Make no little plans. They have no magic to stir men's blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistency. Remember that our sons and grandsons are going to do things that would stagger us. Let your watchword be order and your beacon beauty. Think big.
Daniel Burnham, Chicago architect. (1846-1912)
Thursday, July 28, 2011
Monday, July 25, 2011
Response to Paula
An earlier post generated this comment:
Paula said...
I have recently noticed that there was new construction on Eagle Drive next to Sonic. I was excited that there was the possibility of a new business or a restaurant. I was just informed that the community is to be getting another DOLLAR store. As there is already a dollar store not even a block away, I was a little surprised and more than disappointed. Can you please answer this question...when there are other needs in this community (grocery store, restaurants, etc) why and who planned the construction of another dollar store? I would appreciate a response. Thank you.
My response follows:
Hi Paula,
This is a good question and highlights some of the tension that exists with city planning, regulation, and land owner's rights, and the general interest of the population.
I have written earlier about market conditions in the City of Mont Belvieu. We are a quite unique community, experiencing a lot of growth and with great potential. However, the calculus that most businesses use to determine whether or not a particular location is quite complex. The community's desire to have any particular business is not a great factor in the overall success of the business, companies have learned. We may DESIRE all kinds of different things, but whether or not that makes business sense for a company, or whether or not they can justify the initial expense, is a matter of great concern for the company.
Many factors affect their decision, including proximity to other stores (Baytown's Garth Road, with all of the stores located there, is only 8 miles away), market saturation (there are a LOT of stores in Baytown), and - probably most important - local population. Most of the stores we would like to see, from restaurants to grocery to other things that would help our community, require a local population of about 30,000 people. We have about 4,000 in the City limits, while the area from which people could be reasonably expected to draw includes about 20,000... which is close, but not really close enough for most businesses. From conversations I've had with investors and developers, it appears that they are either waiting for Mont Belvieu to grow (in 5 or 10 years we will probably have the population in the area to support this kind of business) and/or they are looking for something that will be a regional draw - something that will bring people to the area from outside the normal shopping area, a destination store, where people would be willing to drive a long way to get there.
But ultimately, these decisions are marketing decisions. There are occasions when public/private partnerships are entered into in an effort to help bring new/desirable businesses to a community. This may be done for competitive reasons (we want them here rather than in a neighboring community) or for financial benefit (the business is a good fit, but lacks the means to get started in our community). We have not entered into any kind of agreement to support or discourage any kind of business. Thus, if any property owner on Eagle Drive wishes to build any kind of business (with a few exceptions - there are some things that are expressly prohibited on Eagle Drive) if they meet all of the applicable ordinances then the City must approve the application. A developer/owner of a particular parcel has a RIGHT to develop according to that developer's wishes, and the City really cannot do anything about it. Nor do we really want to - any/all business is good for the City: increasing tax revenue, providing jobs, offering product choice and competition. You may not like a DOLLAR store, but if they meet our ordinance we must allow it. Planning when done best provides for the greatest flexibility within limits, limits defined by the ordinance as a reflection of the City's overall goals and desires. Even the most restrictive/prescriptive communities of which I am aware must allow almost all business provided they meet the stipulations of that community's ordinance.
The choice of Family Dollar to locate in Mont Belvieu is a careful one. Family Dollars are located next to Dollar Generals all over the country and do very well. The owner of this store feels that he will do well, also, and fulfill a need in the community, or he would not even propose the investment. These kinds of stores seem to do well in communities like ours - small communities that are under-served in retail opportunities. I don't know how well Dollar General is doing, but it must be doing OK because they are still in business.
I hope that helps. I apologize for the length of the response, but I felt you deserved a complete explanation. If you would like to know more or have further questions, please stop by City Hall any time. Or you may call me at 281-576-2213 x 233. I would be happy to talk with you about this or any other aspect of planning in our community.
Paula said...
I have recently noticed that there was new construction on Eagle Drive next to Sonic. I was excited that there was the possibility of a new business or a restaurant. I was just informed that the community is to be getting another DOLLAR store. As there is already a dollar store not even a block away, I was a little surprised and more than disappointed. Can you please answer this question...when there are other needs in this community (grocery store, restaurants, etc) why and who planned the construction of another dollar store? I would appreciate a response. Thank you.
My response follows:
Hi Paula,
This is a good question and highlights some of the tension that exists with city planning, regulation, and land owner's rights, and the general interest of the population.
I have written earlier about market conditions in the City of Mont Belvieu. We are a quite unique community, experiencing a lot of growth and with great potential. However, the calculus that most businesses use to determine whether or not a particular location is quite complex. The community's desire to have any particular business is not a great factor in the overall success of the business, companies have learned. We may DESIRE all kinds of different things, but whether or not that makes business sense for a company, or whether or not they can justify the initial expense, is a matter of great concern for the company.
Many factors affect their decision, including proximity to other stores (Baytown's Garth Road, with all of the stores located there, is only 8 miles away), market saturation (there are a LOT of stores in Baytown), and - probably most important - local population. Most of the stores we would like to see, from restaurants to grocery to other things that would help our community, require a local population of about 30,000 people. We have about 4,000 in the City limits, while the area from which people could be reasonably expected to draw includes about 20,000... which is close, but not really close enough for most businesses. From conversations I've had with investors and developers, it appears that they are either waiting for Mont Belvieu to grow (in 5 or 10 years we will probably have the population in the area to support this kind of business) and/or they are looking for something that will be a regional draw - something that will bring people to the area from outside the normal shopping area, a destination store, where people would be willing to drive a long way to get there.
But ultimately, these decisions are marketing decisions. There are occasions when public/private partnerships are entered into in an effort to help bring new/desirable businesses to a community. This may be done for competitive reasons (we want them here rather than in a neighboring community) or for financial benefit (the business is a good fit, but lacks the means to get started in our community). We have not entered into any kind of agreement to support or discourage any kind of business. Thus, if any property owner on Eagle Drive wishes to build any kind of business (with a few exceptions - there are some things that are expressly prohibited on Eagle Drive) if they meet all of the applicable ordinances then the City must approve the application. A developer/owner of a particular parcel has a RIGHT to develop according to that developer's wishes, and the City really cannot do anything about it. Nor do we really want to - any/all business is good for the City: increasing tax revenue, providing jobs, offering product choice and competition. You may not like a DOLLAR store, but if they meet our ordinance we must allow it. Planning when done best provides for the greatest flexibility within limits, limits defined by the ordinance as a reflection of the City's overall goals and desires. Even the most restrictive/prescriptive communities of which I am aware must allow almost all business provided they meet the stipulations of that community's ordinance.
The choice of Family Dollar to locate in Mont Belvieu is a careful one. Family Dollars are located next to Dollar Generals all over the country and do very well. The owner of this store feels that he will do well, also, and fulfill a need in the community, or he would not even propose the investment. These kinds of stores seem to do well in communities like ours - small communities that are under-served in retail opportunities. I don't know how well Dollar General is doing, but it must be doing OK because they are still in business.
I hope that helps. I apologize for the length of the response, but I felt you deserved a complete explanation. If you would like to know more or have further questions, please stop by City Hall any time. Or you may call me at 281-576-2213 x 233. I would be happy to talk with you about this or any other aspect of planning in our community.
Wednesday, July 13, 2011
Housing Market...
To me, these are words that do not go well together.
I realize that people have come to view the place they live as an investment. This seems at once incongruous and discouraging. There are few more basic needs in life than the need for shelter. The drive and interest in obtaining the best housing for one's self and one's family is a universal thing, although interpreted differently in various cultures and even regions. An apartment in Shanghai or New York may be very desirable, and thus very expensive, while in our neck of the woods, a single-family detached home on a relatively large lot is desirable. I will not venture to say which is better - that is way too complicated for this kind of forum. But suffice it to note that there are differences in housing types that are desirable by different folks for different reasons, all of which are perfectly valid. Everyone needs a place to stay, to hang their hat, to call their own, to raise their families, and to just be away from others. It is a real, valid need.
Thus, to make a commodity of something so basic, so fundamental to our human condition, is a difficult thing for me to handle. The whole housing bubble thing really disturbed me for a long time - the gentrification that occurred, the debt that people incurred (kept artificially high by fraudulent banking/lending practices and excessive market conditions), and the whole "flip my house" phenomenon (which contributed to both the gentrification and high mortgage rates) really discouraged me. Everyone seemed to want to own a house NOW with little thought about how to pay for it. Banks seemed eager to lend to everyone, creating artificially low conditions and terms for procuring the loans (often giving loans to people who really couldn't afford the payments, thinking erroneously that the value of the house - as an asset - would continue to increase, and thus hedging their poor business decisions on a false premise). So when the bubble burst, and when the artificially low terms came due, well, you know the rest.
This morning I heard a report on the radio. A link to the transcript is here.
A couple of things I noted from the story: first, there is a surplus of 1.6 million homes in the market. If the median house price in the United States is $220,000 (down from a high of about $250,000 in 2007) then that means that there is close to $352 billion dollars in homes on the market that are essentially unproductive assets for some bank. That's a lot of money. Further, someone has to pay taxes on those houses. I'm not sure how that works if the government has taken over the debt (Freddie/Frannie)- do they have to pay local taxes on a foreclosed property? - but if it's bank-owned then the bank must pay. Assuming that they all must pay local taxes, and further assuming a base tax rate of 2% (which seems modest, but just to use round numbers), the entities holding the notes are paying $7.04 billion dollars a year on these vacant properties. It is even more frightening to consider that they might not have to pay these taxes.
Local municipalities may have also set great stock in the housing bubble, entering into infrastructure projects and other tax burdens in anticipation of continued growth and increased property values. When this did not materialize, many local governments are left in the uncomfortable position of having to close schools just built, or not maintaining parks that were just constructed, and leaving built and paid-for infrastructure improvements underutilized - like so many roads-to-nowhere.
Thankfully, Mont Belvieu does not find itself in that kind of position. The financial director and other City staff worked very carefully and cautiously to curtail the kind of excesses seen in other places. The City Council also is very aware of the debt we have and has ensured that we have sufficient funding sources available for unforeseen eventualities. This kind of conservative caution and fiscal policy has served us well and has made our position very stable. It's also good for me - I get to keep my job!
The second thing I noted was the idea of how long it will take to rectify the problem. 1.6 million houses means that 3.2 million more Americans can be accommodated without building any additional homes. This will not affect us much here, where the demand for housing is still relatively high. But it may serve to shift attention to the housing market our way, lowering construction costs (cheaper, more accessible materials and labor) lead not only to greater profits for builders, but also less expensive houses, which can have a negative impact on valuation. These problems are going to take a long time to sort themselves out. Further, since most of the lending institutions are national in scope, their policies reflect and react to conditions outside of our region. We've already seen a much more reluctant lending base (for good or bad) and it may continue to get exacerbated as banks remain cautious lenders.
I guess the take-home lesson in all of this is that the rest of the nation DOES have an effect on our little community. We have done things very well here, fiscally speaking, in terms of managing our debt and policies. But we do not live on an independent island and are subject to the vicissitudes of the rest of the country. Care should be taken on a personal level, as well, to make sure that our families' needs are being met.
I realize that people have come to view the place they live as an investment. This seems at once incongruous and discouraging. There are few more basic needs in life than the need for shelter. The drive and interest in obtaining the best housing for one's self and one's family is a universal thing, although interpreted differently in various cultures and even regions. An apartment in Shanghai or New York may be very desirable, and thus very expensive, while in our neck of the woods, a single-family detached home on a relatively large lot is desirable. I will not venture to say which is better - that is way too complicated for this kind of forum. But suffice it to note that there are differences in housing types that are desirable by different folks for different reasons, all of which are perfectly valid. Everyone needs a place to stay, to hang their hat, to call their own, to raise their families, and to just be away from others. It is a real, valid need.
Thus, to make a commodity of something so basic, so fundamental to our human condition, is a difficult thing for me to handle. The whole housing bubble thing really disturbed me for a long time - the gentrification that occurred, the debt that people incurred (kept artificially high by fraudulent banking/lending practices and excessive market conditions), and the whole "flip my house" phenomenon (which contributed to both the gentrification and high mortgage rates) really discouraged me. Everyone seemed to want to own a house NOW with little thought about how to pay for it. Banks seemed eager to lend to everyone, creating artificially low conditions and terms for procuring the loans (often giving loans to people who really couldn't afford the payments, thinking erroneously that the value of the house - as an asset - would continue to increase, and thus hedging their poor business decisions on a false premise). So when the bubble burst, and when the artificially low terms came due, well, you know the rest.
This morning I heard a report on the radio. A link to the transcript is here.
A couple of things I noted from the story: first, there is a surplus of 1.6 million homes in the market. If the median house price in the United States is $220,000 (down from a high of about $250,000 in 2007) then that means that there is close to $352 billion dollars in homes on the market that are essentially unproductive assets for some bank. That's a lot of money. Further, someone has to pay taxes on those houses. I'm not sure how that works if the government has taken over the debt (Freddie/Frannie)- do they have to pay local taxes on a foreclosed property? - but if it's bank-owned then the bank must pay. Assuming that they all must pay local taxes, and further assuming a base tax rate of 2% (which seems modest, but just to use round numbers), the entities holding the notes are paying $7.04 billion dollars a year on these vacant properties. It is even more frightening to consider that they might not have to pay these taxes.
Local municipalities may have also set great stock in the housing bubble, entering into infrastructure projects and other tax burdens in anticipation of continued growth and increased property values. When this did not materialize, many local governments are left in the uncomfortable position of having to close schools just built, or not maintaining parks that were just constructed, and leaving built and paid-for infrastructure improvements underutilized - like so many roads-to-nowhere.
Thankfully, Mont Belvieu does not find itself in that kind of position. The financial director and other City staff worked very carefully and cautiously to curtail the kind of excesses seen in other places. The City Council also is very aware of the debt we have and has ensured that we have sufficient funding sources available for unforeseen eventualities. This kind of conservative caution and fiscal policy has served us well and has made our position very stable. It's also good for me - I get to keep my job!
The second thing I noted was the idea of how long it will take to rectify the problem. 1.6 million houses means that 3.2 million more Americans can be accommodated without building any additional homes. This will not affect us much here, where the demand for housing is still relatively high. But it may serve to shift attention to the housing market our way, lowering construction costs (cheaper, more accessible materials and labor) lead not only to greater profits for builders, but also less expensive houses, which can have a negative impact on valuation. These problems are going to take a long time to sort themselves out. Further, since most of the lending institutions are national in scope, their policies reflect and react to conditions outside of our region. We've already seen a much more reluctant lending base (for good or bad) and it may continue to get exacerbated as banks remain cautious lenders.
I guess the take-home lesson in all of this is that the rest of the nation DOES have an effect on our little community. We have done things very well here, fiscally speaking, in terms of managing our debt and policies. But we do not live on an independent island and are subject to the vicissitudes of the rest of the country. Care should be taken on a personal level, as well, to make sure that our families' needs are being met.
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