There’s always something to howl about

Archive for January, 2006

Surfing a twenty-year wave in the desert

From the Las Vegas Review-Journal:

For the next 20 years, some of the weightiest issues for home builders will be figuring out where baby boomers really want to move, when and if they sell their homes, and what type of housing will they desire, be it city-center high-rise condo, beach house, or something in a golf course development.

With more than 70 million boomers heading toward retirement — the oldest of them turn 60 this year — these questions were prominent at the National Association of Home Builders’ annual conference, which wrapped up on Jan. 14.

Though consumer survey research has shown for decades that homeowners in their 40s and 50s often have no detailed plans to downsize or sell their houses, a new statistical study unveiled at the convention suggests that boomers might have different ideas.

In the study, more than 50 percent of all homeowners ages 45 to 54, and nearly 60 percent of homeowners aged 55 to 64, rated themselves either “likely” or “very likely” to buy a vacation, investment or new primary home sometime in the coming 60 months.

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Look who’s talking, Part II: Revenge of The Shiny People

When Jon Talton lied in the Arizona Republic, telling you that Maroney’s Dry Cleaning store on Central Avenue had not been killed by Trolley construction, when it fact it had, I wrote this:

The trolley is killing long-established businesses up and down its route, and the green-cheese-heads who inflicted it on us, along with all the other doomed Downtown ‘investments,’ don’t dare admit this and dozens of other obvious truths. They use Soviet-style propaganda to afflict us with Soviet-style ‘improvements.’

The next step in the game will be to plead with you to go out of your way to ‘support’ the businesses that are nope-no-way-uh-uh-never not being hurt by trolley construction. And that is propaganda perfection, Soviet-style, to tell two self-contradicting lies in one moondacious exhortation, challenging you–on pain of being declared a counter-revolutionary wrecker–to question anything you are told.

Phoenix can survive Jon Talton, as odious as he is. And we will overcome the stupid mistakes of the moondacious green-cheese-heads Downtown. But I’m not sure that any good thing can thrive in a place where public discourse consists of nothing but lies, and where anyone who dares to whisper the truth is shouted down and, in then end, self-censored.

The other shoe dropped today. That same Republic editorial page that warned you all about liars this Sunday just past, today issues the very lies I predicted:

Businesses along the construction route bear the brunt of a program that will benefit the Valley for decades to come. All of us should appreciate their sacrifice through these challenging times.

Their “sacrifice” will be to be destroyed. The actual purpose of all of this massive destruction of wealth is to provide upscale amenities for the people talk-radio host Bob Mohan used to call The Shiny People. The downscale businesses in the path of the Trolley will not survive, nor are they meant to survive.

This is important to understand, because again it’s the seen and the unseen. The planned “improvements” around which the Trolley is the lynch-pin will not be nearly as nice as predicted, but they will be very nice, especially from the point of view of The Shiny People. But their cost will be a huge, permanent and on-going destruction of wealth, robbing the Valley of everything that might have been done with the expropriated land and money, of all the opportunity costs occasioned by that expropriation, and of all the leveraged future benefits of profit-making investments, as contrasted with the on-going wealth-destruction of profit-devouring government boondoggles.

What will be seen will be all the fun new places for rich people to play – at taxpayer expense. What will not be seen is all the wealth-producing businesses that were destroyed, nor the wealth-producing investments that might have been built instead, if the City had not robbed it citizens of their money, their land and the future taxable value of that land.

An honest newspaper would at least report both sides of this story. But as the Republic itself admits:

[O]nce truth becomes malleable, once lies become facts and facts become lies, then we make ourselves suckers for every con man, every flimflam artist, every propagandist whose schemes may range from petty theft to the takeover of an entire body politic.

When we finally think to ask, “Who crashed the Phoenix?,” the best answer will be: The Arizona Republic.

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Corporate welfare Downtown

Also from the Republic:

City officials are negotiating with a St. Louis-based company that wants to build a $22 million parking garage on the eastern edge of downtown.

The six-level structure would be on city-owned land on the Phoenix Biomedical Campus, near Fifth and Van Buren streets.

What it says, reading between the lines, is this: Free land for a profit-making parking structure.

But wait. There more.

The garage would contain about 860 parking spaces, including two levels below ground, plus 18,400 square feet of medical office space and about 5,600 square feet of retail space.

It turns out it’s free land for a profit-making parking structure plus 24,000sf of profit-making commercial real estate.

The land will be untaxed, of course. It’s City-owned.

But here’s the cutest part of all:

The Transit Oriented Development zoning overlay would forbid this if it were being done on private land with private money.

The full triumph of corruption comes when uncorrupted commerce becomes impossible…

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Corporate welfare in Phoenix

The Arizona Republic brings us another glowing puff piece on the beauty, the splendor, the wonder, the power and the glory of the forthcoming Trolley system:

Funny thing about “knowledge workers”: They don’t like to drive.

That’s one of the reasons Thomas Gorny decided on a site along the future light-rail line when he relocated his Web-hosting business to Phoenix from Santa Monica, Calif., late last year.

“I found that a lot of developers and IT people don’t like to drive,” said Gorny, chief executive officer of iPowerWeb Inc.

He hasn’t plumbed his employees’ psyches to understand why, but he estimates 20 percent of his 120 workers carpool, take the bus or bike to work, anything to avoid the car commute.

When rail opens in late 2008, Gorny figures he’ll be perfectly positioned at 919 E. Jefferson St. to use the rail as a perk for his transit-loving staff.

This is so cute. The taxpayer subsidy on the Trolley will be $10 per trip, possibly much more. So the subsidy per “knowledge worker” – these would be the same “knowledge workers” who buy all the insanely expensive sports cars? – will be something like $20 per work day, $100 per work week, $5,000 per year.

Why wouldn’t Gorny be glad? He’s getting up to $5,000 per employee in benefits, paid for by the gullible taxpayers of Phoenix.

The City is destroying an immense amount of wealth. It’s not just the billions in tax dollars that will be thrown away building and operating this paragon of 19th Century technology. Vast tracts of land Downtown have been expropriated, as has the entire south side of Camelback Road from 19th Avenue to Central Avenue. This was all taxable commercial real estate, and its taxable value is now gone forever. Still worse, its value as space where profits are produced by production, not destroyed by taxation, is gone forever. Profit-seeking small businesses are perishing all along the route of the Trolley as construction makes them inaccessible.

But all we get from the local media – and not just the Republic – is propaganda. If we had just one actual newspaper in this town, we might have been spared the slow-motion train wreck the Trolley and its attendant boondoggles will cause.

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Corporate welfare in Glendale

From the Republic:

The AAA travel and financial services club will locate up to 1,100 new jobs over the next three years in Glendale as it creates a regional customer service and information technology center in the West Valley.

Roughly 500 of the jobs are considered “high-wage” positions, paying more than $75,000 a year, said Barry Broome, chief executive of Greater Phoenix Economic Council, which helped broker the deal. Up to half of the jobs would be call-center positions that would pay less than Maricopa County’s median household income of $46,111.

When fully staffed, the facility will employ up to 1,400, according to AAA, and will be one of the city’s largest employers.

Sounds like good news, doesn’t it? Not quite…

City Council members will hold a special meeting Thursday to discuss, and likely accept, the 10-year incentive package the city is offering AAA. Glendale is offering to:

&bul; Give AAA $1,200 for every job the company creates that pays more than $50,000.

&bul; Reimburse the company up to $750,000 for facility rehabilitation and waive permit fees up to $49,700.

That $1,200 subsidy per job doesn’t sound like much, but about 700 of the jobs will qualify for it. That’s $840,000 of the taxpayers’ money to buy these jobs. Given that it’s a “10-year incentive package”, I’m wondering if it’s $840,000 per year. Throw in another three-quarters of a million for redecorating and some miscellaneous regulatory relief, and the owners of AAA – a profit-making enterprise – brought home quite a score.

“But, but, but!,” the City of Glendale and the Greater Phoenix Economic Council will exposulate:

The project is expected to pump $42 million into Glendale’s economy over 10 years.

As always, it’s the seen and the unseen. Whether the total price tag is $1.6 million or $9.1 million, it remains that the City of Glendale is going out of pocket to buy jobs. Certainly those jobs have an economic benefit, but we can never know what economic benefits are lost by robbing a profit-producing Peter to pay corporate welfare to a profit-devouring Paul. All we can know is that what might have happened will not.

Here’s a simple lens for distinguishing one from the other, though:

The businesses that do best for everyone – their clients, their employees and their investors – are the ones that are so busy making money that they don’t have time to wrangle deals to rob the taxpayers.

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Look who’s talking!

The Arizona Republic wants you to know that, “Little lies lead to big trouble”:

Because once truth becomes malleable, once lies become facts and facts become lies, then we make ourselves suckers for every con man, every flimflam artist, every propagandist whose schemes may range from petty theft to the takeover of an entire body politic.

You see, if we’re not careful, we could end up with a newspaper that actively campaigns for insane boondoggles, that puts an openly lying socialist on its business and editorial pages, that distorts the positions of anyone daring to oppose it.

This is a free country – for now. The Republic has every right to campaign for every possible form of idiotic, liberty-devouring 19th century social planning. It has every right to be the cesspit of tendentious corruption it has become. The press is free, so it even has the right to pretend to a virtue it has long since forsaken by decrying in others the persitent deception it has long since habituated – most especially on its editorial pages.

But it has no right to expect anyone to take it seriously…

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How to profit by bad examples…

If you want some really bad real estate advice, look no further than The Arizona Republic. Somehow or another, reporter Judy Nichols found three people who suffer from the notion that renting is better than owning their own homes in high-appreciation neighborhoods. Only two actually pulled the trigger and sold their homes, but, as every newspaper reader knows, three random anecdotes are no mere phenomenon but a certifiable trend.


Kurt Nishimura is taking a calculated ride on Arizona’s real estate wave. He sold his home in the Willo neighborhood, believing its value has topped out, and is renting an apartment in the Arcadia area for a year, hoping to buy something after the wave has crested.

The Willo is the most popular of the historic districts downtown. Well-restored Willo homes are avidly sought. People cruise the streets slowly, watching for real estate signs to be posted so they can get their bids in first. I am not making this up.

The rate of appreciation in the Willo consistently eclipses the baseline appreciation rate for the Valley. It’s not hard to understand why: The supply is fixed and finite and the demand is unlimited. The rest of Mr. Nishimura strategy is also daft, but selling a home in the Willo because he expects its value to go down is particularly addle-pated.

But how about Tom Connelly, “president and chief investment officer for Versant Capital Management”? He “recently sold his house near a mountain preserve in Paradise Valley and is renting an apartment near 24th Street and Camelback Road.” What was he thinking? This again is a house that will consistently beat the market. Connelly has a strategy, though. Unfortunately, it’s based on securities trading, rather than real estate: “I think that in 12 to 36 months things will go down, way down.”

Wanna bet?

Gene Cohen wanted to make the same dumb mistake, but in the end he was just too complacent. He’s hanging onto his Willo home for all the wrong reasons. In due course, he will celebrate his inertia.

There is another article in today’s Republic asserting that 20% of Americans think the only way they could save $200,000 is to win the lottery, so I suppose we shouldn’t be surprised that Ms. Nichols was able to find three seemingly well-heeled gentlemen who are so clueless about basic economics.

For example, Mr. Nishimura wants to wait until interest rates go up before he buys another house. His expectation is that houses will be much cheaper. This will not be the case, but his monthly payments could easily be 25% higher.

This is all very simple calculator math. Any of these men should be able to do it, as should Ms. Nichols. On the one hand, they’re going to give up at least 10% a year appreciation on their homes, probably much more, along with the mortgage interest deduction and all the other benefits of owning versus renting–most notably the future leverage value of that accrued appreciation. And on the other hand, they’re going to pay a lot more for a lot less when they finally realize that real estate does not work like the stock market.

But if all that is true, what are we to make of these three stooges? Are they really that dumb, or are they concealing other motives?

Could it be that Mr. Nishimura really didn’t like the hassles of being a homeowner, so he sold his home and justified it with a bogus economic argument? Could it be that Mr. Cohen is embarrassed that he loves being a homeowner so much? Given that Mr. Connelly telecommutes to Minnesota, is it plausible that he might have wanted a zero-maintenance residence?

We’ll never know, because Ms. Nichols didn’t drill down to the underlying emotional reasons for selling, for which the purportedly ‘logical’ reasons may simply be a cover.

On the other hand, it could be they really are as clueless as they come off.

Either way, they have reaffirmed my already strong belief in the long-term value of investing in rental housing.

Who says there’s nothing to be gained from reading the newspaper?


Tempe puts the fork in the Thunderbird…

As anyone who has been to Las Vegas knows, tourism doesn’t make a city. But tourists can make an urban space feel like a city. Who is winning that contest in the Valley? Tempe, as always:

But as cities compete for overnight stays, the numbers could work in Tempe’s favor:

&bul; Business travelers’ stays increased last fiscal year at almost twice the rate in Tempe as the average rate in Phoenix, Chandler, Mesa and Scottsdale, according to TravelCLICK, a company that tracks tourism figures.

&bul; Sporting events are drawing even bigger crowds. Last year, 2,425 overnight Tempe stays were attributed to the P.F. Chang’s Rock ‘n’ Roll Arizona Marathon & 1/2 Marathon. This year, that number jumped by about 1,000, according to the Tempe Convention & Visitors Bureau.

Yet the vast menu of events at Arizona State University and in Tempe’s downtown can overwhelm Tempe’s 5,000 or so hotel rooms, city leaders say. Consider the Fiesta Bowl. Many of the cash-carrying fans, along with the Ohio State and Notre Dame football teams, left Tempe to spend their nights in Scottsdale and Phoenix.

That’s why plans for expansions at two of the city’s most prominent hotels are hailed as big news. Tempe Mission Palms may add up to 200 guest rooms and 20,000 square feet of meeting space, according to Chris Kenney, the hotel’s director of marketing. The Fiesta Inn Resort’s new ownership is injecting $5 million worth of renovations in the form of landscaping and adding conference space, General Manager Sherry Henry said.

Plus, a new upscale hotel will likely go into Tempe’s newest lakeshore project. Starwood Capital Group, the brawn behind the Westin, Sheraton, “W” brands and other hotel chains around the world, has expressed “enthusiastic” interest in putting a luxury hotel on the Tempe Town Lake site, said Chris Salamone, Tempe’s development manager.

“Building new hotels to fulfill the needs of all the tourists our events bring in, for a city that’s landlocked it’s the key to our financial solvency,” he said.

It is needful to point out that these are not to be taxpayer-subsidized hotel rooms. They are being built by actual entrepreneurial businesses risking their investors’ capital. Amazing…

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How zoning causes sprawl

This is from a wonderful op-ed that was published in the Hartford Courant. The argument, though particular to New England, in fact describes a pandemic: Our cities are dull because we have leigislated away all active human intelligence. Everything that would-be urban pioneers affect to love in older cities would be impossible to replicate under current zoning laws.

Sprawl in Connecticut is advanced almost every time somebody pulls a zoning permit. Good intentions about sprawl become academic when someone goes in for a permit. It is far too late for lofty thoughts. All that matters is how well you’ve met the zoning code.

Zoning is, in effect, the codification of a town’s desires for itself – its self-image. Developers, architects and engineers are smart enough to know they must conform, or they will suffer. Zoning appeals are no fun; they are expensive and unbelievably time-consuming. Most developers would like to avoid appeals. And even once you reach the Board of Zoning Appeals level, staff and board members do not welcome blue-sky discussions about alternative ways of doing things.

Sprawl may not be what The Courant wants, and it’s not what a growing segment of the population wants, but it is what our zoning codes demand, so it is what we have and what we will continue to have until we change our codes.

On the whole, our zoning codes are nonsensical. In my town of Essex, as in most Connecticut towns, it would be impossible to use the town’s zoning code to build anew the very hometown Essex citizens love. Few aspects of urban density that make Essex village special are allowed by the town’s zoning code. In a new Essex, buildings would be too far apart, and they would be placed too far from the sidewalk. There would be too much space around each building. Houses would be too far back from the water. The streets would be too wide, and houses wouldn’t be tall enough to have the elegant proportions of those built in the 18th, and especially the 19th centuries.

The village would be too spread out and suburban in feel. You could have the best architects in the country working on a new Essex, but if they’re following the Essex zoning code, they’ll arrive at something very different from our town. And this disconnect is not unique to Essex; it’s typical of most Connecticut towns.

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A riddle…

Q: Why should taxpayers in the City of Phoenix go into debt to build two new redundant university campuses for the State of Arizona?

A: Because the State government has $850 million in surplus funds.

Not funny, but true. Here’s an even better puzzler: Why is no one else asking this question?

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Even when the news is good, it’s bad

The headline:

Construction expert: Home building to slow

The body of the story:

The Census Bureau last month reported from July 2004 to July 2005 population grew 3.5 percent in Arizona. That’s four times the national growth and puts you just a hair behind Nevada. Two hundred thousand people moved into Arizona during that time and they all want a place to live.

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Why the sky doesn’t fall, despite the constant warnings

Here’s a step-by-step instruction manual in writing a sky-is-falling ‘news’ story: First, find some seemingly scary datum. Second, extrapolate the trend to absurdity without ever once cracking a smile. Like this:

If present trends continue, the price of gasoline may someday hit $50 a gallon. The average worker could spend as much as 36 hours of his 40-hour work week to buy a tank of gas.

If you stipulate the premise, “if present trends continue,” the rest follows logically enough. The trouble is, present trends will not continue. The free market is dynamic, and no commodity is valuable irrespective of its relative cost. If we anticipate a steady increase in transportation costs (and the experience of history is all the other way, despite the nonsense you read in the newspapers), then we should also anticipate a decrease in the amount of transportation. This is already happening, not because of gasoline prices but because of time lost to commuting and convenience gained by working from home. From the Las Vegas Review-Journal:

As attendees at last week’s Consumer Electronics Show perused gadgets that could enhance their leisure time, their bosses were plotting to get them out of the office for good.

Members of a panel that delved into the world of technologies for home use said businesses are increasingly eyeing products that will enable employees to telecommute, or work from home.

“We’re seeing a huge trend in the business world to move consumers away from commutes,” said Alexander Ramia, director of product development for Innofone, an Internet consulting company in Santa Monica, Calif. “The person working at home doesn’t know when to quit, so companies get more work out of them, and time spent in cars commuting is lost productivity.”

The point applies to any economic good – most especially real estate – provided it is not monopolized by government. If people are free to choose among alternatives, and if vendors are free to provide those alternatives, buyers and sellers will arrive on their own at a mutually-satisfactory meeting-of-the-minds. This only happens millions of times a day, so it’s perfectly understandable that Chicken Little would fail to notice…

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December 2005 Market-Basket of Homes: Values up 1.73%

Market-Basket homes jumped by an average of 1.73% for December 2005. More details here.

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Setting the record straight…

Say what?!?

The Valley ranks as the second-safest major metropolitan area in which to conduct business and avoid major natural disasters and terrorism.

So says the Business Journal of Phoenix, citing a survey by Risk & Insurance magazine.

Second-safest? Who’s number one?

Sacramento, California, believe it or not.

Surely this is a mistake. Note these important Sacramento defects:

  • It freezes in Sacramento, several times a year
  • It rains 18 inches a year, three times more than anyone should have to abide
  • It’s only 17 feet above sea level, which can’t be good
  • The population of the city is only 400,000–a little more than Mesa
  • Worst of all: It’s in California!

But: There is no accounting for taste. Consider that San Diego, the beach-front suburb of Phoenix, rated no higher than eighth place.

I designed this billboard for New Orleans a few months ago:

Perhaps we need to post it in Sacramento as well…

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An open letter to Ken Western, Editor of the Editorial Pages of the Arizona Republic

Mr. Western,

Regarding your New Year’s Resolution to improve the opinion pages of the Republic, is it possible to petition for a more balanced coverage of the forthcoming City of Phoenix bond issue?

From my point of view–and you probably disagree–the Republic is a tireless cheerleader for all of the–to me–insane boondoggles being effected Downtown. For example, nation-wide, all public transportation schemes are colossal failures from a cost-recovery standpoint, but the Republic publishes nothing but puff-pieces about the ValleyMetro Trolley–which stands an excellent chance of being the biggest failure of all. As far as I’m concerned, this is not news, not opinion, not even public relations. It is active, knowing mendacity, deliberately concealing facts, uncontested but largely undisclosed, for purposes of propaganda.

That notwithstanding, the tax-payers of Phoenix are about to be strapped with nearly a billion dollars of new debt, much of which–in my opinion–will be entirely wasted. It seems only reasonable to me that we have something resembling a debate on the issue. As much as PNI as a corporation or the Republic as a newspaper might favor the bonds and their proposed uses, it remains that the newspaper is the only remaining medium in which such a debate could take place.

Institutional criticism is usually futile. From a customer-oriented point-of-view, criticism is a great gift. It may tell you how to do better, but, at a minimum, it tells you how to stop doing badly. But the denizens of most institutions, when criticized, will instead circle the wagons, insisting on the rightness of their positions and the risible nature of anyone who would dare to challenge their expertise, experience and endless estimable qualities. Certainly this has been the case with the mainstream media, which never tires of ridiculing the alternative media and its audiences, bidding good riddance to every former cash customer. The auctioneer has a cure for this syndrome, but what does he know, anyway?

A couple of weeks ago, I had thought to write to you to offer to elucidate my objections to the Downtown boondoggles, and the course of municipal government in general in the Valley. My working title was "10 ways to crash a Phoenix," reflecting the ten weeks until the bond issue comes to a vote. At the time, I reconsidered, first because I felt it was a waste of my time even to offer to do the work, and second because I have very little confidence that the Republic or any other medium in Phoenix will ever utter a discouraging word about the Creative Class Cargo Cult and its grand designs.

But in light of your article today, I am re-reconsidering my position.

Here is my offer: I will produce op-eds arguing against the bond issue and everything it portends, to be run in the Viewpoints section over the next ten Sundays. I’ll write whatever I want and you can edit for length, if you’ll promise not to eviscerate the content. You’ll pay me nothing, which is already my arrangement with the Republic.

Obviously I can write. You can see me on topic here. You didn’t run this when I submitted it in May, but I didn’t expect you to.

Please understand that doing this is not good for me. It will be bad for my business, both because it will take time away from profitable work and because it will alienate some potential clients (although it may endear me to others). Even so, I care enough about the future of the Valley that I am willing to act contrary to my own interests in order to see this issue debated in the full context of all the facts.

The fact is, the bond issue will probably pass. As the Republic accidentally reported last week, the deck is already stacked against opponents. But when the Trolley and the Civic Center and the hotel–decorated by genuine bureaucrats!–all fail, along with all these other stupid stunts, it would be nice if somewhere in the public fora there had been a discussion of why they must fail. And–who knows?–maybe the tax-payers still have time to catch on to what it being done to them, if they are given the opportunity to exercise an informed discretion.

My expectation is that you’ll refuse this offer–probably without even the courtesy of a reply–but I’m open to the possibility of a surprise. In fact, it is in the long-term best-interest of the Republic to be an honest broker of information in the Valley. I don’t think it has honored this obligation with respect to these Downtown boondoggles, but, as you note, New Year’s is our big chance to resolve to do better.

So: I’m game if you are.


Greg Swann, GRI, CBR, Realtor
Designated Broker
Vox: 602-740-7531 | Fax: 602-504-1353

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