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  • New Chicago Machine Scam In the Works: Eminent Domain Seizure of ‘Underwater’ Mortgages

    With property values down 40% since 2006 in Chicago, the Chicago Democrat Machine has a new scam brewing. The Chicago Sun-Times reports:

    Should Chicago use its sweeping condemnation powers to help stem the foreclosure epidemic — paving the way for underwater mortgages to be written down and repackaged under terms more affordable to struggling homeowners?

    The City Council’s most powerful aldermen believes it’s a concept worth considering, which is why the Finance Committee chaired by Ald. Edward M. Burke (14th) will hold a joint committee hearing on the controversial idea on Tuesday.

    If this passes, the potential for corruption will be unlimited in Chicago. Alderman Burke controls Chicago’s tax code. But, the conflicts are even more pronounced. Alderman Burke slates all the judges in Cook County which means a Burke-slated judge will hear the property seizure case. Even that’s not all; Alderman Burke’s day job is running a property tax appeals tax firm. Being a client of Alderman Burke’s probably will be a good way to avoid a ‘takings’. Expecting a fair appeal, in court, on the seizure? Alderman Burke’s wife, Anne, is a justice on the Illinois Supreme Court. Expecting help from the Illinois state legislature to clamp down on Alderman Burke’s conflicted lifestyle? Alderman Burke’s brother, Daniel, is Assistant Majority Leader of the Illinois General Assembly.

    In conclusion, you can be assured that seizing ‘underwater’ mortgages in Chicago will become a money maker for Alderman Burke. Nothing has left Alderman Burke’s attention in terms of making money off the taxpayers of Chicago. The Chicago Sun-Times has reported that Chicago Public Schools have a history of paying milk money to Alderman Burke. In Chicago, even if you have a checkered past you can still work with Alderman Burke as long as you pay tribute.

  • Vermont’s ‘New Agriculture’: Mini-Farms and the Urban Boundary

    The “new agriculture” is typically small-acreage, intensively-managed, organic (in contemporary terms) in that it avoids both chemical use and genetic modification, and uniquely adaptable to such practices as niche-market services, consumer associations (community-sharing) and pick-your-own. One could argue that it won’t supplant present-day large-scale commercial generic-commodity agriculture any time soon. But one should also recognize that, if industry observers are correct in gauging the size of this producer-to-consumer sector at 20% of the total, then, logically, rural land-use planning ought to be moving to recognize this “new normal” and providing for it in statute and regulation.

    Just the opposite seems to be happening. The so-called “Smart-Growth” doctrine, opposed to traditional low-density suburban development for both residential and commercial land use, now seems to favor smaller lots for residential and commercial use. No more wooded and lawned exurban campuses for business, manufacturing, or research; no more large-lot trophy-house-or-less subdivisions, but very large indeed minimum lot sizes in beyond-the-new-city-wall farmland.

    In Oregon, for example, the minimum farm-lot size is 80 to 160 acres, and is described in various studies of Oregon’s land use laws as the smallest presently acceptable to the State Land Conservation and Development Commission. The same regulatory body calls for a minimum residential lot size of 20 acres for areas beyond the adopted Urban Growth Boundaries, “…to help contain Oregon’s growing urban population inside the growth boundaries”. Similar regulations in Illinois and Pennsylvania call for 40 and 50-acre minimum farm-lot sizes. And these lots come with residential prohibitions. In Oregon, for example according to The Cascade Policy Institute, there’s a State regulation “…requiring a piece of property zoned as high-value farmland to generate $80,000 in annual sales before a dwelling can be built for the farmer.”

    Translated this to a generic-commodity crop like corn, more typically associated with large-scale commercial farming than with small-acreage mini-farms. The 80 acres, if farmed to match the recent new-high national average yield of 160 bushels per acre, and selling at a recent $6 per bushel,, would be generating 160 x $6 x 80, or $76,800.

    This means that a typical Midwestern Corn Belt corn-grower wouldn’t be welcome as a new resident in Oregon’s Willamette Valley, a notably gentrified rural district comparable in size and population (not counting the urban populations) to such enclaves as Virginia’s Shenandoah Valley and, some would argue, the entire State of Vermont. The Willamette Valley is well-known in oenophile circles for its more-valuable-than-corn bottled product. A vineyard operator with an 80-acre operation there would easily meet the $80,000 (that’s a gross of $1,000/acre) threshold benchmark and be permitted (literally) to build a house for the owner.

    Whether operators of mini-farms in the ¼ to 10-acre range (as defined by the titles of advisory books which offer author advice on “X Acres and Independence”) can generate $1,000 per acre depends on, among other factors, production choice. Pastured beef is certainly less likely than row-crop broccoli.

    Judging by the percent of all farms, large to small, which are reported by the USDA to derive some 90% of household income from off-farm non-farm jobs, a safe guess for mini-farmers as a sub-group would be “not likely”. And even if they could gross $1,000 per acre, doing so on, say, five acres (a guessed-at average; we have no official stats, although the USDA tells the that the 0-50 acre category is increasing) doesn’t suggest economic “independence” in comparison to recent Bureau of Labor Statistics stats for median US household income in the $50,000 range.

    And, of course, if there are any mini-farms in the 80-acre size, they would be extremely few in number and far off on the right-hand side of the size-distribution bell curve. That’s for another reason: labor.

    All the qualities associated with “the new agriculture” indicate more intensive management time and effort than for more traditional, large-lot commodity agriculture, with its dependence on 10- and 12-row equipment to enable a single operator with minimal help to produce at large scale, The typical mini-farm operator-plus-household simply couldn’t apply the same level of intensive management at an 80+acre level as they can at the ever-more-widely-practiced 5-acre level. With the exception of some designed-specifically-for-small-operations equipment like cultivators and harvesters (and sold mostly to Third World operators), there’s no equipment yet invented to replace the grower touch in dealing with any produce from flowers and table crops.

    Oregon’s farm-zoning requirements — not less than 80 acres in farm size, not less than $80,000 in annual gross revenues; add in the built-in labor question — all seem specifically designed to prevent mini-farm-based rural land use practices, and to encourage instead a more limited range of larger-scale choices. These range from commercial-scale vineyards, to mechanizeable operations like sod and organic wheat, and relatively low-labor-requirements-per-acre operations like beef grazing, All of the above are hardly do-able, economically, at the typical small-acreage scale of the usual mini-farm. The question then becomes the reasoning behind the State government’s land-use-management decision.

    Two possibilities, seemingly improbable but both historically based, come to mind.

    One posits the competition-prevention scenario; the concern over loss of control of any part of the eventual consumer dollar. “New Ag” and its mini-farms have, over the last two or three decades, raised their “market share” from insignificant to, some observers claim, as much as 20%.In this view, any new farm-stand just outside the “urban growth boundary” is a dollar-for-dollar challenge to the established retailers, distributors, and processors, and even the commodity brokers and buyers in the business chain that ends at the already-established retail check-out counter well within the “urban growth boundary”.

    In recent history, this concern first showed up in Vermont in the ‘70s, when grocery-chain lobbyists attended a raw-milk-ban proposal hearing in force to proclaim that their only concern was “public health” and that, for consumer safety, all milk should be legally required to move from farm to home through their channels alone. Across the nation now, as do-it-yourself or sell-to-neighbors enterprises such as urban poultry flocks or home-baked pies at farmers markets show, legal attempts at prevention (supposedly on behalf of consumer health, but more evidently on behalf of food retailers, almost universally) now take place. For states to respond to industry lobbying pressures for new rural-land-use planning supposedly for preservation of farmland, but actually for preservation of market share, would not be an unreasonable speculation.

    The other posits a tilt towards favoring land acquisition by a wealthier and more gentrified sector of society, as opposed to the sorts of folks who established small-acreage live-off-the-land communes and collectives in the ‘60s. Setting the cost-of-entry and cost-of-stay high enough encourages the former and discourages the latter, precisely as large-lot residential zoning (and even minimum-house-size requirements) did in the more self-consciously exclusive Northeastern suburbs in the ’70s.

    Seen in that light, an 80-acre rule which works well for private-label vineyards and not well for self-sufficiency home-steaders, organic or otherwise, makes some logical sense. Just as different jurisdictions adopt different residential lot (and housing) sizes, it’s probable that some States will pursue the Oregon 80-acre farm-lot model and some won’t. But the economic purchasing power of the consuming 20% now eager to buy organic veggies at farmers’ markets won’t go away.

    Expect some insufficiently-successful vineyard operator near Portland to sub-divide his eighth-section (a little archaic surveyor’s lingo, there; the Homestead Act of 1862 prescribed operation of 160-acre quarter-sections) into 15 little 5-acre leased farmettes, at a total ground rent high enough for the $80,000 annual-revenue permit to build his own mini-mansion on the 16th.

    Flickr Photo by Rick Skully: Uphill view of Four Springs Farm, Windsor County, Vermont. At the top of the photo is the outdoor kitchen.

    Martin Harris is a Princeton graduate in architecture and urban planning with a range of experience in fields ranging from urban renewal and air-industrial parks to the trajectory of small-town planning and zoning in states like Vermont.

  • A New Brand for Houston

    "We’ve probably spent in excess of $75 million in the past 30 years on image campaigns, and we keep coming back and saying, ‘Well, that didn’t work.’"

     – Former GHCVB CEO Jordy Tollett in the Houston Business Journal

    A list of many of those can be found here, including the old standbys "Bayou City", "Space City", and "Energy Capital of the World" (Wikipedia has more here).  And despite many of my own previous attempts on this blog, inspiration has struck me again, especially after reading this recent article at Salon.com on why every city needs a brand (and more on that here).

    A good city brand works on four different levels:

    1. It attracts tourists.
    2. It attracts new residents, especially highly talented and educated ones.
    3. It attracts expanding businesses.
    4. It inspires the citizens and creates a local identity.

    But it’s very hard to come up with a single brand that does all four.  Even some of the most successful brands don’t necessarily hit them all.  Two of the most famous city brands are New York’s "I {heart} NY" and Las Vegas’ "What happens in Vegas stays in Vegas."  And in Texas we’re all familiar with "Keep Austin Weird."  In this case, I think I’ve stumbled upon something that can work across all four.

    Before I reveal it, I need everybody to drop their cynicism shields.  I don’t think the most successful city brand in history, "I {heart} NY" could get off the ground today with our snarky cynical culture.  Just like new songs, sometimes ideas need time to grow on you.  So open up your mind, hold back judgment, and let me  reveal some context-setting definitions and the brand first followed by the supporting reasons.

    Hospitality 

    Noun: The friendly and generous reception and entertainment of guests, visitors, or strangers.

    Hospitable 

    Adjective: 1) Friendly and welcoming to strangers or guests.  2) (of an environment) Pleasant and favorable for living in.

    It started with me thinking of "Houston Hospitality", but then the symmetry jumped out at me it became

    Houspitality

    What the "Aloha Spirit" is to Hawaii, the "Houspitality Spirit" can be to Houston.

    Here are some of the key words and phrases people often use when describing Houston and how they fit:

    • Houspitality for visitors and newcomers: welcoming culture to outsiders, friendliness, hospitality (duh), openness to people from all over the world (diversity), amazing restaurants, museums, arts, and other amenities
    • Houspitality for businesses: business-friendly taxes and regulation (including no zoning), culture supportive of  entrepreneurship, open business culture
    • Houspitality for residents: friendliness, openness, affordability, ease of living, high standard of living, social mobility, opportunity, open-minded, charitable (especially after Hurricane Katrina), "big small town"

    Some additional supporting reasons:

    • Short and sweet, and people "get it" pretty easily.
    • Fits well with the Texas Medical Center helping people from all over the world (and the word "hospital" is right there).  It also fits well with the airports, port, GHCVB, GHP, and others.
    • It differentiates us from other big cities (ever heard anybody talk about the friendly reputations of NYC, DC, Chicago, SF, or LA? I didn’t think so) as well as tourist destination cities (which tend to become jaded towards visitors).
    • UH’s Hilton College of Hotel and Restaurant Management uses the motto "We are hospitality", and is one of the top ranked schools in the country for that specialty.
    • Sounds like "vitality", which is another good brand association.
    • I found a cool, somewhat similar concept here, transforming Humanitarian to Houmanitarian.
    • I think more and more people today are hungry for real community, which is harder and harder to find.  Houspitality is a great brand to convey our real sense of community in Houston.

    Finally, I’d like to end with some supportive excerpts from Ken Hoffman’s recent excellent column on what Forbes got right and wrong about Houston being America’s Coolest City.  I think you’ll easily see the Houspitality Spirit running through them…

    I remember thinking, am I going to have to change? Am I going to have to learn how to write Texan?
    I didn’t change anything. That’s part of what makes Houston cool. You can come here and stay yourself and fit right in.

    Houston is cool because whoever or whatever you are, you’re welcome here. The first two years I lived here, I was burning out the copy machine at Kinko’s applying for jobs anywhere else. Now I wouldn’t leave here for anything. …

    Where better to get better?
    When a congresswoman got her head half blown off, she came to Houston to get better. When Middle East oil sheiks need surgery, they come to Houston. We have the best medical facilities in the world. I didn’t think that was cool until I was run over by a lunatic in a van and was taken to the hospital in an ambulance.
    I still have no idea what hospital I was taken to. But they fixed me up. That was cool.

    We’re in this together
    And please stop talking about Houston’s "diversity." The only thing the word "diversity" does is separate people. Sure, we have ethnic neighborhoods; those are good for a city. It helps in picking a restaurant.
    I’ve never seen a city where people blend more gracefully than Houston.

    Houston is cool
    I thought it was pretty cool when Houston welcomed Hurricane Katrina victims to ride out the storm’s aftermath here. I spent a couple of days in the Astrodome, handing out supplies and clothes to Katrina refugees. I learned a lot about Houston after Katrina. The experience changed me, too.

    Being cool is a city that makes you feel like you belong. 

    This piece originally appeared at Houston Strategies.

  • The Screwed Election: Wall Street Can’t Lose, and America Can’t Win

    About two in three Americans do not think what’s good for Wall Street is good for America, according to the 2012 Harris poll, but do think people who work there are less “honest and moral than other people,” and don’t “deserve to make the kind of money they earn.” Confidence in banks is at a record low, according to Gallup, as they’ve suffered the steepest fall in esteem of any American institution over the past decade. And people have put their money where their mouth is, with $171 billion leaving the stock market last year alone, and 80 percent of Wall Street communications executives conceded that public perception of their firms was not good.

    Americans are angry at the big-time bankers and brokers, and yet, far from a populist attack on crony capitalism, Wall Street is sitting pretty, looking ahead to a presidential election that it can’t possibly lose. They have bankrolled a nifty choice between President Obama, the largest beneficiary of financial-industry backing in history and Mitt Romney, one of their very own.

    One is to the manner born, the other a crafty servant; neither will take on the power.

    Think of this: despite taking office in the midst of a massive financial meltdown, Obama’s administration has not prosecuted a single heavy-hitter among those responsible for the financial crisis. To the contrary, he’s staffed his team with big bankers and their allies. Under the Bush-Obama bailouts the big financial institutions have feasted like pigs at the trough, with the six largest banks borrowing almost a half trillion dollars from uncle Ben Bernanke’s printing press. In 2013 the top four banks controlled more than 40 percent of the credit markets in the top 10 states—up by 10 percentage points from 2009 and roughly twice their share in 2000. Meantime, small banks, usually the ones serving Main Street businesses, have taken the hit along with the rest of us with more than 300 folding since the passage of Dodd-Frank, the industry-approved bill to “reform” the industry.

    Yet past the occasional election-year bout of symbolic class warfare, the oligarchs have little to fear from an Obama victory.

    “Too big to fail,” enshrined in the Dodd-Frank bill, enjoys the full and enthusiastic support of the administration. Obama’s financial tsar on the GM bailout, Steven Rattner, took to The New York Times to stress that Obamians see nothing systemically wrong with the banking system we have now, blaming the 2008 market meltdown on “old-fashioned poor management.”

    “In a world of behemoth banks,” he explained to we mere mortals, “it is wrong to think we can shrink ours to a size that eliminates the ‘too big to fail’ problem without emasculating one of our most successful industries.”

    But consider the messenger. Rattner, while denying wrongdoing, paid $6.2 million and accepted a two-year ban on associating with any investment adviser or broker-dealer to settle with the SEC over the agency’s claims that he had played a role in a pay-to-play scheme involving a $50,000 contribution to the now-jailed politician who controlled New York State’s $125 billion pension fund. He’s also expressed unlimited admiration for the Chinese economic system, the largest expression of crony capitalism in history. Expect Rattner to be on hand in September, when Democrats gather in Charlotte, the nation’s second-largest banking city, inside the Bank of America Stadium to formally nominate Obama for a second term.

    In a sane world, one would expect Republicans to run against this consolidation of power, that has taxpayers propping up banks that invest vast amounts in backing the campaigns of the lawmakers who levy those taxes. The party would appeal to grassroots capitalists, investors, small banks and their customers who feel excluded from the Washington-sanctioned insiders’ game. The popular appeal is there. The Tea Party, of course, began as a response against TARP.

    Instead, the party nominated a Wall Street patrician, Mitt Romney, whose idea of populism seems to be donning a well-pressed pair of jeans and a work shirt.

    Romney himself is so clueless as to be touting his strong fund-raising with big finance. His top contributors list reads something like a rogue’s gallery from the 2008 crash: Goldman Sachs, JPMorgan Chase, Morgan Stanley, Credit Suisse, Citicorp, and Barclays. If Obama’s Hollywood friends wanted to find a perfect candidate to play the role of out-of-touch-Wall Street grandee, they could do worse than casting Mitt.

    With Romney to work with, David Axelrod’s dog could design the ads right now.

    True, some of the finance titans who thought Obama nifty back in 2008 have had their delicate psyches ruffled by the president’s election-year attacks on the “one percent.” But the “progressives,” now tethered to Obama’s chain, are deluding themselves if they think the president’s neo-populist rancor means much of anything. They get to serve as what the Old Bosheviks would have called  “useful idiots,” pawns in the fight between one group of oligopolists and another.

    This division can be seen in the financial community as well. For the most part Obama has maintained the loyalty of those financiers, like Rattner, who seek out pension funds to finance their business. Those who underwrite and speculate on public debt have reason to embrace Washington’s free spenders. They are also cozy to financiers like John Corzine, the former Goldman Sachs CEO and governor of New Jersey, whose now-disgraced investment company MF Global is represented by Attorney General Eric Holder’s old firm. 

    The big-government wing of the financial elite remains firmly in Obama’s corner, as his bundlers (including Corzine) have already collected close to $20 million from financial interests for the president. Record support has also poured in from Silicon Valley, which has become ever more like a hip Wall Street west. Like its east-coast brethren, Silicon Valley has also increased its dependence on government policy, as well-connected venture capitalists and many in the tech community  have sought to enrich themselves on the administration’s “green” energy schemes.

    Romney, on the other hand, has done very well with capital tied to the energy industry, and others who invest in the broad private sector, where government interventions are more often a complication than a means to a fast buck. His broad base of financial support reflects how relatively few businesses have benefited from the current regime.

    Who loses in this battle of the oligarchs? Everyone who depends on the markets to accurately give information, and to provide fundamental services, like fairly priced credit.

    And who wins? The politically well-situated, who can profit from credit and regulatory policies whether those are implemented by  Republicans or Democrats.

    American democracy and the prosperity needed to sustain it are both diminished when Wall Street, the great engineer of the 2008 crash, is all but assured of victory in November.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and contributing editor to the City Journal in New York. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    This piece originally appeared in The Daily Beast.

    Wall Street bull photo by Bigstockphoto.com.

  • Avoiding Expensive Municipal Mergers

    An article in The Wall Street Journal discussed attempts to merge local governments in Michigan. While efforts such as these gain wide support because of the belief that they will save money, there evidence shows the opposite.

    Government consolidations may seem to make all of the sense in the world academically. In practice, they cost more. There are no economies of scale in larger governments, except for spending interests. Voters have less influence in larger jurisdictions.

    A simple look at the evidence, rather than the theory, indicates this. Our analysis in five states shows it, and the differences are stark. Lower per capita spending and taxation at the local general government level is associated with smaller units of government.

    It is not therefore surprising that in Toronto, Hamilton and Ottawa there have been calls to "demerge" cities forcibly merged in the 1990s. In a debate in Toronto last October with a top transit official (a member of the left leaning National Democratic Party), we agreed on at least one thing — that Toronto’s amalgamation had been a mistake.

    Nor is it surprising that despite huge electoral barriers erected by the Charest government, a number of municipalities voted to demerge from the forcibly enlarged ville de Montreal in the early 2000s.

    For the most part, however, there is no going back. Mergers are forever. So are the higher taxes and higher spending.

    My commentary in Canada’s National Post  dealt with this issue on the 10th anniversary of the Toronto amalgamation.