Tuesday, May 25, 2010

Raising tax revenue vs. stabilizing communities

Once again, the lack of prioritization of goals has caused waste, injustice and damage to the welfare of city residents. The situation in Baltimore, Maryland, is typical with the challenges confronting many metropolitan areas. The competing goals facing Baltimore City and many other urban areas as well are the need to raise tax revenues from liens against real estate versus the stabilization, revitalization and recovery of blighted communities.

It appears that the city of Baltimore has sold 12,689 tax liens at a recent tax sale auction. Apparently many of these tax liens were sold to speculators who purchase the liens for a few hundred dollars and charge property owners thousands of dollars for their redemption. In other words, in order to raise a dollar through this process, the City sells the tax lien to a speculator, and the speculator requires the property owner to pay ten to fifteen dollars, or lose the property. Because many citizens are unable to make these payments, they are now subjected to a process by which greedy speculators can exploit their inability to pay, creating more vacant housing and blight in the process.

The rational for selling tax liens to speculators at tax sales is that it assures the payment of tax and water bills. The thinking is that the threat of tax sale provides an incentive to pay, or punishment if the bill is not paid. This thinking is absolutely ridiculous and ultimately destructive. People don’t pay water bills on the basis of punitive threats; most people don’t pay because they just don’t have the money.

When Wall Street and the major car makers just didn’t have the money, trillions of dollars were provided to help them bridge the gap because a priority was placed on their economic survival instead of on punitive damages to further exacerbate their economic condition. In that context, saving the economy was more important than punishing Wall Street for its incompetence and the auto makers for their inefficiency.

By the same rational, selling properties at tax liens, when you are adding to the deterioration and destabilization of communities, is like cutting off your nose to spite your face. If this simple concept is understood, then the punitive and destructive process (of continuing to pile on debt and financial obligation on people who are unable to pay in the first place) would be changed to recognize the fact that the greatest good of the community – stabilization and recovery – would be increased by keeping in their homes those who have committed themselves to the city, until a more empowering environment is created to generate incomes with which persons will willingly pay their taxes.

A more proactive response to this issue would be to allocate community redevelopment and recovery funds to community stabilization. Such stabilization funds could be used to supplement the tax and other bills particularly of persons who have already, by their actions, committed their economic future and equities to the city. By keeping such persons in place, we can begin building a critical mass of persons who have a vested interest in fighting the blight and deterioration that is epidemic across Baltimore and most urban areas.

How much will it cost? In Baltimore, my estimate is less than $20 Million. What a bargain. People could keep their homes, stay in communities that they know and love, and provide a basis for passing along generational and community values rather than vacant, deteriorated and boarded-up houses.

In the context of a priority of stabilization, tax revenues would become of secondary importance to the extent that tax collection activities will not continue to exacerbate the conditions they seek to alleviate. Only then will policy have the impact of stabilizing communities and stopping blight. Keeping long-term residents in place despite water bills and delinquent taxes will help stabilize the community such that there will be a critical mass from which to multiply the redevelopment of threatened areas.

If we as a country can spend trillions to save Wall Street and large manufacturers, why not spend a few thousand dollars to help long-term residents of impoverished areas to stay in their homes particularly when the problems facing them are not caused by their personal irresponsibility but by the general conditions of poverty and blight and a lack of economic viability in the communities in which they live.

Tuesday, May 18, 2010

Letter to the Editor of the Baltimore Sun re. Editorial: In crisis, think big'.

The Baltimore Sun editorial of Friday May 14 entitled “In a crisis, think big” is an exercise in small thinking. Arguing about the issues raised by the City Council relative to numbers and race of police and the state attorney’s concerns about staff cuts is not big thinking. Big thinking requires a holistic view of how a multiplicity of goals are met by the city as it attempts to fulfill its mission with limited resources. Thinking big deals with how issues such as employment, tax income, environment, welfare, social services, public safety, economic opportunities, and all these competing goals can be balanced given limited resources.

It appears that the mayor and the City Council and The Sun are participating in the same kind of politicized discussion that has landed our economy on the brink of disaster. There is too much linear thinking, and too many rules that compete with each other, such that anything that has to be done is strangled by red tape that wastes time and effort and resources. This is what is causing the tremendous budget deficits, not the problems themselves. It is the systems of conflict of rules and regulations, conflict in goals, politicized decision-making, myopic thinking, geometric growth in rules and regulations, and intransigent philosophical predispositions that constrain balanced solutions.

It appears that solutions are not possible because of a collective mindset and a political system that does not attempt to achieve prioritized goals within the context of limited resources. In other words, politicians, lobbyists, community organizations, media, and the general citizenry have been taught and encouraged to focus on small things such as their personal welfare and perspective and no one seems to be concerned about the good of the system as a whole.

Certainly we need policemen, liberals, firemen, teachers, environmentalists, builders, veterans, nurses, lawyers, doctors, artists, jockeys, urbanites, rural dwellers, conservatives, black, white, preachers, youth, elderly, poor, rich etc; the problem is that no one seems to be paying attention to the big picture and coming up with solutions as to how to balance their sometimes complimentary but often contradictory needs as we attempt to fulfill the overall mission of maximizing our collective welfare.

In a similar vein, linear priorities which focus only on narrow perspectives will cause well-intended rules to obviate the collective good. For instance, under normal conditions building or rehabbing a house or a small commercial building is not rocket science. Yet, to obtain a building permit in Baltimore, countless rules and regulations relating to zoning, licenses, environment, community concerns, structural and technical adequacy of the building itself, sewer and water availability, deteriorating infrastructure, electrical, mechanical, etc etc are applied in a manner that they become more of an impediment to building and development rather than being requirements which advance the benefits to the city as a whole. The positive goals which motivated these requirements, when not balanced and prioritized make complex the process by which the positive economic benefits provided by building rehabilitation and new construction could be realized. These benefits include increasing the tax base, reducing vacant housing, inducing community revitalization, cleaning up blighted areas environmentally, reducing crime, providing jobs, income, employment, economic opportunity, and so forth.

The reality is that the positive benefits of building rehabilitation and new construction are exactly what the city needs. Yet there are 30,000 – 40,000 city-owned vacant houses, unemployment is rampant, housing for the impoverished is deteriorating, so that the very solutions to these problems are choked out by a system that cannot consistently pursue an objective because of the operational complexity of competing goals.

The vital and extremely critical role of political leadership and the press in this time of crisis is to bring priority and balance so that the multiplicity of goals will have a context in which effective and efficient operation of government can be achieved. This balance will eliminate the conflict of rules, regulations guidelines, etc and prioritize budgets such that waste from contradictory, duplicative and unnecessary expenditure by government is reduced.

In the context of this thinking it is not whether or not we have policemen, firemen, a cleaner Chesapeake Bay, state attorneys, builders, barbers and beauticians; it is how we limit obstacles and provide incentives for positive, proactive efforts which would increase the welfare of the city as a whole.

These are some ideas as to how to immediately begin to reduce budget deficits and increase the impact of government expenditures:

i. Prioritize budgetary concerns such that matters of public safety, economic opportunity, the environment, human development and education can be decided and operationalized on the basis of causality, time-frame and impact.

ii. Put in place ombudsmen with sufficient authority to eliminate red tape, process requirement, wasteful procedures, and duplicative and/or contradictory rules by examining the cost-benefit of laws, rules and regulations relative to the overall goals and priorities. This office should be completely apolitical.

iii. Look for no-cost solutions such as changing the time frame and procedural complexity of efforts which will multiply jobs and tax income

iv. Eliminate small minded and myopic rules and regulations so that they do not further complicate the achievement of the stated goals

v. Allocate more resources to analyzing the interfaces and causal relationship between economics, environmental concerns, public safety, education and human development variables

vi. Prioritize proactive actions and incentives which multiply resources and employment etc while reducing punitive efforts which add regulatory burden and cost to government and citizens without multiplying overall benefits

vii. Minimize relatively unproductive regulatory activities (such as zoning and housing code enforcement) which increase the burden on the tax payer without providing opportunities for long-term growth, and convert these resources to true health and safety issues which yield immediate benefits such as police and fire protection

viii. Use economic development funds to empower community-based entrepreneurship and community development; make capital and business opportunities available in digestible portions to small business and developers indigenous to the community. This will generate much greater multipliers in housing growth, jobs, tax income and economic activity. To achieve true economic recovery, stay away from big programs which exclude the multiplication of small businesses.

ix. Eliminate strategies which presume nonprofits as a standard necessity for community development. This adds a layer and screen to the ultimate solution, which is small business multiplying through capital. By definition, nonprofits cannot multiply through capital and must be supported and re-funded every year. Give the capital directly to businesses.

x. Analyze, evaluate and replicate successful methods of budget strategies and outcomes and improve those consistently from year to year

In conclusion, it is time for us to get beyond finger-pointing, blame, and philosophical political labels and begin to look at the real outcomes and effectiveness of different government actions, laws and activities. There is enough money to feed every hungry person, provide education to every citizen and maximize the potential of every individual without anger, distress, blame or persecution. This is the time when we need to really say what the big picture is and organize ourselves to get that job done.

Thursday, May 13, 2010

Sue HUD too

It was reported in The Baltimore Sun Wednesday May 12 2010 that the Environmental Protection Agency has come to an agreement with the Chesapeake Bay Foundation regarding the achievement of its mission to clean up the Chesapeake Bay. This agreement resulted from a law suit.

Similarly, such agencies as the Departments of Housing and Urban Development, Health and Human Services, and Labor should be sued because of their incompetence in solving the systemic problems of impoverished communities. Each year, trillions of dollars are spent by multiple levels of government, nonprofit organizations and well-meaning individuals to help empower impoverished communities. Despite these massive expenditures, the incompetence and ineffectiveness of these efforts are self-evident as generations of persons continue to be locked in cycles of poverty, dependency, and entitlement.

Certainly, the clean-up of the bay is important, but what about the millions of persons who are locked in sub-standard housing, blighted communities, welfare, joblessness, dependency on government for social services, and all other types of issues which relate to the lack of economic empowerment?

I believe that the Department of Housing and Urban Development should be sued. It has wasted trillions of dollars over the years and has not achieved its mission. The rules and regulations of this and most agencies which deal with impoverished communities preclude and prevent creative solutions to the target population. The disdain of these agencies for the power of capital in the hands of entrepreneurs in these communities is legend.
The incompetence of the methods by which they attempt to solve the problem of economic empowerment is obvious, yet not easily perceived. The obvious thing is that economic solutions are held in complete disdain by those who presume that the generational poverty of these populations is based upon such issues as politics, crime, drug addiction and other social and psychological dysfunctions. Their thinking excludes economic interventions which will empower these communities through capital, recirculation of capital, businesses, and jobs.

The failure of the agencies that are supposed to be ending poverty is unconscionable. The burden that impoverished people place on the government in terms of the need for social services, welfare, medical etc is also unconscionable. Strategies should be developed to end poverty by introducing into blighted areas programs that provide effective economic systems which increase the multipliers of indigenous economic activity such as businesses, jobs, apprenticeships, capital, income recirculation, home ownership, job accessibility etc

This type of effort will replace the social work mentality that has been taken toward inner city community development. It will begin to generate pay-offs that will eliminate the need for continued government deficits by replacing social welfare with economic opportunity. Instead of dependency on government, millions of people will gain access and participation in a capitalistic economy.

We should sue Housing and Urban Development, and all of the government infrastructure that thrive on the perpetuation of poverty. Not only do they continue to fail to change the underlying conditions of poverty, but they grow geometrically while the conditions for which they were purposed become worse and worse. Absent the empowerment of capital, dependency will multiply; bureaucracy will grow; and budgets will increase geometrically. It’s time to end this incompetence and waste. GIVE IMPOVERISHED COMMUNITIES A CHANCE AT ECONOMIC SELF-SUFFICIENCY. This will be good for them and our economy as well.

Thursday, May 6, 2010

How the System Rules Out Economic Recovery Solutions

My experiences as an entrepreneur, builder and developer prepare me well to provide insight into some of the problems that continue to plague our economy. As a person who loves and respects analyses and economics, and more importantly the word of God, I have discovered that many of the policies, programs and practices of our government work against freedom to pursue economic parity and financial independence for persons such as myself who remain continually locked out and counted out of the system.

Before discussing the litany of issues, impediments and roadblocks that I have experienced, I want to acknowledge the fact that my experiences could be considered anecdotal and not typical of general conditions were it not for the scarcity and rarity of African Americans involved productively in real estate development, and building and infrastructure construction.

I believe that it is time for us as a society to come up with answers to this problem of exclusion.
It is shameful that impediments come disguised as objective laws, rules and procedures. Ultimately, the rules are used to limit, negate and undermine the valid economic and profit-making activities of local community-based entrepreneurs. I have found that housing department, and the agencies for taxation and zoning which purport to support the idea of community development do in fact operate to defeat, hinder and even punish anyone who is audacious enough to use their own money to invest in communities without connections to power and/or corruption networks.

Being a community-based developer, my effort to take the initiative to buy houses in blighted areas for the purpose of redevelopment for profit have only engendered higher taxes, numerous citations, and great disdain from the powers that be.
My experiences include being denied pre-approved utility contractor status by Baltimore County in violation of its own rules and provisions, having a subdivision declared “expired” prior to its expiration date, being disqualified from doing minor subdivisions because of a general problem with sewer mains unrelated to the specific site of my subdivision, being locked out of community redevelopment programs because my company is for-profit (despite the fact that we deliver and do housing quicker at cheaper prices than nonprofits operating in the same area), being singled out for contemptuous and constant scrutiny by arrogant and ill-informed leadership in inspection departments particularly in Baltimore County, and, being denied a builders’ license for reasons that have nothing to do with the quality of my company’s work or our relationships with the consumers we serve.

I have been denied a permit for the second of two adjoining houses because the permit for the first house was illegally suspended without due process.

I have been cited for not cutting grass at building rehabilitation sites which, prior to our improvement operations, were dwellings for rats, roaches, other vermin, drug paraphernalia, and garbage. Even though these hideous conditions existed prior to our operations, citations were only deemed necessary to be given our company after we improved the area. These experiences occurred in such areas needing redevelopment as Homestead Street in East Baltimore, West Lafayette Ave, Bel Air Road (Baltimore city), Winters Lane, Windsor Mill Road, Liberty Road, St. Luke’s Lane (Baltimore County), just to name a few.

I have been cited, and have since learned also, that it is punishable to own a building that is unoccupied even while you are seeking funds to improve it. It has also come to my attention that such buildings may be confiscated by the city because you are unable to make profitable improvements. So, the city in its wisdom, gives citations for vacant properties, which it then sells for taxes, which it then adds to the thirty-thousand unoccupied, mostly boarded properties that it already expropriated and now owns.

In one day, I received a citation for not cutting the grass at two properties, and a citation for cutting the grass at a third. According to the inspector who cited the latter, his justification was that I did not have a “sediment control permit”. So here again, I learned that a person can be given a citation for both cutting grass and not cutting grass. Should he be unable to pay, the property could be sold at a tax sale.

My properties have consistently been given a higher tax assessment rate than similar properties in the same areas. Sometimes, even while our houses are still being built, without use and occupancy permits, they were assessed as though they were finished and occupied!

I have been required by agencies to follow the most cumbersome, expensive and time-consuming procedures in the course of performing regular construction and development activities. For instance, Baltimore County required that we put in a sewer main with 3 manholes rather than the normal procedure which would have been a simple connection from the existing sewer to serve one house. The sewer main is ten times more expensive and completely unnecessary for that one house which could have been served by a house connection. Sewer mains require bonding, engineering and other costs which also multiply the complexity of the process without benefits to either the County or the home owner.

In another instance, the County required that we put curb, gutter, and sidewalk for a single family house on an existing lot of record. Being an existing lot of record, the design for that lot as far as curb, gutter and sidewalk are concerned, had been completed many years ago. In this particular case, the original design did not include the construction of curb, gutter and sidewalk for the lots on that side of the street. In other words, the County required bonding, engineering, and construction expenses to create curb, gutter and sidewalk which connected to nothing in either direction. And for this, they held up the construction of this house, placed our company in severe financial straits, and caused the incompletion of a project which could have added employment and tax dollars.

These types of self-defeating rulings make worse and hinder the type of economic activity that multiplies taxes and income at the local level. The arrogance of public officials who overlook these positive impacts as they make things difficult for economic activity can no longer be tolerated.

Many Americans are beginning to see that our problems are caused by government agencies who deal with us using methods saddled with complex procedures, punitive interpretation of rules and regulations, and guidelines and laws, hence disqualifying us by systemic design while claiming objective fairness. Thus we have been excluded from participating in community development and reinvesting by various screens such as “creditworthiness” where there is no relationship between credit and productivity, “criminal history” where there is no relationship between a crime and competence, “bonding” where there is no relationship between qualifying for a bond and the capability to do the work, “insurance” where risk is allegedly minimized by credit worthiness, bonding, criminal history, productive capacity, experience etc., in other words all the screens that have eliminated the community builder, and so on.

It is ridiculous to see that the very source by which the nation’s tax base could be increased and thousands of person could be put back to work is being undermined by the very systems set up to provide it.

It is critical that local-based entrepreneurs be empowered by the system to create jobs, increase the tax base and provide a local example to youth and citizens of the power of the great multiplier that is in private enterprise. Unfortunately, instead of providing a positive, enabling environment in which small local builders and business are proactively encouraged and nurtured, the system construes rules, laws, regulations, and interpretations of regulations in manners to stifle productivity. In this context, more and more businesses are ruled out of participating in the economy, therefore jobs decrease, income decreases, the tax base decreases, home ownership decreases, deficits grow, dependency on government intervention in social services increases, hopelessness increases and the cost of government balloons.

Saturday, May 1, 2010

Corporate Welfare, Not Economic Development: the Waste of Government Incentives.

Recently, Gov. Martin O’Malley stuck out his chest in pride that the Maryland Economic Development Office has successfully pledged millions of dollars of incentives to attract Kaiser Headquarters to Maryland along with some 200 jobs. On the other hand, Mr. O’Malley has been harshly criticized by former governor Ehrlich for losing Northrop Grumman Headquarters and its potential 300 jobs to the state of Virginia. O’Malley, very much on the defensive, stated that we offered them everything that we could, including $22 million in incentives. Also, political mileage is being made from recent announcements that in March Maryland led the nation by creating nearly 36,000 jobs.

All this talk simply means that the public is being fed garbage about jobs and the creation of jobs. These meaningless announcements and debates signify nothing. In absolute terms, the creation of 36,000 jobs without analysis of seasonal adjustments, historical comparisons and also analysis of nature, type and duration of jobs leaves the 36,000 number meaningless from a stand point of whether or not it is good or bad news for Maryland, relatively speaking.

Between Kaiser and Northrop, the state of Maryland offered about $40 million in incentives to attract these corporate giants to locate in the state and provide about 500 new jobs ($80,000 per job created). Even though this is presented as economic development, it is really corporate welfare.

Given the severity of current economic conditions, such waste is unconscionable and cannot be sustained. We cannot afford to pay for the misconception that somehow attracting corporate giants is equivalent to economic development. The focus should be on empowering local business with incentives which will yield a multiplier effect – capital, business, jobs, income, tax income, recirculation of capital and income, basic economic empowerment etc in the Maryland economy. These corporate giants are locked into a demand-and-supply paradigm that will not multiply significant financial impacts on Maryland incomes and jobs. The revenues and expenditures of these corporate giants are fixed in existing patterns which will continue, and although they may be transacting billions of dollars per year, those funds will not necessarily multiply jobs and incomes in Maryland.

However, small and local business would be generating new supply-and-demand expenditures since it is not tied into an existing financial paradigm. Any incentives given them therefore will become multipliers of new demand-and-supply.

It should be noted that the giants were gladly given in excess of an average of over $75,000 per job created. This is ridiculous. As a builder, I could create 10 new jobs tomorrow with $75,000 of capital and keep people working for years with a million dollars. Can you imagine the multiplication that will take place if 40 builders were given a million dollars apiece?!

The same $40 million of incentives could be spent in ways that would generate over 5,000 jobs within twelve months. The type of multiplier effect that will generate 5000 jobs within the next year can be proven. This is the type of economic empowerment needed to recover the economy. Give me some incentives, and I shall prove it.

Stop feeding fat corporate giants when you should be multiplying small indigent business! Stop feeding corporate expansion and refocus on empowering the job-and-income multipliers of small, local enterprise.