Archive for August, 2012

“We need a qualified Mayor!”  ”We need qualified Directors!”

These are terribly misleading statements.  But we hear them all the time in the city.  ”Qualified” is possibly the most overused and abused term in Trenton politics.

The only qualifications for being a Mayor are to be a citizen, a resident , be 18 or over and have a pulse.

You don’t vote for qualifications, it’s not that easy.  Qualifications come from a job description, they are one person’s opinion.  Rest assured that my “qualifications” are different than yours.  My list of qualifications for Public Works or Recreation Director would be different than yours.  We all have different notions of qualifications for our government leaders to the point where its meaningless to use the term.

We vote for ideas, creativity, hard work and values.  What motivates a candidate?  Are their interests aligned with ours? Have they laid out a plan that makes sense?  Do they instill confidence?

Qualifications are easy and no one background is the right one for a job anyhow.  For instance, I might prefer to have some bright, aggressive young kid, anxious to make a name for themselves, lead a Trenton department over a “qualified” guy who’s been marking time on the job.  In Trenton, we need to stir things up.

Invention won’t come from inside, it’s likely going to come from outside (another reason to do away with residency restrictions as if the past 2 years haven’t been convincing enough).  Creativity and new thinking can also come from identifying talent in the organization and letting it rise faster than normal.  It can come from transferring leadership around.  A great creative team that has been hand-selected will not just to know how to fill out the right forms, but rather to consider whether the forms are needed at all.

Let’s stop worrying about resumes and worry more about what’s behind a person’s eyes.  Depending on “qualifications” is what scared, unthinking people do.

DCA’s vetting skills won’t save us.  DCA isn’t building a leadership team.  Teams are built by carefully selecting people who have different strengths and counter-balance each other.   These kinds of teams allow out-of-the box thinking to mix with pragmatism.  DCA isn’t doing that kind of team building.  They’re just trying to keep the lights on.

Trenton needs a leader that can assemble a team to re-invent our city, not just keep the lights on.    Harping on hiring “qualified” people is proof that a candidate doesn’t have the leadership juice to run our city.

What in Tony Mack’s qualifications told any of us that he could do that?

A good first step for a candidate in 2014 will be to explain that they understand these and other principles of leadership.

Perhaps no other government initiative better illustrates why Trenton has economic problems than the Miller Homes HOPE VI project (aka Rush Crossing).

Early on in the project I suggested privately to City Council members and publically at City Council meetings and on reinventtrenton.com that the Miller Homes HOPE VI project would be economically disadvantageous to Trenton.

One would think that if an activist who is known to analyze Trenton’s economic issues and whose paying job is to do similar analysis for his corporate clients, someone in city government would have at least attempted to calculate the economic impact of Miller Homes. No one ever has.

The city has been flying blind on Miller Homes pushed along by developers, financiers, lawyers and contractors eager to feed at the public trough. The scene has been unseemly. Last year at a presentation to City Council 15 non-residents in “suits” showed up to watch the developer, Penrose, with their enablers, Trenton Housing Authority, pitch the project to City Council. They talked about how they would help the “poor people” but not once did they mention the project’s impact on Trenton’s City budget. These were carpetbaggers feeding on $61M in Federal, State and City tax funds. Their lawyer was there earning $300/hr to sit at City Council, their bond guy was there looking forward to his commission on the publically back financing and the developer was there to get paid to build the most overpriced housing in Trenton.

So what’s so wrong about Miller Homes?

1) The cost is wildly out of line with housing prices in Trenton
2) The cost of supporting the residents will be higher than the tax revenue and Trentonians are left holding the bag

Our tax dollars are funding housing of $300,000 per unit at Miller Homes in a city where the average home price is $61,000.

Only an insane person would think this project is sane. The total price for Miller Homes is $61,000,000 and it will yield 204 units. Simple division works out $299,000 per housing unit. These aren’t specially equipped apartments for the disabled; these are normal 1, 2 and 3 bedroom apartments. Most similar apartments in Trenton rent from $600 to $800 a month.

The $61,000 average sales price for Trenton comes from Zillow and reflects current prices. However even at our economic peak, average home prices were around $100,000.

An analysis of investment property in Trenton shows that property values range between 70 and 90 times rents. Therefore using the most optimistic valuation, an $800 2 BR rental unit would be worth $72,000. At Miller Homes our tax dollars are paying $299,000.

Trenton’s City Council, the administration, Trenton Housing Authority, the State of New Jersey and HUD are behind this. No one has publically admitted why they support this kind of waste. It can only be that with so much waste involved, the developer can afford to throw money at government officials in ways too indirect for the public to easily discover.

The fact remains that new construction for 2 BR apartments simply does not cost $299,000. The 2 BR units in Miller Homes will be approximately 999 SF. Even at fairly expensive construction costs of $120/SF (expensive for affordable housing) the costs should come closer to $120,000. Why then are costs $299,000 per unit.

Defenders of the project will say that they are adding amenities like community rooms and lighted paths. However, in normal privately funded projects these things are always built.

Taxpayers have grossly overpaid.

The cost to serve the residents will be $3M but we’ll collect only $750K in revenue.

Wasting taxpayer money on development isn’t really Trenton’s biggest problem, though the land we donated and $3.5M in funding we provided could have been put to more productive use.

Trenton’s biggest problem is that we’ll feel the negative economic impact of the Miller Homes for the rest of our lives.

If we assume that the owners of the building are taxed like other commercial landlords then their valuation will be based on income. Projected rents, based on THA’s own published comments should be around $140,000 per month for 63 – 1 BR, 73 – 2 BR, 62- 3 BR and 6 – BR apartments. Using the valuation of 90 times monthly rent, the value of Miller Homes will be $13,255,000 (a far cry from the $61,000,000 development cost). At Trenton’s tax rate of 5.63% this will yield $747,000 a year in taxes.

If we assume that Trentonians pay for half of their city government and half of their school costs (an assumption that we have to make should Trenton ever revitalize an no longer be an Abbot district), then taxes generated from Miller Homes need to cover proportionate costs of the residents.

For a 1 BR apartment with no kids, this equates to $4114 per year (to support police, fire, public works etc.) . A 2 BR apartment would include one child and 3 BR apartments would include 2 children (for sake of argument). Each child should cost Trenton about $10,357 to send to school (the city’s portion). Therefore a 3 BR (on average) would require $25,000 a year in public spending.

Given the mix of 1, 2 , 3 and 4 BR apartments in Miller Homes, the project will require $3M in public spending on the city’s portion of its municipal and school government. However, because the rents, and therefore the valuations are so low, we will collect (at most) only $750K in tax revenue.

Even if Trenton were to fully revitalize, other Trentonians will continue to subsidize Miller Homes in the amount of $2.25M a year, forever.

This analysis is meant to show how public officials in Trenton need to start thinking about publically funding redevelopment. We have allowed federal and state funds to be squandered on a project that does not gives us bang for the buck. We could have found better projects. Also, because our City housing and economic development officials and city council members could not be bothered to listen to an economic impact analysis we have burdened ourselves with a financial albatross even bigger than the city’s last major self-inflicted disaster, the much maligned downtown hotel.