What is the ideal use of land? That is a difficult question to answer without first looking at several factors: What is it being used as currently? Do you have alternative uses? What does the public want? These are all important questions to ask, but the answer to one alone will not suffice.
I raise this issue because the lease will soon be up on the back nine holes of the Newport Beach Golf Course. The county leases the land to a course operator, and at the same time, John Wayne Airport needs more space for rental car companies. Should the county extend the lease or make another use of the property?
This is clearly becoming a heated issue around town, but so far all I have heard are the anecdotal stories of how much people love the course. Give that credit to Dave Ellis, the consultant hired by the course operators to get their lease extended. No one knows how to craft a debate better than Ellis.
In the end this may be more of a political decision than an economic one. Going against golf courses is more dangerous than fighting Republicans, Democrats, union bosses and big business combined. It could be because so many of these people mentioned are golfers themselves. Let's face it: Golfers can be a little fanatical. What other sport calls spouses golf widows?
Let me start off by saying that I am not on either side of this debate. I live on a golf course (Mesa Verde Country Club). It's a great game, and the last thing I want to do is tear out a golf course and put in a parking lot. I do, however, want the debate to be more than just, "I like golf, so the golf course should stay."
We need to look at the issue as a whole and come to a few conclusions before we make a decision. And if that decision is to keep the golf course, then I will be more than happy. I just want to make sure that the decision is made with all the facts on the table. I am always amazed by how many of these issues are decided without all the facts.
So here is my stab at some of the important questions.
How large is the back nine? My back-of-the-napkin calculations put it at 30 acres plus.
How much is it worth? Land in the area easily sells for $2 million an acre for office buildings. Let's discount it 25% for being under the flight path, about $1.5 million per acre. That times 30 acres equals $45 million. Now we're talking about real money.
Does the county have any other uses for the land? So far we have only heard about the rental car lot.
But there are other competing issues. John Wayne's proposed expansion adds a new terminal and an additional 2,500-space parking structure. You might ask yourself if we would have to build a parking structure that large if we had some land for parking, hence the back nine. Parking structures cost roughly $25,000 a space. If we move half the new need at JWA (1,250 spaces) multiplied by $25,000 we save at least $31,250,000 in construction costs, and we only used eight of those 30 acres.
So in the end, I am just asking a few simple questions, the most important of which is this: How much is it worth to the taxpayers to have the back nine? Thirty-one million dollars? Forty-five million dollars?
The driving force behind all these issues is the expansion of John Wayne. As we have predicted for years, the airport use is going up.
Bottom line, if the airport gets expanded it will need more parking for passengers and rental car companies. And, therefore, this decision — and many more like it — are coming down the pike.
So while we get the hard decisions in this part of the county, Irvine is debating how to spend its $1.5 billion on El Toro Great Park instead of El Toro airport.
Maybe they should use some of that money to pay for the additional parking structures needed. That way we wouldn't have to worry about losing our golf course.
Friday, May 25, 2007
Friday, May 18, 2007
Our Budget Boondoggle
The news out of Sacramento was good last week if you are a state worker, teacher or prison guard. At first glance it looks like the state brought in more money this year than was expected, hence the pay raises for government employees and pension plans.
You may ask how the state took in so many more of your dollars.
First, let's thank smokers. I know they are a dying breed, but without them we could not come close to balancing the budget. The 1998 Tobacco Settlement Act pays California $10 billion over 25 years. Cigarette manufacturers raise smokes another buck and, bingo, California gets billions. But why wait 25 years if you can get it now? California borrowed almost $4.5 billion of that 25-year payout in 2003 to balance the budget. The state securitized that revenue stream, and when the money comes in from the tobacco companies we just give it to Wall Street with interest. It worked so well we did it again: Less than four years later we borrowed an additional $1.2 billion to balance this year's budget.
Second, the governor proposes to sell the EdFund, which guarantees student loans in the state. A $1 billion, one-time boost that I'm sure will allow Wall Street to be extremely generous to our California college students — not to mention the loss of income down the road.
A closer look at the numbers and you find that all of these one-time revenue-generators are really borrowing against future revenue to pay today's expenses. Making one-time sales of government assets is like refinancing your house to buy groceries. Sooner or later the borrowing comes due.
But the state can be more creative than that. With these $3-plus gasoline prices, the state is raking in extra gas and sales tax (California makes more on a gallon of gas than Exxon). Proposition 42 and Proposition 1A force the state to use most of this money on transportation projects. What a novel idea, gas taxes for roads!
Well here's an idea: Why don't we move $627 million from the public transportation account to a new budget line item, "home-to-school transportation"? That's right, in one fell swoop we moved more than $500 million to pay for school buses. Forget that this used to be a school expense. Now it is taken out of your gas taxes — a slight of hand that would make an Enron chief financial officer blush.
When doing a long-term business deal — which is not unlike what the state budget is — what sense does it ever make to sell off a potential long-term revenue source for a mere percentage of the total worth? Sure, you may make some teachers and prison guards happy in the short term, but what about a few years down the road when we don't bring in money from these long-term revenue sources?
Case in point: To balance future budgets, Gov. Arnold Schwarzenegger is also planning to lease the state lottery for 40 years to some hedge fund for a lump sum of around $37 billion. He'd sell it but the state Constitution won't allow it. Last year, the lottery brought over $1.3 billion to our schools. Over the next 40 years, the lottery would bring in an estimated $90 billion — a $53-billion loss no one seems to mind.
In California, we do not have a revenue problem; we have a spending problem. We are not going to solve the problems of today by sacrificing the future. First and foremost, we need to balance the budget the old-fashioned way, by reducing spending and keeping it less than what we bring in.
Sure, we can make some people happy today by selling off our assets, but what about five or 10 years down the road?
You may ask how the state took in so many more of your dollars.
First, let's thank smokers. I know they are a dying breed, but without them we could not come close to balancing the budget. The 1998 Tobacco Settlement Act pays California $10 billion over 25 years. Cigarette manufacturers raise smokes another buck and, bingo, California gets billions. But why wait 25 years if you can get it now? California borrowed almost $4.5 billion of that 25-year payout in 2003 to balance the budget. The state securitized that revenue stream, and when the money comes in from the tobacco companies we just give it to Wall Street with interest. It worked so well we did it again: Less than four years later we borrowed an additional $1.2 billion to balance this year's budget.
Second, the governor proposes to sell the EdFund, which guarantees student loans in the state. A $1 billion, one-time boost that I'm sure will allow Wall Street to be extremely generous to our California college students — not to mention the loss of income down the road.
A closer look at the numbers and you find that all of these one-time revenue-generators are really borrowing against future revenue to pay today's expenses. Making one-time sales of government assets is like refinancing your house to buy groceries. Sooner or later the borrowing comes due.
But the state can be more creative than that. With these $3-plus gasoline prices, the state is raking in extra gas and sales tax (California makes more on a gallon of gas than Exxon). Proposition 42 and Proposition 1A force the state to use most of this money on transportation projects. What a novel idea, gas taxes for roads!
Well here's an idea: Why don't we move $627 million from the public transportation account to a new budget line item, "home-to-school transportation"? That's right, in one fell swoop we moved more than $500 million to pay for school buses. Forget that this used to be a school expense. Now it is taken out of your gas taxes — a slight of hand that would make an Enron chief financial officer blush.
When doing a long-term business deal — which is not unlike what the state budget is — what sense does it ever make to sell off a potential long-term revenue source for a mere percentage of the total worth? Sure, you may make some teachers and prison guards happy in the short term, but what about a few years down the road when we don't bring in money from these long-term revenue sources?
Case in point: To balance future budgets, Gov. Arnold Schwarzenegger is also planning to lease the state lottery for 40 years to some hedge fund for a lump sum of around $37 billion. He'd sell it but the state Constitution won't allow it. Last year, the lottery brought over $1.3 billion to our schools. Over the next 40 years, the lottery would bring in an estimated $90 billion — a $53-billion loss no one seems to mind.
In California, we do not have a revenue problem; we have a spending problem. We are not going to solve the problems of today by sacrificing the future. First and foremost, we need to balance the budget the old-fashioned way, by reducing spending and keeping it less than what we bring in.
Sure, we can make some people happy today by selling off our assets, but what about five or 10 years down the road?
Friday, May 11, 2007
Alienable Rights
Most of us know of our certain inalienable rights — life, liberty and the pursuit of happiness. These rights separate us from every other country in the world and are why America is the great nation it is today.
More directly, with regard to property rights, we have the 5th Amendment: "… nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation" as well as the 14th Amendment: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law …"
But what about those rights that aren't inalienable, those rights that some presume to have? When thinking about your home, do you think you have a right to a view? Do you think you have the right to a certain amount of sunlight? What about the right to keep someone from innocently looking into your backyard from their secondstory window? What about the right to decide the color of your neighbor's home? How about the design? Is it your decision to say what's "compatible" in your neighborhood?
What about your neighbor's rights when they want to remodel their home? What about their right to build their home to better suit them and their family? Do you really think you have the right to tell them how to build and design their home?
Many of the homes in our communities built in the 1960s and '70s are ready for major renovations. This is a good thing. It is imperative as we have more homeowners interested in doing just this that we respect their right to do what is in their best interest.
When we buy property, we own from the center of the earth and outward, including the land underneath, and the air above. Though we have "due process of law" and zoning jurisdictions, should we really be subject to losing our inalienable rights because some people think they have phony rights to a view, sunlight and compatible design? It is not the responsibility of a homeowner, absent of an existing deed restriction, to protect a neighbor's view, sunlight or ocean breeze, or to make his or her house compatible with your 1972 "Brady Bunch" special.
Homeowners' rights are bent, walked over and crushed every week in city council and planning commission meetings all across the United States when your neighbors get up to the microphone and assert all of these phony rights in front of a council that may just be counting votes for election time.
Let's face it. Some politicians would make the "majority" happy and get reelected rather than stick their necks out to protect some homeowners' rights and maybe lose an election. We need leaders in city halls to stand up for property rights and to communicate why they are so important. In turn, they need voters to support them when they do the right thing.
More directly, with regard to property rights, we have the 5th Amendment: "… nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation" as well as the 14th Amendment: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law …"
But what about those rights that aren't inalienable, those rights that some presume to have? When thinking about your home, do you think you have a right to a view? Do you think you have the right to a certain amount of sunlight? What about the right to keep someone from innocently looking into your backyard from their secondstory window? What about the right to decide the color of your neighbor's home? How about the design? Is it your decision to say what's "compatible" in your neighborhood?
What about your neighbor's rights when they want to remodel their home? What about their right to build their home to better suit them and their family? Do you really think you have the right to tell them how to build and design their home?
Many of the homes in our communities built in the 1960s and '70s are ready for major renovations. This is a good thing. It is imperative as we have more homeowners interested in doing just this that we respect their right to do what is in their best interest.
When we buy property, we own from the center of the earth and outward, including the land underneath, and the air above. Though we have "due process of law" and zoning jurisdictions, should we really be subject to losing our inalienable rights because some people think they have phony rights to a view, sunlight and compatible design? It is not the responsibility of a homeowner, absent of an existing deed restriction, to protect a neighbor's view, sunlight or ocean breeze, or to make his or her house compatible with your 1972 "Brady Bunch" special.
Homeowners' rights are bent, walked over and crushed every week in city council and planning commission meetings all across the United States when your neighbors get up to the microphone and assert all of these phony rights in front of a council that may just be counting votes for election time.
Let's face it. Some politicians would make the "majority" happy and get reelected rather than stick their necks out to protect some homeowners' rights and maybe lose an election. We need leaders in city halls to stand up for property rights and to communicate why they are so important. In turn, they need voters to support them when they do the right thing.
Saturday, May 5, 2007
Hefty Price For City Hall
How rich is Newport Beach?
I know some very wealthy people call Newport home, but is the city so flush with cash that, when it comes to capital expenses, total cost is lost in the equation?
I am referring to the largest capital expenditure the city will incur this decade: building a new city hall. The number being batted around town is $50 million. No study, no report, just an out-of-the-air guess.
My antenna always goes up when I see a large government project proposed.
Call me cynical, but why is it that whenever a capital project is proposed, some members of our local government always say, "This is what we need"? They should ask how much it costs, if the city can afford it and if there's a better use for the money.
The supposed need always overwhelms the question of cost.
In making any large capital decision, whether it's a Fortune 500 company, your immediate family, or, say, the city of Newport Beach, you should always ask yourself several questions: Do we need it? What do we have (cash, assets, land)? What do we owe (bonds, loans, pension obligations)? What will we have left after the fact?
If, after asking those questions, the proposal seems affordable and logical, only then should we be asking where to put it, what design to use and what color to paint it.
Let's, for argument's sake, acknowledge that a new city hall is needed. Call me a cheap, unsophisticated hayseed from the Midwest, but why would the city consider not using the surplus land it owns? Specifically, a 12-acre vacant lot at MacArthur Boulevard and San Miguel Drive.
Let's see, the land needed for a city hall is 3 acres. At the asking price of about $7 million an acre, the cost for the land alone would be $21 million.
Even in Newport Beach, $21 million is real money. But let's not stop here.
The land is next to the city library. How novel, a city library next to a city hall. If you haven't seen the library from the road, you are not supposed to; it was dug into the hill, not exactly inexpensive construction either. But what the heck? You wouldn't want to affect the view of a few homes. It's just taxpayers' money.
But wait one minute. Previous City Councils said the land should be a park. Oh, I forgot. We still have 9 acres left for a park, and with a city hall next door we might even have people to use it.
Given the choice, previous councils might have saved 3 acres had they known a new city hall might be needed.
Let's be real. Twenty-one million dollars is a lot of hard-earned money from the people of Newport Beach.
There is an old real estate axiom: When someone makes an offer and you don't take it, you just bought it for that price.
Let's just say we already had a 9-acre park and 3 additional acres becomes available for $21 million. Would you pay that much for the additional land?
If Newport doesn't use the land for a new city hall, its taxpayers and leaders just paid a steep price.
I know some very wealthy people call Newport home, but is the city so flush with cash that, when it comes to capital expenses, total cost is lost in the equation?
I am referring to the largest capital expenditure the city will incur this decade: building a new city hall. The number being batted around town is $50 million. No study, no report, just an out-of-the-air guess.
My antenna always goes up when I see a large government project proposed.
Call me cynical, but why is it that whenever a capital project is proposed, some members of our local government always say, "This is what we need"? They should ask how much it costs, if the city can afford it and if there's a better use for the money.
The supposed need always overwhelms the question of cost.
In making any large capital decision, whether it's a Fortune 500 company, your immediate family, or, say, the city of Newport Beach, you should always ask yourself several questions: Do we need it? What do we have (cash, assets, land)? What do we owe (bonds, loans, pension obligations)? What will we have left after the fact?
If, after asking those questions, the proposal seems affordable and logical, only then should we be asking where to put it, what design to use and what color to paint it.
Let's, for argument's sake, acknowledge that a new city hall is needed. Call me a cheap, unsophisticated hayseed from the Midwest, but why would the city consider not using the surplus land it owns? Specifically, a 12-acre vacant lot at MacArthur Boulevard and San Miguel Drive.
Let's see, the land needed for a city hall is 3 acres. At the asking price of about $7 million an acre, the cost for the land alone would be $21 million.
Even in Newport Beach, $21 million is real money. But let's not stop here.
The land is next to the city library. How novel, a city library next to a city hall. If you haven't seen the library from the road, you are not supposed to; it was dug into the hill, not exactly inexpensive construction either. But what the heck? You wouldn't want to affect the view of a few homes. It's just taxpayers' money.
But wait one minute. Previous City Councils said the land should be a park. Oh, I forgot. We still have 9 acres left for a park, and with a city hall next door we might even have people to use it.
Given the choice, previous councils might have saved 3 acres had they known a new city hall might be needed.
Let's be real. Twenty-one million dollars is a lot of hard-earned money from the people of Newport Beach.
There is an old real estate axiom: When someone makes an offer and you don't take it, you just bought it for that price.
Let's just say we already had a 9-acre park and 3 additional acres becomes available for $21 million. Would you pay that much for the additional land?
If Newport doesn't use the land for a new city hall, its taxpayers and leaders just paid a steep price.
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