March 18, 2013
THE COST OF DOING NOTHING FORETHOUGHT
INTENT: Demonstrate the cost to the City and residents of allowing these blights to go unchallenged.
The downward spiral
Hundreds of billions in net worth have been stripped from the economy. Quantitative Easing by the Federal Reserve can only do so much without net worth creation at the local level. Without net worth to move the Nation forward, the economy's wheels are spinning without gaining traction. Subsequently, jobs and opportunities continue to be lost. Despair has now settled in.
Inaction does have a real cost to both the City and the residents. The American Dream is anything but that when Banks are allowed to bludgeon neighborhoods. As Cities decline, many unsavory and costly things occur:
Graffiti is a quality of life crime. Its strident message creates fear and depresses property values. As values drop, City revenues decline as well. Graffiti cleanup is expensive.
Crimes against people and property increase as neighborhoods slip into disrepair and decay. There are two messages being sent: “the police aren't around” and “the City doesn't care”. Fear of crime negatively affects peoples spending habits. Business activities diminish and so do tax revenues to the City.
Homeowners being pushed underwater denies them the ability to sell their home. Thus foreclosures become more common when people are laid off. Houses frequently sit for years in the foreclosure process. Empty homes do not support the local economy. Businesses fail and jobs are lost. City revenues from fees on phone, garbage, power, etc are lost.
Negative net worth thwarts entrepreneurial opportunities. Job creation stalls. Tax revenue is lost.
The cost of inaction is far greater than the price of action. Price and cost are not interchangeable terms. Price refers only to the out of pocket expenditure of action. Cost is a more encompassing term. It takes into account how all of the pieces of a City are interconnected.
Cost would show that its not just a neighborhood issue. Declining neighborhoods aren't able to support a vibrant business community. That in turn creates a triple hit to the City finances. Sales taxes from businesses, property taxes from the residents, and utility taxes are the three pillars of revenue for the City. All are crumbling. The ability to have safe neighborhoods is now in jeopardy. Police protection is 56% of the the City Budget. The ability to fund this protection is now being called into question. The City has reached a tipping point.
Lies, damn lies and statistics
Using information gleaned from the internet can be dicey. Google has over 25.8 million sites listed when I searched; what does an abandoned bank repossession cost municipalities. It is a large problem throughout the U.S.
I will be referring to houses costing the City 34K in this presentation based on an FDIC Report. I am referring to costing lost revenue, not price. My City didn't lift a finger or spend a dime (price) on any of these houses with the exception of the Chase house.
Allowing net worth to drop affects more than homeowners – it effects everything including the City's finances. That year, Burien had to dip into its “rainy day fund” for 1.4 million dollars due to savage revenue shortfalls. I believe the cost of doing nothing was far greater than the 34K I quoted from the FDIC.
The cost of managerial inaction was so profound, that nothing was untouched. The decline was accelerating rapidly. I will be requesting the full implementation of the Municipal Code to turn this situation around.
TEXT OF SPEECH
According to the King County Assessor’s Office property values in Burien are falling 35% faster than Sea-Tac, 35.1% faster than Tukwila, and 34.6% faster than Des Moines.
Houses like these on the overhead projector are scattered throughout Burien. Each one affects the property values for three square miles and with the City having only 10.1 square miles these houses cannot be allowed to exist without serious financial results for the homeowners of Burien, the businesses of Burien and the City of Burien itself.
According to the FDIC each one of these houses cost the City 34K in lost revenue and the surrounding home values go down by 220K.
These 8 houses on the screen have cost the City 589K in lost revenue in the last three years.. The residents of Burien have lost $208,125,000 in net worth last year above and beyond our surrounding Municipalities because the City refuses to take action against these type of houses.
The code policy of reactively dealing with code issues gives us houses like those on the screen. There are somewhere between 50 and 100 houses like this throughout Burien. Some are Bank repos and some are owned by slumlords.
Not one new law has to be enacted to deal with every house on the screen.
It would take the City no more than 40 man hours to abate each one of these. In one year the City would add 1.7 million dollars to the City coffers and increase homeowners net worth in excess of 1 billion dollars by dealing with these houses using the existing BMC.
It would send a powerful message to potential home buyers that Burien is the kind of City that will watch their backs and deal effectively with issues like these as they arise.
What it does require, is the City Council to send new marching orders to the City Manager to enforce the existing Burien Municipal Code.
RECONNAISSANCE March 18, 2013
I used the King County Assessors Office to acquire information on Burien and the surrounding Cities of Sea-Tac, Tukwila and Des Moines. All of these communities had a similar housing inventory. I compared the performance of these three surrounding Cities to Burien. This underscores the inaction on the part of the Council in monitoring the performance of the City.
I Googled: what does an abandoned bank repossession cost municipalities. There were 25.8 million results. I used an FDIC report for my information. This shows the price of action. The actual cost of inaction was much greater.
Comparable real estate values are affected for a one mile radius. That is 3 square miles. Shows the Council not being cognizant of the cost of these blights to the City's finances.
My ability to control the volume of my voice has returned to normal. Though I still have some tightness in the Solar Plexus, the breathing exercises are starting to work.
Moving the Nation Forward
Engaging City Hall is the easiest way to add hundreds of billions of dollars to the Nation's GDP. As these Bank REO's are cleaned up, neighborhoods will once again become desirable. Home values will improve. People will have money to engage opportunities. The economy will get moving. Underemployment will shrink and wages will rise. The economic recovery will become sustainable.
I am proposing a more expansive change than just a repatriation of our net worth. It involves a fundamental change in the way government engages corporate power. City Hall is the one that is allowing these problems to fester in our neighborhoods. They have the laws to deal with these issues – yet refuse to take action.
The key to turning this around at the National level starts with City Hall. Speaking effectively requires staying out of the blame game and keeping the audience focused on solution.
Moving Beyond Victim
Political power frequently has a “control over others” component. That boundary violation fans the flames of anger throughout this Country. Dealing with this issue requires engagement, not fighting.
When we fight, we relegate ourselves to being a “victim”. Victim is a place where blaming and paralysis occur. Despair and fiery anger are its hallmark. Moving away from this stance requires a conscious choice – thoughtful action. The action I am talking about is giving up blame and moving towards solution.
Solution is about engaging my audience – the community. The Council won't like it, but judiciously articulating the problem and offering a solution will get their attention. Councils don't like being questioned about their policies. Being portrayed as ineffective, meeting after meeting, will get action.
Banks also represent a vicious form of power over others – casual unconscious violence. City Hall is the venue to engage this pernicious boundary problem. Using Code and Law will call into question the City Manager's job performance. The Manager will do what it takes to save their job – they can move mountains when they are motivated.
I've seen the results of motivating a City Manager to get even the most obstinate bank into compliance with Municipal Code. The monetary results – increased net worth – are what the Federal Reserve refers to as the “wealth effect”.