starting blocks. I don't think the city has been the cause of the delay. This has been one (perhaps the only) favorite residential son in Rowlett. It would appear that nothing this developer did could be wrong. In fact, the two residential developments turned down by City Council above could have potentially been competition to Homestead. However, I think that would have been good. Success breeds success. Two additional upscale developments nearby would have generated traffic for all of them. The combined advertising would have generated a lot of interest in Rowlett. That would be good for Rowlett from a number of aspects. However, the product is good. I like it. The problem to me seems to be the marketplace. I would guess that there has been some trouble getting builders to commit to the location and the housing style. I am aware of three marketing plans: 1) Five builders to build in the development. 2) One builder to take over everything. 3) Two builders (Weekley and Cambridge) to build out the development. To me, Rowlett's new Form Based Codes might be presenting some marketing obstacles. I'm not sure the builders are completely sold on them. FBC limits a builder's style. This is not always well received, in spite of what the city says. My concern here is that the City Council doesn't really understand FBC. They paint pretty pictures about family and foot traffic, but nothing about limited design features, pour traffic patterns to some visitors to the residents, and high HOA fees. I don't think City Council has paid sufficient attention to Form Based Codes and their limitations. I wish I knew more about the builder's commitment to build. The form based codes were the darling of our previous city manager and her retinue. City Council didn't sufficiently vet these new limitations placed on Rowlett builders. FBC controls the length of overhang of a roof. What does that have to do with foot traffic? What other area towns have, or are starting FBC? Why? Or, Why not?

All the background to the questions above have been provided in detail within posts of the past. Everything leading up to those questions have been wrestled to the ground. If you're read them all, that's good and I appreciate it. A little review might be in order before answering some further questions. If you are a relative new comer, go back and read some of the earlier posts. The quality of your logic will be based on the amount of information you have. In addition, you may have disagreement with some of my conclusions. If so, you need to know why. As I have written many times in this blog site, it is not important that you agree with me. It's only important to know WHY you agree or disagree.

"WHY?" is the most often repeated question in this blog. The answers are most important. Between now and the next post, ask yourself "WHY?" to all the above. Form up some answers. If you believe some mistakes have been made, and you know "WHY?" then you can focus on where we go from here. At least then we have a chance to fix any problems and plan for a better hometown. That's part of your duty as a citizen and resident.

I will get back with my observations and my answer of "WHY?"

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Start drawing it together

8/10/2014

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Well, we probably have talked about enough "stuff" to enable us to start drawing some conclusions. Why do we care? Because it tells us the probability of success regarding the direction we, as a community, are going. If we don't understand where we've been, we have no chance of successfully navigating thru the future. Oh, we'll get to the future okay. Be assured that will happen. However, the question is, "What will we have when we get there?" Our future might be okay, but maybe not as great as it should be with our assets. We have to know how to get there.

I have endeavored to document all the facts that I have used to reach conclusions. Some conclusions are based on personal experiences without documentation, but not much. However, I will swear to their accuracy. As I have stated many times, I only opine in real estate issues. Real estate issues are what drives our tax base.

This blog site is about TAX BASE........which is fueled by real estate.

Many, many discussions and cussing sessions are spent when analyzing the city's expenditures. "Officialdom" tweaks the budget, studies the staffing, assesses the maintenance issues, re-tweaks the budget, studies the staffing, and estimates maintenance costs again.......all in an attempt to determine the money needed to pay the city's bills and keep the services at an acceptable level. Of course, I don't attend the budget meeting, nor do you. However, I often wonder how much discussion is held about the state of the tax base and where is it going. Are any projections ever made regarding the growth of the tax base? If there is no serious discussion about the tax base planning program, there is only one other place to find the money to pay the bills........tax rate and elimination of some tax benefits. You are being slowly fed these numbers for your digestion at the present time.  There is some "getting used to" that needs to be done with these new taxes.

Once again, we have had some, but virtually no meaningful increase in tax base. Thanks to some new houses over the past couple of years and appraisal increases courtesy of the Appraisal District, we have had very modest increases in tax base.  But, all the hoopla over the past three years has been Bush Tollway and DART. I can attribute only The Villages of Rowlett as having been sired by DART and Tollway influence. The balance of any additional Rowlett growth was not initiated by anything Rowlett has done, but by the strong economy of North Texas. We are getting our allotted growth as determined by the North Texas economy. In my opinion, we are growing a little, not because of our efforts, but in spite of our efforts. For all practical purposes, housing has been shut down. We have a couple of existing subdivisions by Lennar and Highland Homes, and we just got started on The Homestead. That's pretty much it for volume housing. There is some smaller "scattered lot" housing going on, but its not significant. That is all that's going on in a town of 57,000 in North Central Texas, a place with Top Five positions in practically any economic survey currently being conducted and probably the hottest real estate market in the USA.    Our population has probably only grown 2,000 or 3,000 persons in the past 4 or 5 years. Everyone around us is bursting at the seams.

So.....what's wrong? Well, we're going to kick it around a bit......then look into the future. In my next post, I'm going to discuss each of my conclusions written since February, wrap them up into two or three final conclusions, then look forward to what we can expect based on past experience. I hope to make it interesting. I know this may not be entertaining reading, but hopefully interesting.

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Homestead of Liberty Grove

8/6/2014

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We've had some pretty good discussions about Northshore, the land east of the Community Centre, the Villages of Rowlett, and some limited discusions about Homestead of Liberty Grove. I want to return to Homesteads of Liberty Grove for this post.

Even tho this project is just getting underway, I have known about it for some time. I have met the developer a couple of times and visited one of his projects in Hometown in North Richland Hills. The developer seems to be a stand up guy. His product is good. It is not exactly my desired type of subdivision, but that doesn't mean it's a bad design. I prefer a more open design of subdivision plat. I prefer the houses not be so close. However, I grew up in a small town, pop. 15,000, in the Midwest whereby the houses were close together and it was a very good life. I now have been in Texas for 50 years and I have been climatized.

The Homesteads of Liberty Grove is almost a nostalgic re-creation. It is a replica of neighborhoods built just after the turn of the 20th century.......say 1910 to 1925. The houses are closer together. There are steps up to the porch......a porch that probably has swings or chairs. there are nice sidewalks and treed parks nearby. It is reminiscent of a very comfortable time. I certainly have no problem with having that type of development in Rowlett. In fact, I cheer for it. It's a choice that I am glad that any new arrivals to Rowlett will have as a optional housing selection. If it's a marketing success, I would push for more of this style of development. However, there is some baggage.

There are some twists to this new development.  There are these new form based code features and a couple of stories that give me pause. First, this development was the favorite child of our previous city manager. I fully expected her to announce at any time that the developer walked on water. I'm sure you know what I think of that. As it was, he seemed to be a pretty good guy, but I think he was going to have to know where the rocks were to keep from sinking. Our previous city manager pressed very hard to make Homestead Rowlett's first subdivision to fully utilize her pet Form Based Codes that she ramrodded thru Planning. If you frequent this blog, you know I am only partially supportive of Form Base Codes. Form based codes are a new twist. I support it where it was intended.......in urban refurbished areas............close to urban densities and transportation and entertainment facilities. However, our previous city manager set about creating a culture in city hall whereby most supp0rted her idea of shutting down all residential development in Rowlett unless it fit the format of Homestead and Form Base Codes. Essentially, she said all future development will be a clone of Homestead. I disagreed with this.

I try to keep from making reference to individuals that are currently employees of, or in elected leadership positions of the City of Rowlett. I usually refer to them as "officialdom." What I'm really referencing is this "culture" that evolved in and around city hall. I have nothing against "officialdom" selecting a direction of planning for the city. However, I would wish they would predicate their decisions on the acquiring of knowledge rather than a knee jerk reaction. I fear that the Rowlett official culture will be overly "protective" about form based codes. There is absolutely no doubt that our previous city manager was "strong arming" some of our elected officials. However, others had their own mind. That was okay, if any of their opinions were based on their interpretation of the facts instead of blindly following someone else.

It was that "stuff" that I objected to......and I still do. Even tho our earlier city manager is now gone, much of the culture remains.

The Homestead development took too long to get off the ground. There was something wrong and I didn't believe the city had any involvement in the delay. I think it was a marketing issue. There was an early signal. When I first saw the Homeland project in North Richland Hills, the developer insinuated that the five builders of Homeland would build in Rowlett's Homestead. Immediately, I knew there was something wrong with that statement. I recognized one of the products in the Homeland development. It was a distinctive townhouse design that I had seen many times before. I knew the builder, and I also knew the builder had recently filed bankruptcy.    Therefore, I knew 20% of that statement was wrong. Then, it was taking too long to get the development started when the city was bending over backwards to get this favored son off the ground. Later, I heard from a reliable source that a single builder was taking over the construction of the homes. Of course, I knew the builder. I didn't believe the more recent story would ever happen. There were too many differences between the developer and the builder's basic vision of the end product. It prodded along for more months, then I heard that the subdivision was going forth with David Weekley and Cambridge Homes as the builders. I like these builders, but once again, there was a deviation in the plans. This fibbing, maneuvering, and delaying was suggesting that something was awry in the marketing concept. In fact, there could have been some lender resistance in some deal. The lender gets to vote, too. They have the money.

When I heard that Weekley and Cambridge were going to build in the development, that was an endorsement to me. They didn't get where they are by being stupid. They are smart builders and don't make many marketing errors. If they like Homestead enough to invest in modeling and advertising, that suggests they like the project.

There is just one thing I would like to know, and that is the strength of the Weekley and Cambridge commitment. If they signed purchase agreements for 10 lots, with an option to purchase another 100 lots, that means one thing. If they signed a "specific performance" contract to purchase, say 100 lots, and they agree to "take down" schedule of so many lots per month, that is a considerably stronger deal. It further demonstrates the builder's faith in the project. One is a fairly weak commitment and the other is a fairly strong commitment. It would be good information to know, but I don't think we'll ever find out.

So........I'm waiting for the market to prove up how good our previous city manager was. In this very strong market, I think the development will do well. However, I don't think the land is the best site in Rowlett for this type of product. There are other sites that I think are better. We will know in about three years. If the sales are outstanding and moves are afoot to develop another subdivision just like Homestead, I will admit I was wrong and the previous city manager was right. The market will prevail.

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