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ROWLETT RAMBLINGS

Rowlett/Bayside Regatta

9/28/2016

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Folks, this Saturday is the start of something big.  It is the first of hopefully many annual sailboat regattas sponsored by the City of Rowlett and Kent Donahue, developer of Bayside.   This Saturday will be a piece of history.  You really need to attend.  It'll be fun.  You'll contribute to the victims of the  tornado (please buy a t-shirt), and you will start a historical venture that could last for many, many, years.  

Obviously, credit should go to the sailboat owners and crew.  Without them, its just another Saturday.  However, no small amount of credit should go to Rowlett's Chamber of Commerce.  The Chamber, under the leadership of Diane Lemmons, has leaped into the breach and have performed beyond the call.  This event would be just another sailboat race without the Chamber.  Also, Rowlett  is fortunate to have found a brand new outstanding corporate citizen.  Kent Donahue, developer of Bayside, contributed a pretty good amount of cash to grubstake this event.  All three entities are deserving of applause. 

I would like to share with you some information issued by Diane today.  You will see this is worthy of your participation.
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"This is a “site” for our future billion dollar Bayside development that I am sure you have all heard about by now.  If you have not I encourage you to visit www.discoverbayside.com so you will understand how special this is to be able to spend the day out there and make these memories on what will be the most awesome development in the State of Texas.  

I have attached 3 maps for your reference (see below).  There is a main site map.  This shows the numbers of the booths and the layout.  I have attached a map list which will show you where you will be in the layout.  I have also attached a big site map that shows the entire scope of the area so you understand where on the land we will be.  The water is directly behind the stage.  When we watch Erick Wayne, Southern Ride Lead Singer MC for us and then play an acoustic set, then we watch the JD Cobb Band and Infinite Journey ~ The Music of Journey as the sun sets over the water it is going to be an amazing show! 
 
Please remember this is a fundraiser benefiting Rebuild Rowlett.  We will be selling Regatta shirts at the Chamber booth and I encourage you to buy one.  Help us help our citizens repair their lives after the December 26th tornado.  Some of you may think it has been 10 months and things should be ok by now.  They are not.   For some of our  citizens they are having struggles making ends meet to make the necessary repairs to get back home.  I am not sure if you ever have enough insurance to cover a tornado. We have senior retired citizens on fixed incomes that did not have enough insurance.  This is where all of us come in to help these folks and have some fun doing it.........

...........We have a pit area for the rib cook off.  We have a children’s area for the bounce houses and face painter.  We have a large area for Big Mike’s Kites.  We also have Opa Greek Taverna providing our beer garden.  We have a kite boarders race in conjunction with our main event the Bayside Sailboat Regatta.  It is going to be the coolest thing to see all of this on what looks like to be the BEST DAY ON THE LAKE!  As I always say when someone asks me what are you going to do when it rains…… “It’s not going to rain we will have Chamber of Commerce weather”...............
...........Thank you again for participating!  It is truly appreciated!  We could not do this without you!"
 Diane
 Diane Lemmons, IOM
President
Rowlett Chamber of Commerce

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Folks, let me tell you.  Without Diane Lemmons and the Chamber you could only wonder about why are there so many sailboats out there.  With their participation and expertise, we have a truly community spirited event.  Many of your local  merchants will be represented. 

It will be a great day, and worthy of your participation.  Buy a t-shirt.  It will be an heirloom.  (Buy two.....put one in the cedar chest).

Go buy a t-shirt.........or two.  This will be a historical event, and lots of fun, too.

.

Scroll down above to see all the merchants and booths.
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Housing Financing Corporations

9/26/2016

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On September 11, I wrote about something called Housing Financing Corporations.   Basically, these tax exempt corporations exist to provide financing for residential development projects.......both single family detached housing and apartments.   
The Texas legislature passed a bill in the early 1980's to accommodate such financing.  Since passage of the legislation, 70 towns and/or counties in Texas have created their own HFC.   In fact, in nearby Waxahachie, Lancaster, Duncanville, Desoto, and Cedar Hill, all have HFC's.  In addition, an HFC exists for each of Rockwall, Hunt, and Ellis Counties.  And, even the City of Dallas has one.  There appears to be nothing new and exotic about HFC's. 

Essentially, a Housing Finance Corporation exists for nothing more than a financing vehicle for residential real estate development, funding everything between developing apartments, or helping a family purchase a house.    There are some different rules that I am just now learning, but in the final analysis, its simply a way to finance residential real estate transactions.

I'm only experienced in private non-government development financing.  Therefore, I have a substantial learning curve to climb.  I am still mired down in many of the syrupy details, but I've formed a couple of opinions.  I'd like to share some.

An apartment project was recently denied by City Council.  The motion was denied for lack of a second.  Of course, each City Councilperson had their own ideas about why the proposal failed, but I have my reasons.......and maybe they meshed.

According to the developer, in order to make the numbers work, the Dallas Housing Authority had to be invited into the deal.  They would have to bring their check book.  In return for their cash investment, they would get absolute authority to select tenants for 60 of the 223 units.  In addition, although the DHA did not technically manage the project, they had their list of rules on how to manage the project.  In short, if you accepted their financial support, you accepted their rules.  This almost assured the use of Walker Vouchers, the descendant of the Section 8 program, and the tenants could come from all over Dallas County.  Standing alone, I have nothing against Walker Vouchers if they are used sparingly over a large geographic area.  By doing so, any project or neighborhood avoids being "tagged" as a low income area.  That is good for everybody.  However, I only wanted to fill needs of Rowlett residents, not all of Dallas County.  I wanted more control to be administered by Rowlett than shared, and maybe junior to,  another jurisdiction.   If someone wanted to move to Rowlett because it's nice, that's fine.  However, I didn't want them sent here by someone we didn't even know.  

Another issue was the tax issue.  Since a tax exempt entity does not pay taxes, the above developer proposed a "payment" each year to the city in lieu of taxes.  That would be fine, but it was only $55K a year.  That is hardly enough to pay for all the police and fire protection, and infrastructure maintenance.   It was only about 1/3rd of the normal tax load.  That means that all costs over $55K per year had to be paid by Rowlett taxpayers.  Folks, that's a subsidy.......and maybe a subsidy to residents that were imported into Rowlett from other places.

Atho all the facts (and risks) aren't in, yet, I feel an HFC can mitigate the above risks.  First, all the funding needed for any project would come from Bond sales, and on some loan structures, maybe contain Federal Tax Credits benefits.  I still have to learn the details.  Those features should negate the need for DHA.  That eliminates any tenants or homeowners that were not vetted by appropriate Rowlett  officials.  

Secondly, on an apartment deal, I think (altho still unproven) that an HFC can contract independently with the City to provide services to the city, including sharing part of the developer's fee.  I think the city could receive maybe 75%-80% of the revenue that would have been received if there was no tax exemption.  The taxpayers would not be subsidizing the projects.  

Folks, I think this is worth looking into.  I have received email from Rowlett's City Manager in which he states that he has talked to staff about this proposal.  I am also receiving phone calls from very knowledgeable experts in the business of setting up and administering to HFCs.  All are Austin based.    I will report progress as I learn of it.

I'm excited about the prospects.  We need very good housing for Seniors and workforce families.  So far, I see nothing on the horizon that would prevent us from adding an HFC to Rowlett's tool box.  The more tools we have, the better we can build a Rowlett.

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More taxes

9/22/2016

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Some time ago (8/28/16), I discussed a proposed reduction of the tax rate.  The proposed lower rate was not original with me.  It came from the City Manager's office.  In that same memo to the City Council, the City Manager supported a one cent reduction in the tax rate. 

In my blog post, I was making fun of the city keeping 18.3 cents of the 19.3 cents of additional revenue generated by recent inflation of home values.  I thought it was greedy for the city to keep 18.3 cents and only giving one cent of the 19.3 cents generated back to the taxpayers.

Four members of City Council decided they wanted the whole enchilada.  They say promises were made to the city that required that they keep all the increased tax revenue generated by increased real estate values.  Of course, the all promises made costs money.  Since the 19.3 cents per 100 equates to a 19.3% of revenue, then the spending on promises should be 19.3% more than the previous years.  Let's round it off to 20%.  Now we can ask the question, "Is there 20% improvement in services?"

You can find the below commentary on the City of Rowlett website:
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"In Fiscal Year 2017, City staff and the City Council will continue this discussion and develop strategies to identify the deliverables that must be attained, such as when our new development actually impacts revenues, in order to reduce the tax rate in the future. The City Council’s decision Tuesday night to maintain the existing tax rate was very difficult and not lightly entered into. The promises made to Rowlett citizens when the tax rate was raised are taken very seriously and this budget reflects that commitment!"
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The underlined passages above seem to conflict with one another.  The top underlined passage seems to say they would work hard to still identify what needs to be done.  The bottom underlined passage seems to say the promises are already made.  Which is it?  List the promises so the citizen knows what improvements they are getting for their money.  Or....does everybody get a raise and 37 people go out and fix 6 pot holes?

The author of the above commentary  is also providing a misdirection move.  You are told about the low impact of what one cent will only be on a $160k house.  Have you seen a $160K house, lately?  I was conservative when I estimated an average $200K value for the average house in Rowlett.  I think the current average house price in Rowlett is much higher than that.  The tax rate is remaining the same........after recent inflation. The city is receiving approximately 19.3 cents per hundred in increased value!!  The city was only  talking about a penny, when they should be talking about 19.3 pennies.  Let's run the numbers on the 19.3% increase over two years on a $200,000 house.  A $200K house will have increased in value by $40,000 over two years.  Apply the 19.3 cents per hundred against the average increases in value and you get $40,000 in increases of value times $0.193 per hundred = $77.20 increase in annual city tax in just two years........and some city leaders feel they couldn't even share one lousy penny ($4.00) with the taxpayers.  If nothing else, it would show some compassion for the citizens.

Perhaps next year you can be  asked to deed your house over to the city. 

The city just passed an ordinance whereby future subdivision covenants will allow the City of Rowlett to foreclose on future houses if  maintenance is ignored by owners and HOA's. Did you know that the city could then foreclose on your house if you do not properly maintain it?  They can.  Council passed the ordinance just a few months ago.  I wonder who's idea that was?  You should ask.  Now, in Rowlett, if you purchase a new house in a new subdivision, you are accepting the condition that the city can foreclose on your house if it is not properly maintained.   That should endear Rowlett's new subdivsions to potential citizens.  I am certainly not for poor maintenance, however I am for protection of property rights.  I have lived my entire life rarely bothered by a neighbor's maintenance habits.  Usually peer pressure is enough to keep property upkeep within reason.  I've got a really good question.  Who decides what is proper maintenance?  Could the city foreclose on Seniors who can't mow their lawns, because of health or money, as often as a city bureaucrat feels needed?  It is now possible.

Do you still have a name?  I'm identified most places by the last four digits of my social security number.

Drip.  Drip.  Drip.  Drip. 

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A little something new

9/22/2016

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I have learned about something new.  I have always been in the private (non-government) financing of real estate.  I am not an expert of government financing of development projects. 

Recently, I have been exposed to government financing of real estate.  Frankly, it seems a little weird, but there are some interesting features.  The word "interesting" does not mean good or bad........just "interesting." 

A little background:  Whether you observe a house or a 20 story office building, if construction is still underway, it is all made possible by borrowed funds.  Nobody builds anything out of "cash on hand."    In 99% of the time, if not more, a lending institution is involved in providing funding for plumbers, electricians, HVAC  tradesmen, etc.  while the project is under construction.  This financing is called "interim" or "construction" financing.   After the construction project is complete, the "construction" lender is paid off by the "permanent," or "mortgage" lender.  Then, monthly payments are made to the "permanent" lender until the debt is retired.  

Both lenders are motivated by the profit motive.  They must earn income "over the cost of money" in order to stay in business.  When you deposit money into a bank, the bank pays you interest; not much now a days, but some.  The bank must make money over their cost of paying out money.  Rent has to be paid.  Employees have to be paid, etc.

There is a reason for writing about the above "quick study" on a part of the real estate financing business.  That reason is to help you  understand that lenders are motivated by "income" possibilities, or "reduction of risk" possibilities.  I guess you've always known that, but maybe not any of the "specifics." 

I want to write about one of the "specifics." 

In the real estate world, we have encountered an unusual situation; particularly in North Central Texas, but in other places around the USA, also.  We have the value or cost of real estate outpacing the ability to buy or rent a place to live. 

For example, an average  workforce family in Rowlett finds it extremely difficult to secure financing to purchase  an average  house.  When purchasing a house is not possible, the families turn to rental projects for a place to live, but the rents are so high on newly constructed apartments, the ability to save for down payments are severely limited.  Furthermore, the senior citizens have their own problems paying for a place to live.  Even if the senior has paid off their house, the cost of owning (insurance, taxes, utilities, etc.) continues to climb, but the income does not. 

That is the situation that Rowlett now finds itself.  It's incumbent upon all city leaders, Rowlett and beyond,  to try to find some solutions.

We have excellent builders that know how to build the houses, however the problem is financing them.  How do you entice a lender into making the necessary loans to provide housing to those that need it.  Certainly the interest rates are low.  They can't be reduced much more.  Right now they are the lowest I have seen in 40 years. 

Some years ago, legislation was passed that if banks or lenders entered into certain types of development, Community Reinvestment Act (CRA) credits were earned.  These credits earned by banks put them on some kind of "good guy" list.  I don't know what the banks get for this, but they all want them, and they entered high risk areas for loans, so I presume something good happens to banks that participate.  More recently, legislation was passed whereby tenants were subsidized with Section 8 or Walker Vouchers.  This helped the low income populations needing housing, but they missed the workforce and seniors populations. 

We need something for the Seniors and Workforce populations.  We have something.  It's called Housing Finance Corporations.  Actually, it's been around for a good while, since early 1980's, but there has never been such a need  as now. Therefore,  it has been relatively unused in most areas of Texas.   It certainly exists in some more urban locations, but many smaller towns have not been active in seeking HFC's.  Since passage of the legislation, 70 municipalities, or counties, in Texas have created a HFC.

I started researching this lending vehicle.

Below is a copy of part of  an email I sent to Rowlett's City Manager and Mayor regarding HFC's. 
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I have been researching other municipalities.  Rowlett is not unique in their under served citizens.  It's nobody's fault.  Everywhere, the Senior and Workforce real estate  markets have been surprisingly and unexpectedly ignored by events favoring upscale real estate development.  These are not "low income" people.  They are policemen, firemen, staff in city offices, small business operators, and retired people on Social Security.  They are the absolutely essential lubrication that make any community work. This adverse condition has been created because of the extraordinary good economic conditions that have spurred the economic explosion for Texas.  Costs of housing have simply outdistanced many citizens ability to pay for suitable housing.  It is incumbent upon city governments to address this problem.   It is not felt that Section 8 and Walker Vouchers are the best way to address the under served market problem.  These programs are more utilized in "low income" markets.  This is not to be confused with workforce markets.

HFCs offer a more diversified, yet more targeted,  alternative to Section 8.  There is no use of subsidies such as Section 8 or Walker Vouchers.  The HFC vehicle is the financing vehicle offered to Lenders and Investors.  Lenders receive tax credits and CRA credits for their willingness to participate in financing the projects.  There are rules, but very acceptable rules.

I have talked to experts in legal, financial, and administration of HFCs.  I can share with you my findings, then provide you the contact information to verify my observations.

Essentially, two markets are addressed:

    1.  Senior housing
    2.  Workforce housing

Four advantages of Rowlett using HFCs in lieu of Dallas Housing Authority:

    1.  More control of who occupies and/or finances housing for selected market
    2.  Near 75%-80% of typical normal tax revenue  with contract with city to offset          tax exempt status.
    3.  No risk to city after HFC organized and running.
    4.  Political ties with HFC severed.  No "blow back" to elected officials.

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The way the HFC's work is simply sell bonds.  The city has no liability attached to the bonds.  Only the HFC.  The government issues "Tax Credits" to purchasers of the bonds.  These "tax credits" can be sold to anyone wanting or needing tax relief.  This could be any company that has a lot of income to shelter.  The revenue from the sale of the "tax credits" goes toward retiring debt on the development.  Plus, the lender gets CRA credits. By reducing the debt, the rents can be lowered, and/or down payments reduced in the case of buying a house.  This can be a substantial savings to someone needing an apartment  or buying a house. 

You must remember, this is not a subsidy to a tenant.  There are no Section 8 or Walker Voucher payments.  This is strictly an inducement to a lender to lend money to build a house and/or an apartment project.  Of course, there are rules.  This program is not designed for high income users.   You can't make $150K a year and come in and take advantage of lower than market rate rents.   That's okay with me.

After sending the above email, I prepared a 36 page proposal and submited  to Brian and Todd and to any city officials that they may want distribute, and then proposed a meeting
.  We had the meeting on November 10.  Brian, the City Manager, and Marc Kubansade, the Director of Planning, were present.  Todd could not make it.

The meeting seemed to have gone well.  Brian said he was interested in looking further into HFC's.  Marc was kinda non committal, and Todd was gone.

I asked Brian to advise me after he met further with other members of staff.  I wanted to ask the Directors of the two Austin based HFC professional organizations to come the Rowlett to answer any questions the City Council had regarding HFC's.  The organizations volunteered this help without me asking asking for it.  I have also talked to a lawyer in Chicago who is an expert on HFC's and a Financial Advisor in Austin who is considered by the two organizations mentioned above as the "best in the business." 

I fear that after all the research, it has been sent into a black hole.  I am a very qualified real estate analyst.  I don't know who the analyst the city is going to use might be.......or the "in house" experts that may be available.  Those thoughts scare me a bit.  Why ask someone who is not in the business? 

I will call Brian tomorrow and inquire about where we stand regarding going forward with this.  I trust Brian, but I don't want this thing to get  bogged down in the bowels of "officialdom"  because no one wants to make a decision.

Sorry for the long post, but this "stuff" isn't Facebook chatter.

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What's a Rowlett?

9/14/2016

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I need to write about two recent meetings I attended regarding some Rowlett "stuff."   There is some quiet pride in what I observed.   My observations just might help define some of what defines Rowlett's ingredients. 

I have written about attending a meeting at Bayside and how impressed I was in the manner in which things just seemed to come together without a "leader" orchestrating things.  No one was saying,  "Hey, look at me."  Everyone knew what to do themselves and listened to the jobs others had to do.  The police, fire department, owner, sailors, Chamber of Commerce all knew their own skills and disciplines.  They also know how to "dove tail" those skills and disciplines into a cohesive team.  It was refreshing to watch.

Last night I attended a meeting regarding the clean up and redesigning of a green area that was destroyed by the tornado.  Once again, there were no "leaders."  There  was a member from the  Keep Rowlett Beautiful organization.  The Assistant City Manager's office sent a representative.  The Rowlett engineering department sent a representative, and there were three citizens.   No one was elected to office.  No one was running for office.  No one announced that they were boss.  Everyone just brought their thoughts to the table.  Out of those thoughts, a preliminary plan began to evolve.  In fact, before adjourning, a Phase One of several phases,  was determined.  

Folks, significant in both of the meetings I attended, very workable plans were given birth without a leader.  It was very refreshing to see residents and officials of Rowlett address a problem and resolve it without anyone getting in front of a parade and leading it in. 

The Rowlett community is capable of functioning under it's own steam.  The sense of community is alive and well.  Do you know how many communities can make that claim?  In my opinion, probably not many.  We are fortunate to be able to live here.  Does that mean everything is done right.  Nope.  We have some warts.  However, given time, Rowlett can resolve most issues........with the strength of its citizens.  We need Rowlett's "officialdom" to take care of health, welfare, and safety.  Our community will fix everything else.   

Community spirit.  That's part of what Rowlett is made of.

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Distorting the truth

9/11/2016

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Below is a post on  Nextdoor placed by a reader named Chris White.  Immediately following is a rebuttal by me.


I read Ron Miller's "Ramblings" and I know his line of work is real estate development but I take exception to him constantly referring to Rowlett no longer being a "Backwater" city. We were a very nice upscale bedroom community, quiet and with a very low crime rate; one of the best cities I've ever lived in. How is any of that 'backwater' like we were country hicks living in shacks?

He also defends cramming apartments into our area while not mentioning things like how all the additional traffic is going to be handled. Regardless of how he dismisses any concerns, much like the officialdom we get from city hall, people who live in apartments are not the same mind set as people who are single family home owners.

People who say they love Rowlett and want to change it into something completely different are in love with something other than Rowlett. Most of them are business people who stand to profit in some way from all the development they favor. So what they really love is pretty obvious. And it's not us.

Thank
Patty and Vickie thanked Chris

My response:

Ron Miller from Stone Meadow Cir · 9m ago

Thanks, Chris.. I had forgotten you were still around. I have a rebuttal. I have a couple of comments regarding your incredibly intelligent commentary.

First, I worked for many years in downtown
Dallas among many people who were born and raised in Dallas. When I moved to Rowlett there were only 1527 people, per the sign outside town. I worked around people that had no idea how to find Rowlett. They knew it was around.....somewhere. This lasted for many years. Rowlett and Rockwall were considered to be somewhere in East Texas. I have lived in Rowlett for over 41 years. How long have you lived here? How many cities have you lived in? I didn't use the terms "country hicks" and "shacks." You did. I had a great time raising my kids here. My son had his own sailboat at age 14 and my daughter had a horse. Do you have any kids? You're painting a picture that ain't true, my friend. Is that what you're like?

Until the advent of DART, PGBT, and more recently, Bayshore, Rowlett was still considered a town with not much future, except for what the overflow from Dallas gave it. The above events changed that. I understand your feelings about the bucolic small town atmosphere. I grew up in one. However, that's no longer Rowlett. If you really need that atmosphere, I understand Paris, Texas is nice. Rowlett is entering a really exciting period. Citizens of Rowlett can benefit from it. It should be fun around here, unless you're a curmudgeon.

As far as supporting apartments, sometimes I do, and sometimes I don't. You profess to read my blog. Did you read last Wednesday's post? If you did, you would have read that I appeared at Tuesday night's City Council meeting and spoke against a proposed apartment project. The apartment proposal failed. I defended Rowlett taxpayers.

So much for the accuracy of your reporting the facts. Any reference to me referring to apartment dwellers as "not the same mind set" as single house dwellers is a lie. Are you a liar, Mr. White?

You further imply that I only work to better myself at the expense of the city. . Let's see now, I have served on the Park Board, Environmental Learning Center Committee, the DART Station Design Art Committee, The Comprehensive Plan Steering Committee, the Economic Development Advisory Board, and City Council. I have also been instrumental in organizing the Bayside Charity Regatta for tornado victims to be held on October 1, and studying regulations for adapting Housing Financing Corporations to be recommended to city officials, and working with a developer to see if we can put together some housing products for Senior Citizens and another for low to moderate income families. Just exactly what have you done for the City of Rowlett?

Mr. White, you are nothing but a trouble maker.



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What's in a number?

9/11/2016

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Last Tuesday evening an apartment project failed to be approved by City Council.   However, Councilman Rick Sheffield spoke in favor of approving the project.  He also made the motion to Council that the project be approved.  The motion failed because of lack of a seconding motion by any other Council member.  

In Rick's appeal to approve the project, he rebutted my objection that the tax "formula" submitted for Council's approval did not generate enough tax revenue to "pay it's way."  In other words, the cost to the city of having the project exceeded the annual revenue generated by the  project.  Therefore, the Rowlett tax payer was subsidizing the proposed project.  I have nothing against the developer making money........as long as taxpayers make a little, also. 

In Rick's rebuttal, he mentioned and justified a number I have often heard being emitted from "officialdom's" mouths.   This number is a value that a house in Rowlett must have, when multiplied by the current tax rate, to provide sufficient tax revenue to "pay their way."  Rick referenced this number the other night when he said there was nothing wrong with subsidizing the proposed apartment project, because, he stated, that the city approved subdivisions "all the time" whose house values do not provide the necessary tax revenue to "pay their way."  I've heard the number mentioned several times by different officials.  It varies slightly each time, but always exceeds $300K.  A number of $325K is probably a good average.

Folks, I don't believe that number.  I never have.  I have never understood how it was conceived.   I have always thought that the number was thought up by someone who never really had enough to do, and really didn't know what they were talking about, anyway. I think its an example of a "numbers freak" playing games with arithmetic, and not knowing the full scope of his assignment.   I think it's a classic example of "B. S." 

I have never heard anyone from "officialdom" mention the source of the number.  Where did it come from?  Who "calculated" this number and presented it as fact?  Where's the proof that the number is valid?  Rowlett's "officialdom" seems to think its valid.  They use it periodically as part of their facts vault........as evidenced by Rick's use of it.  Anyone......please send me the source of the number and I'll research it.

So, for discussion purposes, let's use the $325K home value as a baseline value to ask a couple of questions.  

If it costs the city more to service a $200K home than what a taxpayer pays in taxes, where does the extra money come from to pay the balance of the costs?    The city can't print their own money.  The funding MUST come from the all the taxpayers, including homes worth over $325K and homes under $200K.     Do you charge a higher rate on taxpayers that have more expensive homes?  No, you can't do that.  That's illegal.    Do  arbitrarily add $125K to the value of a  $200K house to get the tax bill up to where they "carry their load?"  No, that's illegal, too.

So......how do we get the city to become cost effective and only provide services to only homes that "pay their way?"

.....  I got it!!

We send a letter to all the homeowners that the Dallas or Rockwall Appraisal Districts say own homes that have a value of less than $325K.  We inform these homeowners that Rowlett can no longer provide police and fire protection.  They have to hire their own police and fire protection.  Also, they have to repair their own streets.  Heaven forbid that the sanitary sewer line stops up.  It might get a little "earthy" in the old subdivision. 

Of course, we'll lose all the tax revenue that is generated by homes valued at less than $325K.  Therefore, we'll have to raise the rate of all homes over $325 to compensate.  Or, we can layoff all the employees that have  become unneeded because of the reduced work load.   I doubt that most houses in Rowlett exceed $325K in value, so that means more than half of the staff and employees would be laid off. 

After the above adjustment, we would have the value vs. cost ratio in balance.  We would now have a cost effective city.  Everything is really cool, now.  Brian can go fishing.

Does anyone besides me realize just how incredibly stupid and useless such "facts" are?  Why does our "officialdom" insist on using them?  Is it simply a lack of knowing what the hell they're talking about?  Or, is it more sinister?

It doesn't matter.  We can fix all that. 
.
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A hollow victory

9/7/2016

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Last night an apartment developer lost a bid to develop some apartments near downtown Rowlett.   I spoke against the project.  I am generally pro-developer and I find no pride in aiding in the defeat of this proposal.  I am not against apartments, if properly managed.  I am certainly not against low to moderate income families.  In fact, I'm trying to work on some development and financing vehicles to provide really good housing for these Rowlett citizens. 

I met with two of the members of the development team for about 30 minutes last night.  We met before the project was presented to City Council.  I actually liked the developer.  I wish I could have supported their project.    Even tho the developer and Marc Kurbansade, Director of Development Services, clarified some math I referenced, I still could not support the project for the following reasons. 

Agreement with Dallas Housing Authority.

The developer had proposed entering into an agreement with the Dallas Housing Authority seeking additional financial equity for the project.  This agreement would have allowed DHA to place tenants in 60 units of the 203 unit project.  These tenants could have come from anywhere in Dallas County.  My position was that I didn't mind helping low and medium income families in Rowlett, but I thought Dallas should take care of their own.  You will see why when I discuss the taxing situation under this program.  A new term I learned last night was "Walker Vouchers."  It was pointed out that they were not Section 8, but I would have to say, to me they are very similar.  There is nothing wrong with Section 8 when used sparingly in various locations.  If too many are placed in close proximity, the apartment project or the housing neighborhood will become "tagged" as a Section 8 project.  That's probably unfair, but that's how it works.  To combat this, I think City Council should take steps to study Rowlett's needs for this income group and devise a plan to address it.  I want to help Rowlett's people........not Dallas' people.  The developer stated that his experience suggested that overwhelmingly, the tenants came from the local municipality.  I have asked for evidence. 

The taxing "quirk."

I am not an expert in government financed projects.  Nearly all my financing experience was in the private financing world.  I am aware of the Texas statues regarding appraisals for taxing purposes.  Stated simply, the statues state that all property is taxed at market value mutiplied by the local tax rate.  The only exception was agricultural land that rested in developing areas.  In that case "roll back" taxes were accrued until the property sold, then someone had to pay the back taxes.  I knew of no other exemptions.

When I saw that the Blue Line Lofts project had presented a value of $7,105,000  to calculate the amount of tax cost, I knew that number was wrong; at least in the private sector.  This project would have cost at least $20 million.  This would result in a tax bill of 1/3 of the percentage a taxpayer was paying for their homes.  That didn't seem fair.  It will become more apparent below.   I was informed by the developer and Marc Kurbansade that these projects enjoyed some kind of special and favored disposition on establishing value.  Their "appraisal" of tax values allows them to use "comps" of other undervalued projects in neighboring cities.  If the State of Texas allows this, then my argument is with the state, not the developer.  I have asked for evidence. 

In the real estate appraisal business, there are only three ways to approach a Market Value appraisal:  1.  Cost approach,  2.  Comparable properties,  3.  Income approach.  In proposed construction, the cost approach is the preferred formula, altho the other two methods are considered.  If the income approach of appraising the property doesn't support the cost of building the project, it won't be built.  That's good common sense.

In this type of government financing, nothing makes economic sense.  I was shown comparable projects by the developer  last night in which towns around us have used that same discounted value to establish tax load.  I don't want to get off in the weeds here.  It's a lot more complicated than I can get into here.  However, here is the end result for the Rowlett taxpayer.  Remember.....Dallas Housing Authority is a tax free enity, therefore this is no "tax income."  Utilizing the lower value proposed for the project, then applying the current tax rate, and then develop a "payment plan" to offset the absence of taxes, it would result in Rowlett receiving $55K a year in revenue from the project.  This is about 1/3 of the amount that would be due if the same formula was applied to the project as applied to your house.

Now, think further.  Rowlett will be responsible for fire and police protection.  Rowlett will also be responsible for the maintenance of the the "wet" utilities (water, sanitary sewer, and storm sewer) and the roadways leading to this 203 unit  project.  If there is one fire call a year in this project, the bite into the $55K would be severe, if not totally spent.  Add to fire protection, police protection and patrol, utility work and patching pavement, it is reasonable to assume that annual costs to Rowlett will exceed the $55K revenue.  Anything over the $55K revenue, the Rowlett taxpayers pay for.  Stated another way, Rowlett taxpayers will be subsdizing the project..........and many tenants may not even be from Rowlett.  Therefore, Rowlett gets no tax revenue from the project.  The "fee" paid by the developer is only $55K per year, and anything over that is paid by Rowlett taxpayers.

We need a better mousetrap.  It's my opinion that the City of Rowlett should look into a financing vehicle called "Housing Finance Corporations."  I have the regulations in my possession, now.  I am beginning to study them.  Marc Kurbansade is familiar with them.  Brian Funderbunk, City Manager, is familiar with them.  So far, it's my understanding they could replace the need for Dallas Housing Authority, and give Rowlett more control over their own destiny.  I like that.

The availability of a "Housing Finance Corporation" may not solve the tax problem, but it would more nearly assure that our tax dollars are going out to help Rowlett residents, and I'm okay with that.

As I stated above, I liked the developer.  I wish we had a workable HFC to replace the DHA.  We would still have to do some numbers crunching on the taxing situation.  If we do many of these DHA deals, the upward pressure on taxing home owner would increase.  If these two issues were resolved, I would have to re-think my position.........but at the present time I remain unchanged.

I think the subject project, as presented, contain unacceptable  risks for Rowlett home owners and tax payers.  The two risks together are subsidizing a project that provides housing of not only Rowlett residents, but residents being moved in by a absentee manager.  At the very least, these two issues should have been shared with the public.  If this developer came back with a proposal to mitigate these two issues, I could be swayed.


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