Author Archive

Giving up on Reinventing Trenton

For over five years now and really much before that I’ve studied the issues and policies surrounding urban revitalization especially as they pertain to small post-industrial cities.  In that time I’ve written numerous articles published on this site, commented extensively on Facebook and elsewhere and started up two volunteer groups meant to education the public and potential leaders about the policies that would make a difference in Trenton.

The effort has taken quite a bit of time

And the results have been miserable.  As Trenton has failed and our leaders steadfastly refused to pursue any of the policies recommended on these pages, I must come to the conclusion that I have failed.

I have a lot of critics.  They say I don’t make things simple enough or that I’m arrogant.  They complain that math and analysis aren’t everything. I have theories about what’s really going on and perhaps that’s why I need to step away.

I’m sure we will continue our downward spiral.  My taxes will go up.  My property will continue to lose value and my family will be less safe.  We will continue to shop outside of Trenton.  It’s very depressing.

We own a home that we can’t easily sell and our son is buried here.  We have good friends that have supported us over the years and we sponsor a 5K to raise money for scholarships for Trenton kids.  We’re tied to the community, but that doesn’t mean I have to keep banging my head against City Hall.

Meanwhile, I’ll focus on making more money to pay for the taxes and to fortify our home against the increasingly bold thugs and bums who wander like zombies up and down our streets.

I do thank those that have gone along with me on this journey with me especially Bob Lowe, Jim Carlucci and Kevin Moriarty.  Carlos Avilla and Michael Goldstein also have unique voices in the city.   But it’s tough.  These guys are ignored by the un-thinking and shouted down by the pompous.

We’re a city of people who feel entitled to be wrong year after year.  What really pushed me over the edge was the recent debate over Thomas Edison State College’s proposal to develop a parcel of city owned land.  The same empty suits that pushed the hotel, the ballpark and the arena on us as revitalization measures (that clearly didn’t work) were at it again.  In a city that says we have too many state buildings, we rushed to build another one. And our City Council who posits themselves as new thinkers just went along with the old thinking like sheep to a slaughter.

We can forgive ourselves the mistake that is Tony Mack, but when the rest of Trenton’s leadership rushes to follow his lead and that of the cast of characters that has provided poor advice to this city since I’ve lived here, well I guess there’s no hope.

Our budget is a mess.  Our tax system is anti-development.  Our police force is understaffed and demoralized.   Our Mayor is a crook.   And we own a hotel that is bleeding us dry.   Our schools are failing and corrupt (by many accounts).   A single shopping center in Hamilton dwarfs Trenton’s total retail sales. There is no corporate base. A third of our housing is subsidized. Our tax base is shrinking.  In every way we are moving backwards.

As for my role, I can’t point to one suggestion that I’ve made over the years that has been enacted.  No Land Value Tax. No targeted development strategy. No Priority Based Budgeting. No transparency.   We’ve elected the politicians who did the worst on the Fix Trenton’s Budget economic scorecard.  We’ve not sold the hotel.   We’ve not even made our government transparent as evidenced by Jim Carlucci’s cottage industry in OPRA requests.   Our inspections department stands in the way of development.   We have NO strategic plan.  We’ve not lifted a finger to sensibly address State funding (the Mayor doesn’t even understand it).   We’ve not taken bold steps to encourage new development.   We’ve not created a methodology to evaluate the break-even on development projects.

If this were a business, our lack of insightful management would have bankrupted us years ago.  But we’re not, we’re a government with the power to tax in order to cover up our mistakes.  So that’s what we do.  We tax and then increase the tax some more.

It doesn’t make sense for me to continue being an activist.  I’m a volunteer but there are professionals lined up to hatch dumb ideas like the TESC deal, one right after another, and they get paid by taxpayers to do it.  I can’t compete with that.  The cards are stacked against me and the other activists hoping to make Trenton a better place for no other reason than to have a better place in which to live.

That’s what the non-activists don’t get.  The volunteers that complain about City Hall don’t have a political purpose other than to have a better life in Trenton.   It’s the city official or Mayor that has something to hide, a status quo to protect and, as it turns out prison to avoid.

Maybe sometime in the future I’ll find a role that will let me apply what gifts I do have (tact is not one of them) to the important work of revitalizing the city.  It certainly won’t be in an elected role, I’m not cut out for that.  However, the people of Trenton are going to have to “wise up”.  Electing the likes of Tony Mack because “we know him from the hood” just can’t happen again.  We’re a national laughing-stock because of our gullibility as an electorate.  We let Doug Palmer drive Trenton’s economy into the ground, but we invited Mack to put a stake into our heart.

Listen to the activists I mentioned.   They can help.  They know the issues and they understand what leadership qualities are needed to turn the city around.

Dan

Causes and Effects: A Guide to disciplined policy discussion

The world is made up of causes and effects.  Hurricanes cause storm surges.  Hitting a cue ball hard into a break causes pool balls to scatter.  A bad earnings report causes a company’s stock to go down.  And so it goes in business, sports, life and cities.  High crime rates cause visitors to stay away from a city.  High taxes slow development.  High college acceptance rates attract students to schools.  This is what economists spend their time thinking about.

Most people think about these causes and effects abstractly.  Common sense tells them that one thing ought to affect another.   For instance, an after school program keeps kids off the streets and therefore should reduce the crime rate because kids on the streets sometimes commit crimes.    Another example might be, making a city’s inspections process less expensive to lower development costs and stimulate investment.   Or perhaps, opening a new museum will increase tourism.

Most people are comfortable making statements like the above, but generally don’t know the details.  For instance, they can’t answer questions like:  If we spend $1,000,000 on foot patrols how many FBI index crimes will be avoided?  Or, if we lower inspections fees by 50%, how much incremental investment should the city expect to see over the next 5 years?   These are fair and important questions.  Most citizens can come nowhere close to answering these types of questions, and that would be OK but sadly, most policy-makers in a city like Trenton can’t answer them either.

So how can normal citizens get better at thinking through the policy issues that face us every day?

Without researching every policy assertion that’s ever made, how can we begin to really understand causes and effects?

We make better choices by knowing whether a policy has a 1st order or 2nd order effect and whether the effect is strong or weak. Of course we need to start with clarity on our goals (investment, crime, education, population, income). But after being clear on goals we must carefully consider causes and effects so we can begin to decide whether policy assertions are important.  This kind of thinking is often called “systems” thinking and is used to better understand complex things, like cities.

There’s a difference between 1st and 2nd order effects

In pool, when the cue ball strikes another ball and knocks it directly into a pocket, we call that a 1st order effect.  One thing caused another.  However that same pool shot may have left the cue ball well positioned to allow the player to sink the next ball.  That’s a 2nd order effect.  The difference is that  in order for the good “leave” to have happened, many more effects of physics had to take place over and beyond the just hitting the first ball in.  The cue ball had to be deflected just so, the spin had to be just right and perhaps the cue ball needed to bounce off the bumper with just the right angle.  The good “leave”, assuming it was intentional, had a much less likely chance of success than hitting the first ball in.

And so it is with city policies.  An afterschool program will most definitely get some kids off the street.  Getting kids off the streets is a 1st order effect and can be measured fairly simply.  It’s the number of kids in the program minus the percentage of those kids who would have otherwise stayed at home or in the library.  For instance: of the 100 kids in the after school program we might say 40 of them would have been home.  So the program got 60 kids off the street.

But how does an after-school program affect crime?  It’s not likely that a kid staying home would cause a crime.  But what about the 60 who would have hung out on street corners.  It’s a bit harder to say because crime reduction is a 2nd order effect.  For example, not all of those 60 kids would have ever committed a crime.  Of the several who might be inclined to commit a crime they might do it when they weren’t in the after-school program.    But then again, maybe the program has a long term effect on the child, or maybe it doesn’t.  As you can see, the 2nd order effects begin to get murky.  This is why sophisticated policy makers don’t depend on them and often point to 2nd order effects as “potential side benefits”.

In Trenton, we shouldn’t base our important policy decisions on 2nd order side effects.

Strong vs. weak effects and the importance of context

Even when causes and effects are 1st order, the linkage between the two can be weak.  For instance in buying a used car, high mileage may not dissuade you from buying it.  This is a 1st order effect but not a strong one because you’ve already decided you could accept a few miles on the car.  However, dented side panels may just completely turn you off.  The big dents might be a strong 1st order effect and keep you from buying the car.

It’s the same with public policy.  Let’s return to inspection fees for a new home.  Let’s say we want to stimulate growth by reducing the fee from $1000 to $300.  That’s a big drop.  And because it directly affects the price of the house, it’s a 1st order effect.  However, that $700 drop in cost is fairly small in comparison to the $300,000 that you’ll eventually spend on the house.  Other things like lumber, labor, land and property taxes easily dwarf the inspection cost.  So while the reduction in inspection fees may be annoying to the builder, it has a weak effect (though 1st order) on the eventual buyer.

2nd order effects can be weak and strong as well.  For instance, we can imagine a school retention program that lowers the high school drop-out rate.  This program might have a good 1st order effect on education but also a 2nd order effect on crime reduction.  That 2nd order effect might be considered strong because we know there’s such a high correlation between high school graduation and likelihood of committing a crime in the future.  Compare that to an after-school basketball program which should have a 2nd order effect on crime reduction (as we discussed above) but that effect may be weak.  Certainly the research and evidence linking graduation to crime reduction is stronger than that linking basketball to crime reduction.  That’s not to say there’s no effect, it’s just not likely to be as strong.

The cause and effect of crime also varies widely.  Economists have shown that each incremental index crime in a city leads to one person moving away.  However, the rate of emigration is 5 times higher for high income people and 3 times higher for families with children.  Poor, single people are much less likely to move away due to a high crime rate.    Therefore we can say that a high crime rate has a strong effect on high income people leaving a city but a weak effect on the poor leaving (likely because they have fewer choices).

Just understanding this differences in the effects of crime, even in the abstract, should have a profound impact on how we think about policy in a city like Trenton.  Sadly, you’ve never heard a government official make the above distinction.

It might be good to focus on strong 1st order effects rather than weak 2nd order ones.

In the world of policy making and particularly in a cash-strapped city like Trenton, we need to make hard choices.  We don’t have either the money or the man-power to do everything we’d like.  So it’s important for citizens to lobby for the most important policies and for government officials and activists to help clarify 1st and 2nd effects and strong vs. weak linkages.

We can use crime reduction as an example of a good objective.  Criminologists know that high rates of incarceration have a beneficial effect on the crime rate (most people get this).  There is a strong 1st order cause and effect between building good cases against criminals that lead to long sentences.   On the other hand, we may spend the same money we would have spent on an extra detective on a mentoring program.  The mentoring might have a 2nd order effect on crime reduction and likely a weak one at best.

When we talk about programs and policies in Trenton politics, we need to keep these things straight and always keep our core goals in mind as well as cost-benefit.

Policies that have multiple 1st and 2nd order effects are generally more impactful than others

Finally we should remember that sometimes policies can have multiple effects.  You’d likely trade a $1,000,000 program to reduce crime that has single strong and effect on the crime goal, for a $1,000,000 program to stimulate development that might have a strong 1st order effects on the economic growth goal, a strong 2nd order effect on the crime goal and a weak 2nd order effect on the education goal.  Some policies give us broader “bang for the buck”.

Policies that positively affect multiple goals in Trenton (investment, crime, education, population growth and income growth) will not only strengthen the city and stretch our dollars, but will find broader political support.

Every minute of every day, Trentonians have policy discussion on Facebook, at barber shops, in civic association meetings, over drinks and at City Hall.  We discuss crime, trash pick-up, taxes, parades and any number of topics.  It’s important for Trentonians to move past sentimentality and misguided assumptions in our discourse.  We need to get on the same page.  To do that, not only do we need shared goals, but we need a common vernacular for discussing policy.  To the extent we can begin to discipline our thinking by keeping our goals clear and then breaking causes and effects down into 1st and 2nd order and then strong vs. weak, we’ll have a more constructive civic dialogue.

Note:  I wrote this article for my blog 2 weeks ago, before the TESC deal for Glen Cairn Arms came up and was having it edited.  I had no way of knowing we would be having a important policy debate about this very subject.  I held off publishing it in favor of reporting on and  providing thoughts about the proposed TESC deal.  However now is a good time to start talking about causes and effects in policy discussion.

The Fix Is In

On Friday afternoon, (Jan. 11, 2013) Trenton first heard that Thomas Edison State College was to acquire the former Glen Cairn Arms (GCA) building at 301 W. State St.

The deal is that they pay a one-time fee of $300K and then never another dime to Trenton for all eternity.  TESC wants to construct a nursing school on the site.

To those of us that have observed the RFP process for GCA and the city’s broader attempts to market the city over the years, we know that our failure to interest a developer was due to lack of imagination, financial acumen and hubris.   The city under Doug Palmer had paid a substantial amount of money to acquire and settle lawsuits regarding the building, in excess of $3M.   We always thought we were better than any developer thought we were.  A Walgreen’s wasn’t good enough or a developer wouldn’t pay enough of the demo cost.  Or maybe other payments weren’t made.

In 6 tries over 16 years the city has not found a proposal that it liked enough to accept.  They’ve turned down proposals that would have had a positive return on investment for the city (i.e. paid more in taxes that our cost to make the site read).   And meanwhile, they never presented a plan to make the area around the site attractive to developers.  Over the years both Palmer and Mack have slowly let the city deteriorate in general both in its ability to fight crime but also to function as a working government.

So here we are.

In comes George Pruitt to present a deal to the city for the site that gives us nothing and for all time.

Tonight’s City Council meeting was obscene in the degree to which those of us working to help fix our approach to government were dismissed.  It was as if we were on the wrong side of the negotiating table with TESC, City Council and the administration lined up jointly to oppose us.

George Pruitt and his subjects threw out comment after comment hoping to convince, I don’t know who, that the project was a good idea.  They didn’t need to convince Council because they’d already been dealt with before the deal was announced.   Council and the city administration have given up on the city’s ability to affect change in marginal areas of the city.

This is a scary thought.  By giving up on Glen Cairn Arms, which has quite a bit going for it in terms of location, they’re saying that they don’t know what to do in any marginal part of the city.  They don’t know how to stimulate development.   It’s a hard thing to accept especially when the city administration and council don’t even know that’s what they’ve done.

But back to Dr. Pruitt’s comments on the numerous benefits to the proposed project:  Bob Lowe called them second order effects, which is what they are if you could even prove that.

For instance, he insists that by erecting a shiny new building property values would go up.  However, there’s no evidence in Trenton to suggest that.  It didn’t happen with the ballpark, hotel or arena in the so-called opportunity triangle.  It didn’t happen with the Hughes Justice Complex and it’s not happening with the new County courthouse.   The theory just isn’t supportable with the evidence.  And even if it was, it wouldn’t help our revenues because we don’t revalue our property, ever.

Second, Diana Rogers of the CCRC strongly supported the project.  Well that’s wonderful but who cares.  Ms. Rogers’ contribution to the “logic gone wild show” was to suggest that students at the nursing school would move to Trenton.   Wow! That was a doozy.   So what she thinks is that nursing student from around the world will pass by all of the other nursing schools in between them and Trenton just to come to TESC so that when they get here they’ll need a place to stay.   It’s hard to believe that a person that calls herself a redevelopment professional actually said that in public.

Next we hear the obligatory jobs argument, both construction jobs and permanent jobs.  I’d like for just once somebody to put pen to paper and show exactly how that translates into municipal revenue.  Unless new workers are being recruited from other areas of the country and need housing, and then when they get her happen to decide they want to live in Trenton, new jobs don’t equal new revenue.   Or maybe Dr. Pruitt thought that TESC would be hiring unemployed homeless people already in Trenton.  I don’t know what he was thinking other than he knew the public would like hearing it.

Finally we hear the nursing school compared favorably to other schools like Princeton, Rutgers and The Naval Academy.  The argument goes that those schools spin off industry and stimulate the economies of their host cities.  There is evidence that research universities have contributed to the development knowledge economies.   There just isn’t any evidence that nursing schools do that.  If there was then wouldn’t we be experiencing the boon Dr. Pruitt and others predict given that Mercer County Community College already has a nursing school in downtown Trenton.  I’ve read a lot about the linkage between universities and economic development.  I just haven’t come across the same linkage for nursing schools.

So we’ve got $16.7M in state spending that will make Trenton look a little prettier, give students another nursing option and construction workers another 6 months’ worth of work.  But Trenton gets nothing.

But we expected those banal arguments.  It’s what people say when they have to run away from the hard truth that a public project won’t benefit the host community.  We’ve heard this story too many times to count in Trenton.

What we didn’t expect to hear was the outright hostility to the idea that maybe we should take some time to think about this idea before we act.  I suggested that we form a group to look into the claims that were made by TESC and their paid contractors.   Shouldn’t we verify that there is no hope for site?  Shouldn’t we calculate the city’s cost in supporting this building for all eternity?  Shouldn’t we find a way to determine how nursing student lunches will translate into municipal revenue?   TESC made a lot of claims and didn’t provide any calculations to show how the city would actually benefit.  Shouldn’t we look into that?

And what about the city?  How is it that an economic development department can go 16 years and not figure out how to turn around one of the most trafficked blocks in the city?   How is it that a Business Administrator can’t figure out that a demolition loan at 2% would be a bargain if it generated a 4% return in taxes?  It’s not hard math.

Shouldn’t we do a little due diligence?

Nope rather than allow citizens to help look into these questions, our city council angrily shut the door on meaningful analysis and research.  They literally suggested that if we wanted to, we could  try to come up with something on our own. We could, but we’ve only got two weeks.   I’m sorry but we have jobs.  TESC told the Council that they had been working on this plan for two years.  Trenton taxpayers working as volunteers have only two weeks.

And to top it off, it was suggested that if we as taxpayers were so concerned why we didn’t do something about it before.  With whom?   Tony Mack hasn’t had the same person in the same job for more than 6 months for the past 2 ½ years.  Activists have tried to work constructively with the administration but it’s like walking on quicksand.   Further, I’ve been writing about this very subject for years.   I’ve written post after post about how to deal with land that has negative value.  I’ve proposed that we subsidize demo costs as early as 2008.  I’ve written extensively about neighborhood level development and land value tax.  These are measures to which the Palmer or Mack administrations or Council could have listened.  But instead they’ve chosen to chase business as usual and cede more Trenton land to the State of NJ.  They’ve chosen to be influenced by the same people who have influenced Trenton into the hole it’s in.  They’ve chosen to make us more dependent on the State, not less.

The lack of questions, the suspension of logic and the shutting out of meaningful public comment is proof positive that once again, in Trenton, the fix is in.

Other blogs/write-ups on the subject:

Jim Carlucci’s write-up of the Council meeting

Reasons to be Cheerful. Not.

Glengarry Glen Cairn

Tony Mack’s Worst Deal Yet

Tony Mack’s Worst Deal Yet

Today, Tony F. Mack announced that he wanted to give the Glen Cairn Arms building to Thomas Edison State College (TESC).  They want to put a $16.7M nursing school of some sort on the property.   Right off the bat, unsophisticated Trentonians started messaging that this was progress.

It’s not progress; it’s more of the same.

Every single politician and activist in Trenton for the last 12 years has complained that the State of New Jersey doesn’t pay its fair share in Trenton.  And this deal is simply more untaxed State land.  Do we need another tax exempt property?

Let’s do the math

TESC wants to give Trenton a one-time payment in lieu of taxes (PILOT) of $300,000.  One time!  That’s essentially free.

That $300,000 is to cover taxes for all time on a $16.7M building? Spread over 10 years that’s a 0.2% tax rate. Spread over 20 years that’s 0.1%.  Trenton’s tax rate for the rest of us is 5.5%.   Put another way, the State would be paying 1/50 of what you and I and every other private property owner pays in taxes. That’s essentially nothing.    Many private homeowners in Trenton pay more in taxes than this deal will yield.   It comes nowhere near the cost of paying for the police, fire and public works costs to support the building.  The new building’s direct support costs for just those services would be around $700K per year.

Trenton’s City Council should NOT approve this.

Instead, City Council should do what Fix Trenton’s Budget recommended two years ago and approve a standard PILOT for all new development in Trenton.  That standard PILOT should be based on taxing land at 30% of assessed value and improvements at 1.5% of assessed value. This PILOT should be available to all developers.   A standard PILOT like this would be welcome by developers and go a long way to encouraging new taxable investment in Trenton.   It would also serve as a reasonable basis for PILOTs for non-profits and eventually for a Land Value Tax for the rest of us.   This is important in our effort to have our tax system work for us rather than against us.

“Isn’t something better than nothing?”

It’s true that Glen Cairn Arms has sat vacant for many years.  But, as the math above shows, we lose money on this deal.   So no, “Something is NOT better than nothing”

Why hasn’t the building sold?

The City of Trenton owns the building and has been unsuccessful in selling it for many reasons:

1)    The City has maintained a poor development environment for many years due to crime, ineptitude in city government and lack of a plan to improve.

2)    The city always tried to sell it rather than give it away.  It’s obvious the building is a mess and therefore has no value and maybe negative value.

3)    We don’t have a standard PILOT that makes sense for a developer. I’ve proposed one above.

4)    We may have to demolish it ourselves (i.e. because as the building stands it has negative value)

There are several options

  • We sell it to TESC using a standard PILOT. The current assessed value of the land is $500K. With a $16.7M improvement and using the suggested standard PILOT rate, we receive $400k/ year in revenue. This is what we should get.   It still doesn’t cover all of our direct costs, but it’s closer.
  • We sell it to a private developer with a new package. We would spend the ~$1.4M * it would take to demolish the building in anticipation of a private developer putting a $5M building on the land. With the standard PILOT in place that would yield $225K a year in tax revenue.  This is a 16% return on investment and a pay-back of 6 years.
  • However, we should NEVER approve another tax exempt property deal. Increasing ratables in Trenton should be our #1 priority. This deal with the State of NJ is the opposite of that.

But there’s more

Do we as citizens really want to let Tony Mack negotiate development deals for us?  Time and again, we’ve seen in New Jersey that government money is rife with corruption.  Tony Mack has provided us a case in point.  We have no reason to trust him and every reason not to.

Our Indicted Occupant of the Mayor’s office will do anything to make himself look good to unsophisticated voters.  In this case, it appears that he’s working to curry favor with TESC and let that organization’s patina rub off on him.   The leadership at TESC should know better.   Furthermore TESC and Mack are using State money as part of this scheme.

But I’m really confused about the choice of Glen Cairn Arms?
Trenton has a large unused medical facility with multiple buildings that could certainly be converted into a nursing center.  Why not encourage TESC to purchase all or part of the Capital Health Mercer campus.   Isn’t this exactly the use we’ve all talked about for that site?

Finally …

This deal has been presented to citizens without any economic impact assessment.   Certainly our City Council has come too far with this corrupt and incompetent Mayor to allow him to get by with this. But more importantly, if you support this deal, then you have no business complaining about the State not paying its fair share in Trenton. This is just making it worse.

* I originally estimated $300K based on numbers from a previous bid, but understand that TESC thinks the cost is $1.4M so I’ll use their number to be conservative.

Embrace and Extend: Revitalizing Trenton’s S. Broad St.

This last week, a meeting was held of building owners and stakeholders representing a stretch of Trenton’s busy S. Broad Street from downtown to the Sun Bank arena. I’m one of those building owners.  If you’re familiar with Trenton at all, you know that this is an extremely visible and potentially important stretch of road.

There were around 40 people at the meeting and it’s the first time I’ve ever been in the same room with so many of my fellow S. Broad owners.  It was an important first step in the conversation to revitalize this part of Trenton.  I was skeptical of the meeting at first as I’ve been to a few failed attempts in the past and haven’t been able to get myself organized enough to hold a similar event.

The Old Mill Hill Society gets credit for getting this ball rolling and in particular Kari Brookhouse, Phil DeRose, Pete Kasabach and Craig Shofed.  They got the Mercer County Improvement Authority (MCIA) to fund an architectural firm to do some visioning work.  This was the impetus for the meeting.

To be honest I suspect some of the owners were there because they thought someone was handing out façade grants, but nonetheless they were there.  At the meeting we all got a visual overview of the area and then talked about what would make it better.

If you’ve driven or walked on S. Broad recently you’ll be able to guess that the #1 topic of discussion was trash.  Yep, somehow this busy commercial street has become a dumping ground.  We don’t know why but the architects pointed out that there wasn’t a trash can on the 300 block of S. Broad and yet that’s where all the restaurants are.  This is a problem.

Parking was the other big issue.  We’re a commercial area with no access to off street parking.  One of MCIA’s drivers for being involved in the meeting is that workers and visitors to the new county courthouse near S. Broad and Market St. will have to walk 2 blocks on S. Broad from parking lots at the arena.

Other issues such as crime and Mercer County’s nebulous plans for the “old” county courthouse also weighed on the group.  However, I’m hopeful.

The meeting got me thinking about what would make a difference in these 5 blocks of Trenton.  Together they represent $58M in assessed value but only $12 M of it is taxable.  So, as well trafficked and important as these 5 blocks are, they generate only $600 K in tax revenue.  That’s a problem.

My hope is that if we can continue to get ourselves organized, we can turn this around.

Keeping this part of Trenton clean should not be beyond our grasp.   Dumping enforcement, trash cans, street sweeping, public education about trash pick-up times and maybe some anti-litter marketing could help.  We discussed several small street-calming tactics that should be within our reach  such as trees and decorating the Rt. 1 bridge.   Furthermore, if we’re talking as a group, we’re also sharing business ideas and helping each other attract investment to the corridor.  That’s a good thing.

But what I really want to see happen is that we organize ourselves just enough so we can set a goal to grow from $12 M in value to $18 M over the next 2 years.    It’s not unattainable.  We’re not dependent on the city to grow, though the city could certainly do several things to avoid being in the way.  And, it would help us all.

If you know this corridor, then you know that it has an interesting mix of stakeholders.  On one side is one of Trenton’s nicest neighborhoods, Mill Hill.  On the other is a public works project, Kingsbury. Mercer County owns large buildings on either end of the corridor and there are large regional churches in the middle.

My attitude towards revitalization in this corridor is to “embrace and extend”.  As building owners we need to find business tenants that can embrace both Kingsbury and Mill Hill.  This might not be easy as the demographics are radically different.  This happens to an extent already but as we think about marketing our corridor we need to know more about the buying trends of the two neighborhoods.  Furthermore, why not create an environment in which churchgoers and arena visitors would like to linger. Most of the churchgoers on this block do NOT live in Trenton. Let’s make them feel welcome.

Secondly, we need to aid the extension of the corridor.  My hope is that Mercer County does NOT hold on to the old courthouse and instead sells it to private developers.  Also in the works are development of the former Hill Motel site, a plot of empty land near the arena and an infill lot in the middle of the 300 block.  As a group we will need to support these developments and help them succeed.

By embracing what we have now and then extending through new development, we can meet a goal of increasing values on S. Broad St. and doing our part to revitalize the city.

Fix the product first and then advertise

Trenton needs an ad campaign now like we need another hole in our head.
City activist Pat Stewart has been beating this horse for years. For the love of God, let’s have a product plan first.

Marketing VPs get fired for launching ad campaigns at the wrong time. The right time is around the launch of a new product or product update. Trenton hasn’t updated its product. In fact, we’re not even sure what our product is.

Yet, a marketing campaign is exactly what Mayor Tony Mack has recently suggested.
I’ve written about this before, but basically we need to sort out what we’re trying to sell first.  Are we selling abandoned warehouses as Mack suggests in his recent “Ask the Mayor” session.  If so, are they saleable?  Are titles cleared?  What are the brownfield issues remaining?  What’s the market for abandoned warehouses?   Perhaps we’re selling city-owned houses or infill projects in our nice neighborhoods. Or, perhaps we should promote downtown living.

Mack doesn’t know what we should be selling. Sam Hutchinson doesn’t know. If councilmembers knew, they certainly wouldn’t agree with each other or the Mayor.

A marketing campaign can’t market everything.  If we’re going to make a pitch we’d better make it for a product that’s ready to be sold.  For instance, promoting infill opportunities before we know how we’d take a developer or homeowner through the development process is wasteful and potentially damaging to our reputation as an easy place to develop (of course we don’t actually have that reputation).  Another consideration is what are our development priorities?  What kind of development gives us the most “bang” for the buck?  That analysis has never been done in Trenton and marketing consultants won’t be able to do it for us.

Before launching an expensive marketing campaign, we need to have sorted out the residential market for Trenton.  Who’s going to move here?  Where do they live now?  We have challenges like our crime rate and schools.  Are there population segments that don’t care so much about those things?  Where would they live in our city?

Before we think about promoting Trenton we need a marketing strategy.  Read more about that in the following:  Managing the Trenton brand
The first step in a plan to sell Trenton is to figure out what we’re selling and why.  This doesn’t have to be a difficult process but when we’re talking about spending precious tax dollars and time we shouldn’t just guess.

Second, just as in business, our pricing needs to be right before we market.  Trenton is currently priced too high.  Many of our abandoned buildings have negative value and yet the City attempts to sell them for positive prices.  It’s no wonder they haven’t sold. Also, our tax rate is the highest in NJ making new development in Trenton a bad idea when compared to neighboring towns with half our tax rate.  We need to work out how to make our product’s pricing attractive. Land Value taxes are one answer. Subsidies and abatements are another.

More on how land has negative value in the following: The case for dumping city-owned property

Third, we need to spruce up the product. We can do this by reducing crime in the area of focus. We could clean up a bit. If we’re marketing to population segments likely to appreciate the arts, we could invest in some targeted cultural things. We could also wait until we have a Mayor that’s a little less radioactive.

When you visit Trenton and pick up a paper, all you’ll see are dirty streets, stories about shootings and murders, a recreation department in disarray and a corruption scandal that sought to extort a developer.  No amount of marketing is going to overcome these issues.  And while we don’t have to eliminate crime or have pristine streets to attract new development, we do have to have made progress and at least have a credible plan on how we’ll improve.   The product improvement plan for Trenton doesn’t exist.

Fourth, we need to make sure our operations work. As a customer you hate it when you try to buy something but the store is out of stock, it gets shipped incorrectly, or it’s broken when you receive it.  Trenton is like that.

Our Economic Development department isn’t prepared to deal with an influx of developer interest.  Our residential and commercial realtors don’t have the city’s marketing plan in mind so they can be part of the solution.  There’s not even a promotional web site in place.  Our inspections process has never been a positive aspect of developing in Trenton.  Would it be useful to have turned that department into a positive instead of a negative before we start attracting new investment? Can the City even transfer property?  Properties sold in last year’s auction still haven’t closed.

The bottom line is that before we start attracting interest we need to improve the operations of our city so that our new customers have a positive experience.  If you currently live in Trenton and have dealings with the city, you know we’re a long way from operational excellence.  Companies that run marketing campaigns when their operations are broken make matters worse and pretty soon go out of business.

Advertising is the last step.

To recap, first we must

  • Decide what we’re selling and to whom
  • Competitively price our city
  • Fix the issues that are causing our poor image
  • Improve operational proficiency

These aren’t new ideas; and its’ pretty much Management 101.

For more reading on planning for Trenton’s revitalization see of the below articles:

Revitalization is a dirty job

A Vision and Plan for Trenton

The State of Trenton – by the numbers

Trenton’s Plan: The Ultimate Question

Trenton’s Plan: Setting Goals

Dysfunctional and without a plan

Big suggestions for Fixing Trenton

Trenton is Missing Out on Big Business

Buying Out Tony Mack’s contract is a Win-Win

Our country’s economy and especially its real estate market has been in a slump for 4 years.  However, in the next 2 years we’re going to come out of it, no matter who wins the Presidential election.

When that happens, we don’t want Trenton to be left behind.

A normal economy will grow around 2-3% a year.  For Trenton with its $1.9B tax base and  ~ $70M in property tax revenue that means our revenues could increase $1.4M – $2.1M a year.  That’s if we were normal.

The problem is that our Mayor has become a national and regional publicity problem due to his various missteps and most notably his arrest by the FBI on corruption charges.  It should be obvious to us that no matter how good the national economy, a developer, potential homeowner or business owner would not want to invest in a city under such leadership.

Tony Mack is a drag on Trenton’s economic recovery.

In addition to the bad reputation he’s given the city, it’s also become apparent that Mack’s administration has no intention of addressing our economic growth.  In Mack’s 2 ½ years in office he has not made one proposal to increase our tax base.  In his 10/16/2012 budget address to City Council he did not mention ratables or growth in property taxes other than to pitch his proposed  $.19 tax hike, which would have a negative impact on economic growth.

Mack is not thinking about revitalization.  He’s never mentioned it.  There’s never been a plan presented.  This city’s budget discussions have never contemplated expenditures related to increasing our tax base and thereby our property taxes, our single largest source of revenue.

If by inaction and negative publicity, he “drags” our economic growth by even one quarter of one percent or $150K per year in growth, we would be better off paying the man to step down.  We’d be better off  paying Tony Mack his $126,000 a year salary, NOT to show up for work.

For a man facing a difficult legal battle and under severe personal financial distress, this seems a win-win for both Tony Mack and the City of Trenton.

Palmer’s Dream, Still a Nightmare

It’s been almost two years since I wrote my first article about the Trenton Marriott shortly after I joined the Lafayette Yard Development Corporation board (LYDC).   which oversees the hotel on behalf of the city.  At the time in 2010, I was encouraged that a new Board would take aggressive action to get us out from under the hotel’s debt burden and operational risk.   A new year and a new attitude at our hotel

After I joined the board and began to understand things better I started saying to anyone who cared to listen, and certainly the LYDC board that: Our hotel isn’t worth very much to us and we need to sell it now.

The LYDC board has a few sophisticated people on it and many others who simply have no business being on the board of a multimillion dollar operation.  This is one of the many follies in having a city owned business; it has to be run by citizens who simply aren’t equipped to make important business decisions.

Two years after I wrote the above, hopeful, article:

  • We still own the hotel,
  • It’s still struggling,
  • We’ve bailed it out to the tune of $500K,
  • And we’ve paid $2.8M in debt payments from our city budget,
  • And I’ve resigned from the board.

The fundamental problem is that the hotel is worth more to a third party than it is to Trenton and it’s not worth very much to us at all.  For instance a third party would be allowed to lease out the restaurant space (we’re not).  A third party could profit share with its manager.  We can’t do that.  A third party could make big decisions quickly.  As a public corporation the hotel has to go before a citizen board and sometimes City Council.  The operations of the hotel are severely limited in flexibility and business model structure.

As an asset, the hotel should be valued to the owner (the taxpayers of Trenton) at the present values of its future cash flows. In a good year we can expect around $100K in cash from operations before our debt cost of $1.4M a year. The value of those cash flows comes out to about $700K. This means that we should be happy to sell the hotel for that amount of money.

Of course there may be a buyer who would pay us more than that but every day we turn down offers for anything more than our own value is a day that we’re losing money (because we pay the debt).

For instance, if, when we had an offer for $22M and had wound up selling for $10M, we would be able reduce our $15M debt by 2/3.   That would save almost $1M a year in debt payment from the city. The board President didn’t even manage to bring that offer to the LYDC board.  He failed to do so at the advice of our bond financiers who felt considering a sale would have gotten in the way of their bond sale, and thus their fat commissions. The bond guys were effectively running the board and had a significant conflict of interest.  I quit the board soon afterwards.

The City of Trenton (taxpayers) pay $1.4M a year on that $15M in debt. Every year we don’t sell the hotel means another year we’re paying that full amount.

I hope to God the LYDC board has at least put the hotel up for sale, but as of the time I left the board, they couldn’t even get themselves organized to do that.

The City of Trenton needs to get itself out of the hotel business now, not next year or the year after. There is no reason to expect the LYDC to manage the operation to greater profitability, experience shows it won’t.  We need to put this bad experiment in mayoral arrogance and public gullibility behind us.

Instead, we continue business as usual.  The Marriott will take away its brand in the middle of 2013 because they are disgusted with us.  Waterford, the organization who has managed not to run the hotel at a profit and who caused the city to have to bail out the hotel, may get replaced.    It will likely be replaced with another outfit recommended by Acquest but without a serious national search for a new manager or owner

Erin Duffy at the times wrote a good summary this week in the Times: Trenton Marriott next to Statehouse could change branding to Holiday Inn.

Trenton is Missing Out on Big Business

If you’ve driven up the turnpike from Exit 7 to 8A then you’ve undoubtedly seen all of the giant distribution centers.

These are businesses that could have been located in Trenton if we’d gotten our act together.

One of the things you do as an aspiring civic leader in Trenton is go to workshops where you’re asked to list Trenton’s assets.  People always give the same answers:  its people, its buildings and its location.

Well our people are going to work on the turnpike corridor in places like East Windsor and Robbinsville, our buildings are empty and our location isn’t as good a one would have thought.

Instead Barnes and Noble, Green Mountain Coffee and likely Amazon along with many others have set up shop in modern warehouse space in the suburbs.

Before the apologist tell me that building new construction space is cheap and Trenton can’t compete, let me suggest that we didn’t even try.  Doug Palmer was asleep at the wheel and Tony Mack is, well he’s Tony Mack.

The explosion in industry just 10 miles from downtown Trenton happened without our city even lifting a finger to figure out how we might be competitive.

We had at least one competitive advantage over the suburbs. Those warehouse facilities are hiring Trenton people.  The Kenco facility that houses Green Mountain Coffee are actually bussing Trentonians to Robbinsville.

What went wrong?

My guess is that the views on business among the city leadership are simply too provincial to understand what was happening.  Additionally our culture of corporate extortion limits us to dealing with small time developers.  Serious logistics companies like Kenco wouldn’t give a trifling crook like Tony Mack the time of day.

Furthermore we just don’t have a good story to tell.  To attract a 500,000 SF logistics operation we’d need to show why Trenton is a less costly option than a “Greenfield” in Robbinsville.  We’d have needed all the creative business people we could muster to pull that story together.  A difficult task indeed, but we didn’t even make a serious effort.

Trenton misses out on opportunities like this because we are distracted from the job of revitalizing our city.  Instead of attracting world class development, we’re busy playing political games to attract housing projects like HOPE VI.   We spend our days begging for money through grant writing and we reshuffle the deck chairs in our city budget.

I don’t expect Trenton to develop a plan in the next two years.  Rather we’ll need to wait until a new administration is elected.  In the meantime, we need to listen for candidates who have a “can do“attitude about engaging the city in developing a real revitalization plan.

Kenco brings Green Mountain to Robbinsville

The Economics of “Good Corruption”

JoJo Giorgianni has given us his economic assessment of the value of corruption to a city.  His plan was to use Mayor Tony Mack like a puppet to enrich himself as developers bribed his version of Tammany Hall for the right to build in Trenton.  JoJo’ and Mack’s thinking was that they were facilitating investment and should get paid.  Why else would they have gone to the trouble of getting Mack elected?  In his conversation with an FBI informant, JoJo called this “Good Corruption”.

I guess that’s one idea.

But just to spell it out we, need to be clear about why corruption hurts a city.

Corruption distorts a market and creates uncertainty.

Investors HATE uncertainty!   When it becomes known that one developer has had to bribe city officials, all other developers become uncertain as to what level of corruption they will face as they consider investment in Trenton.  A developer would much rather play by a transparent and clear set of rules rather than the murky give and take of Trenton’s underworld.

Furthermore, in a climate of corruption, it is entirely likely that a developer could face a second round of shake-downs further into the project after there was no turning back.  This possibility opens the developer up to a high degree of risk.  What was to stop JoJo and Mack from ordering the building inspector to look again at a project, unless the developer had “Uncle Remus” visit again (their code for bribe money).

Our PILOT (Payment in Lieu of Taxes) negotiations are another source of risk and potential corruption.  Every developer negotiates separate deals with the administration on what taxes they will pay.  This kind of uncertainty makes evaluating a deal impossible.  Even when options for a “standard” PILOT have been presented to the Mack administration, they have ignored them.  Why give up the opportunity for graft.

Bribery and extortion create an unequal playing field that raises the cost of business in a place like Trenton. Developers have other options and we need them more than they need us.

Trenton politicians have a history of shaking down developers

Tony Mack isn’t the first politician to require that developers “check in” with the administration before doing business.  Other politicians have required contributions to campaigns as a pre-condition of cooperation.  We should all be suspicious of campaign war chests exceeding $200,000.  That kind of money doesn’t come from normal citizens hoping for better government.  It comes from people who want favors, at our expense.

We don’t want to make it expensive, risky or difficult for developers to build in Trenton.  We can see the results:  very little development happens in our city because of our corrupt climate and heavy handed administration.  I’ve talked to many Trenton developers over the years who’ve refused to work in our city again because of the bad taste it left in their mouths.

We need a completely different approach

In a new revitalization minded administration, we’ll:

  • Clean out our Housing and Economic Development and Inspections Departments and start over with a new attitude
  • Publish a process for development that does NOT include the Mayor’s office
  • Set prices for city owned land in a public Internet based auction system (For the time being, NO more deals).
  • Create a standard PILOT hopefully based on Land Value Tax system that rewards investment and discourages speculation

Trenton has been relatively closed to honest business development for many years.  Hopefully, with the Mack era behind us we can start fresh and turn our city into the easiest place in Central Jersey to develop instead of the hardest.  Given our other issues, we need to be better than everywhere else.