The Obama administration is hurrying its fiscal stimulus plan. I’ve lost count of the trillions the federal government has already spent to deflect the worst crisis since the Depression. At a recent Miami environmental conference, all the talk was of ‘buckets’ of federal money coming to South Florida. The question on everyone’s lips: how many infrastructure projects are ‘shovel ready’?
“Shovel ready’ is a message frame calling to mind the garage shovel for snow removal or cleaning out street gutters or the backyard garden. Fair enough. But how does the federal government pour a trillion dollars into the economy without using a very large size funnel? And which, among agencies, is ready to administer and audit such massive doses of currency after a decade when the primary purpose of government was to dismantle regulatory authority; who exactly is left to determine which projects are shovel ready or not?
We know how to re-pave highways and interstates, or re-build bridges. We know how to build an asset bubble from houses and stocks. If we put enough billions together, we can even put tunnels under cities and build imaginary bridges of financial derivatives from suburbs in Atlanta to housing developments in Phoenix and Tampa and Minneapolis that all look so similar you might forget what city you are in should you ever get lost without directions home.
But if these investments—or the debt they represent—were real economic growth the US economy would not be stuck today on the coral reef, waiting to be looted by pirates. So let’s take a look how the fiscal stimulus is likely to proceed.
The broad devolution of federal authority has turned federal agencies into caretakers. Today, the only way to distribute massive amounts of federal stimulus money is through bucket lists developed by states, filtered through decisions of local power brokers at the municipal and county level.
Several months ago at a meeting of the Miami-Dade County Commission, I watched the results applied to a $62 million dollar grant from US Housing and Urban Development for the purpose of purchasing low-income apartment building foreclosures to benefit Miami’s swelling ranks of poor and disadvantaged. The hour-long debate from the dais wrapped the thirteen county commissioners, elected by single-member districts, into instant acrimony along ethnic and racial lines despite the fact that professional county planners and staff had clearly organized their presentation to provide objective data and information about need, availability, demographics and location.
In this respect, the $62 million HUD grant was a test-run of what happens when the federal government gives money away to local jurisdictions. We’ve already seen what the banks have done with the first installment of the TARP plan: they squirreled it away into their own books. Without audit and regulatory controls, the only way that the trillion dollar fiscal surplus will reach the states and into communities is through the same channels that proved so inept in protecting the public interest.
In fast growing states like Florida, ‘shovel ready’ depends on whether or not permitting for specific infrastructure projects is complete according to local and state laws. Here is one thread, one specific case, that easily traces back to spool from which it unwinds.
Kendall is an amorphous patchwork of platted subdivisions and home to more than 250,000 in west Miami-Dade County. Its traffic infrastructure is a nightmare. Most residents travel to jobs east then north to jobs downtown, joining a flood of hundreds of thousands of additional commuters in cars from earlier ring suburbs closer to Miami. Although Miami is less than fifteen miles away, the work commute by car is often more than two hours a day. This will sound familiar to tens of millions of Americans, trapped in suburbs and cars of their own.
During the building boom in Florida, land speculators and developers made a fortune in thousands of scattered low-density areas like Kendall; building and profiting from leap-frog developments in platted subdivisions to sprawl further toward the Everglades and into important watersheds, even as the state and federal government was trying, year after year, to cobble a plan together to revive the faded and dying River of Grass.
“You can’t stop it,” said Al Hoffman, the most influential developer in a state crowded with influential developers. “There’s no power on earth that can stop it!” Hoffman, the energetic leader of WCI Communities Inc., knows a bit about power. He was co-chair of George W. Bush’s presidential campaign and the Republican National Committee’s finance chair. Now he’s the top money man for Gov. Jeb Bush — a former developer himself — and heads an exclusive council of CEOs who advise the governor on policy. A scribbled note from the president hangs on his office wall: “You are the man!” So wrote the Washington Post in 2002. “The unstoppable force Hoffman was talking about is the runaway development marching from southwest Florida toward the Everglades. The Naples area was the second-fastest-growing in America in the 1990s. The Fort Myers-Cape Coral area is not far behind. And the gated golf course communities that have come to define this subtropical mecca are spreading east. “It’s an inevitable tidal wave!” declared Hoffman, 68.” (‘Growing pains in Southwest Fla.’, Washington Post, June 25, 2002)
In Florida, former Gov. Jeb Bush put Al Hoffman at the head of the business Council of 100 in 2000. Hoffman’s enthusiasm was reinforced by the unspoken, certain awareness that massive infrastructure projects were in the pipeline to accommodate Florida’s growth—from trans-state gas lines to feed new power plants, to new highways bi-secting undeveloped portions of the state, and plans for new airports to benefit large landowners like the St. Joe Company.
Suburban sprawl relies on gargantuan scale to deliver both profits and political orthodoxy. That scale needs to be continuously replenished by ‘shovel ready’ infrastructure. Although the housing asset bubble began to collapse in 2006, the big infrastructure pieces promoted by Hoffman and his council friends—highways, water, airports, ports, electric utilities—are all on decadal permitting timelines. Many of these projects were conceived in the full bloom of the housing asset bubble. According to the Washington Post, in 2001, Hoffman’s former company sold $1.1 billion worth of homes. Today, it no longer exists except as a shell of its former ebullient self. But the projects advocated, planned and put in motion by state agencies at the direction of the Florida legislature at the direction of the Council of 100 collectively, or individually in their own communities, are very much in the pipeline.
If they are not ‘shovel ready’ now, they will be among the first to be ‘shovel ready’ as soon as the federal money starts landing in the hands of local decision-makers. It goes without saying that in Florida, these projects were conceived by GOP contributors from the development and real estate industries. Here is a specific example.
West of Kendall, some of the most powerful Republican development interests in the state—who exerted their influence as lobbyists or campaign donors or behind the scenes—were pushing for new infrastructure along the western-most boundary of the county, a two lane road serving farmers called Krome Avenue. These political entrepeneurs made huge speculative investments adjacent to Krome Avenue and outside the Urban Development Boundary.
Data on these investments are publicly available through county tax rolls and real estate listings. One recent listing is for a 49 acre parcel for sale outside the Miami-Dade Urban Development Boundary at $1.7 million or $34,694 an acre. But during the building boom, high land acreage just inside the Urban Development Boundary, where local government was committed to providing infrastructure like roadways, sewerage, water, and schools, was selling for nearly $1,000,000 an acre. On the other side of the UDB, prices in anticipation of zoning changes had soared from only a few thousand an acre upwards to $100,000. The difference? A zoning decision to move the Urban Development Boundary.
South Florida’s lobbyists-turned-developers purchased Krome Gold Ranches (Rodney Barreto, Agustin Herran, Armando Guerra) at the peak of the market in December 2005 for $44,608,600 for 466 acres, or, $95,726 an acre. Baretto is a top recruiter for Republican causes and candidates in Florida; former Gov. Bush appointed him to the Florida Wildlife Commission where he is now chairman. Baretto has been a primary force behind planning and efforts to widen Krome Avenue; a purpose that would serve requirements of Florida growth management law requiring that traffic infrastructure should be in place before major development.
Just east of this property are 125 acres owned by Neighborhood Planning Company (Armando Guerra, Agustin Herran, Ramon Rasco, Carlos Garcia and Sergio Pino), bought in July 2005 for $15,000,000, or, $120,000 an acre. Krome Investments, LLC (Sergio Pino and Armando Guerra), in the same area, bought 59 acres in December 2005 for $6,621,440 or $112,227 an acre. Pino was a Bush-Cheney “Ranger” for having raised at least $200,000 for the president’s 2004 re-election campaign and, according to the St. Pete Times, “is a major donor to Gov. Bush’s non-profit educational foundation.”
This property is near Lennar Homes proposed 1000 acre development called Parkland. The bulk of Parkland property was purchased by Ed Easton–a close Bush associate–as trustee for Krome Gold Land Trust; approximately 614 acres were purchased in late 2004 for nearly $65,000,000 according to County Property Appraiser records. Easton, a close Bush family friend and major polical donor, and others, including Pino, appear to have paid over $100,000 per acre for this property as well.
Assuming that current market value per acre outside Miami’s Urban Development Boundary on Krome Avenue is $34,700, then these four investments cost about $132 million and now have a paper loss of more than $88 million. The only way these investors, or their banks, can begin inching back to their original investment value is by securing zoning and permitting changes. And what these GOP contributors need most of all is for transportation needs to be met by public investment.
In Miami-Dade, County Commissioner Joe Martinez has been doggedly pushing for the expansion of the CSX rail right-of-way despite the fact that citizens and residents are strongly against the measure because traffic infrastructure to get people from where they live to where they work is abysmal. Parkland is bordered by a rail line owned by the CSX Corporation. In the final months of his tenure as governor, Jeb Bush made a deal with CSX for its rights-of-way. Most of the public attention is to the CSX issues in the middle of the state, butCSX remains a subject of considerable sensitivity to the former governor.</a>What the CSX project would do is make it easier for Parkland and other land speculators in the area to make the claim for traffic “concurrency” and meet the state planning mandate.
Citizens have fought in one public hearing after another, to prevent the use of the CSX right-of-way and Krome Avenue widening, both, as a justification for more ‘shovel ready’ sprawl. In a January 5th 2009 public announcement, the local transportation planning agency issued the following press statement: “The Miami-Dade Metropolitan Planning Organization (MPO) has initiated the CSX Rail Corridor Evaluation Study to further address issues arising during the Kendall Link Study (2007), which analyzed rapid transit options for the Kendall area. The CSX Rail Corridor Evaluation Study’s goal is to examine the feasibility of a broader set of transportation options along the existing CSX rail corridor from Miami International Airport to the South Dade and Kendall areas. In addition to this meeting, the MPO will also be conducting periodic public meetings throughout the study, which is scheduled to be completed in June 2009.”
Barry White, a Miami resident and board member of Citizens Against Nonconcurrency Task Force, wrote a stinging rebuke to county commissioners: “How can they propose such a study except as part of a comprehensive plan for Kendall and the area? Wasn’t that what the MPO was instructed to do? What is the impetus for such a narrow and specific study and effort? Who’s ox is being fed? What about (mass transit) on SW 137 Ave? What about (mass transit) in the whole area? What about MDX’s proposed extension of SR836 south around SW 162 Ave. No funds or energy should be expended on the CSX red herring until an overall plan is prepared. MPO already wasted almost $900,000 on studying this area.”
The lesson of West Miami Dade is clear: when the Obama White House turns on the fiscal spigot, the flood of money will find a way to accrue, first, to relieve the financial pressure on private investors and land speculators whose claim on local authority is still secure and tight, notwithstanding dire economic circumstances. Widening Krome Avenue and the CSX right-of-way issues will be pushed deeper into the permitting pipeline controlled by political appointees whose job security depends on a political order that may be down on its luck but is very much intact; the revolving door between lobbyists, big engineering and planning firms, senior government agency staff and public officials.
The other side of the argument is that environmental regulations are adequate to the purpose of protecting the public interest. If this is true, why is staff morale at agencies like Miami Dade Environmental Resource Management or the Florida Department of Environmental Protection in the pits? Why is there no connection, whatsoever, between state transportation planning and environmental permitting agencies? Why, then, between 1999 and 2003 in Florida, did the US Army Corps of Engineers approve more than 12,000 wetlands permits and reject one. During the same period, 84,000 acres of wetlands vanished. (“They won’t say no”, St. Pete Times, May 22, 2005)
The unwritten, and mostly untold history of these agencies is how the housing asset bubble required the mission of these agencies to be thwarted and deformed to suit the needs of builders and developers. A Republican legislature and county commissions dominated by development interests literally threw gasoline on the fire of unsustainable development, permitting sprawl as fast as Wall Street could finance it, showering fees, commissions, and billions in compensation along the way; all based on persuading distant investors who didn’t give a damn about the Everglades or anyone’s quality of life so long as their principal and interest was AAA rated and insured.
The reality is this: Florida politics for the past decade was organized around the principle that massive public investments (through bonding and debt creation to benefit dealers, brokers, and local operators)—like airports (St. Joe Company) or highways (Miami-Dade County) could be steered to employ public resources for private gain. The essential feature was to misprice risk, through fealty to a regulatory regime that served the zoning and permitting processes benefiting an insulated political and economic elite.
The shovel-ready plans that the Obama White House will find at the local level were created through a planning and regulatory regime that served very different masters. Some of those masters are gone. They banked their profits. But there are others who want their game back, and they did not necessarily vote for Barack Obama. How ironic would it be if their best laid plans that had gone to waste through greed and hubris would be delivered by a Democrat in the White House? After all, who needs ficticious debt created by Phd mathematicians housed at Goldman Sachs and Lehman Brothers and Mother Merrill and Citigroup, when the doors to the public treasury are wide open?
Get the nail guns going: that is the political artifact of the housing boom.
Without audit standards or control even to control the TARP, it is clear that billions of dollars will be channeled exactly as they were before the asset bubble crash, mainly because the purpose of government these long years has not been to innovate the economy but to bulwark and to protect zoning councils responsible to development interests who fund political campaigns.
Here is what should happen: the strings attached to the trillion dollar fiscal stimulus should prevent investment in infrastructure that simply seeds a failed model of economic growth: suburban sprawl. What Miami Dade citizens have said for decades, and what public officials have neglected for as long, is simply this: take care of the needs of existing residents first. Protect the quality of life and enhance the livability of places where infrastructure deficits are enormous; especially related to mass transit serving urban areas of the nation.
President-elect Obama administration must understand that his best efforts to rescue the US economy from the deepest crisis since the Depression will be steered by the political artifacts left by the asset bubble related to housing. Why is this important? If recalcitrant operators, in states like Florida for instance, are able to steer the hundreds of billions filtering downward in ways that simply reinforce a static order– like trying to put humpty dumpty back together again– citizens and taxpayers are at high risk for the worst of possible outcomes.
ALAN FARAGO, who writes on the environment and politics from Coral Gables, Florida, and can be reached at email@example.com