Making Proper Comparisons, NOT simplistic ones

It’s easy yet intellectually dishonest to take two different real estate development types, do a 6^th grade-level, basic mathematical comparison on one metric--ad valorem property taxes paid-- and then suddenly exclaim “point-proven, issue settled residential development is BETTER than Commercial!”

To take such a firm-fixed position on such a large and complex subject (real estate development and the public-sector) based upon one data point is ridiculously naïve.

First and foremost:  Because we know the free market system works, the private-sector should always take the lead in development of the lion’s share of residential and commercial development within an economy. The government (public-sector), on the other hand, should enact policies and ordinances that foster an environment conducive to private-sector development of most housing, commercial facilities, and other development that enriches a community (e.g. shopping malls, restaurants, theme parks, golf courses, office buildings, strip centers, etc.)

Of course, there are circumstances where the local government must purchase and develop properties for the good of the citizens and to fill a market niche for which the private sector has no profit incentive. (Schools, Fire Stations, Hospitals, libraries, Courthouses, Jails, etc.).

Then there are cross-overs between the public and private-sectors:  for-profit hospitals, for-profit schools, public-private ventures, contracted-services, out-sourced services, off-shoring, nonprofit- provisioning and not-for-profit service providers.  The lines become blurry on some areas between what the public and private sectors do in some economies.  

That is a fact.  

There are numerous other examples that could be given.

  

And regardless of how one feels about either low-cost publicly-subsidized housing or public-sector economic development---from a philosophical, ideological perspective---there are already numerous federal, state, and local laws and ordinances that encourage both of these hybrids.

Most importantly for this discussion are the publicly funded economic development projects. 

Along with Infrastructure and Public Safety--Economic Development is a vitally important government function—no matter who says otherwise.  Escambia County voters recently approved a renewal of the local option sales tax of which 15% can be utilized for economic development—and this is a good thing! The game has changed nationwide-and communities are now engaged in a pitched battle for jobs.  

States and communities have put together strategies to compete, and there are winners and losers—as in life. 

Escambia County has had several big victories in the competition to import jobs and revenue to our economy from outside of our area:  Navy Federal Credit Union is building a massive campus here that will culminate in 10,000 jobs by 2026 and an economic impact to our region of $3.4 Billion yearly--- per reporting by the PNJ.  ST Engineering Aerospace just completed a massive Maintenance, Repair, and Overhaul (MRO) Hangar at the Pensacola Airport, they’re bringing 400 jobs here and they’ve just received a $56 Million Dollar grant from Triumph Gulf Coast to build 3 more MRO hangars and add an additional 1300 jobs!

None of these wins occur without diligent effort and incentive packages from the public-sector. 

Incentives drive the decision making. Incentives bring corporate relocations, manufacturing firms, and jobs. 

Incentives were the deciding factor in NFCU’s move to Pensacola according to NFCU Senior Vice President Preben Ebbeson as reported in the January 2003 Site Selection magazine.

So, when we bring the discussion back locally to the subject of what to do with the 636 acre OLF 8 site in Beulah that Escambia County will soon acquire, to achieve the highest and best use for this property, we must be sophisticated and intelligent.  We must be deliberative and we must listen to the

 experts.

The restore act committee that looked at more than 100 projects ranked the commerce park at OLF 8 as their #1 Economic Development project.  

Our restore act request was passed unanimously by the BCC, and once we receive OLF 8 from the Navy, the BCC stands to receive millions of dollars more from Restore and as much as $29 Million from Triumph for the development of that site—which will include a significant infrastructure and storm water upgrade.

If, on the other hand, we decide to simply accept that property and do nothing with it—we will lose the grant money that will be available to develop this parcel and build out the storm water, roads, utilities and other infrastructure on this site.

Recently, a very basic mathematical comparison (touted in a recent PNJ op-ed) was made between one of our existing and very successful commercial parks, and a residential subdivision/mixed use property in North Escambia County.  

This basic analysis compared just one attribute of both property types:  Ad valorem tax generated for the county.  Now, the commerce park generates double the ad valorem revenue as compared to the residential development from this analysis—however on a per-square foot basis the residential properties do generate more ad valorem revenue per square foot.  Setting aside the obvious issue of a failure to utilize comparable property conditions for this basic comparison (e.g. old WWII era hangars in the commerce park compared to modern, recently constructed residences and commercial structures in the mixed-use development)-the data utilized to make the case is simply too one-dimensional to be useful; there is much more to assess when deciding upon what the county should consider when identifying the highest and best use for a property.  Economic Development, again, is an important governmental function—whereas developing and constructing a mixed used or residential property is not.  

Caution must be exercised.  

And when looking back on the comparison between two of our existing properties—an important data point that was not scrutinized in the basic comparison between one residential development and one commerce park was jobs and economic impact. 

The commerce park in question from the study above, Ellyson, supports 123 companies, 3,600 jobs, and spins out an estimated $144 Million in annual payroll that ripples through and multiplies within the economy.  This economic velocity creates ancillary support jobs and the economic throughput of those payroll dollars generates housing purchases, spending in retail stores, and gas purchases that generate fuel-tax and LOST dollars for the county’s use. Additionally, commercial enterprises pay for business taxes, permits, and other governmental fees that help sustain the county’s operations.  None of this important information was addressed when the basic, topical, and one-dimensional analysis was made between these two development types in the paper.

The Milestone residential development has no significant ongoing “payroll” and therefore Ellyson beats this development hands down when a thorough and holistic economic comparison is made.  That’s number 1.

Number 2 is even more important. 

If it is decided that an aesthetically-pleasing, well-designed and functional high-tech, clean-tech commerce park with landscaping, community and tenant amenities, and the capacity to create 3,500 good jobs is NOT what the county wants—even though this was the impetus for everything we have done and planned for thus far in our acquisition and development strategy for OLF 8---there will be adverse consequences. 

Grant money that will be available to develop the OLF 8 property from Triumph and Restore- if the objective is not transformational-could very well be withheld. 

Building a clock tower, an ampitheater, a huge community park and some boutique retail and mixed residential buildings might be nice-but these amenities would be hard-pressed to qualify for either triumph or restore act funding.  

So, again, if the $29 Million Dollar Triumph project is withdrawn or not awarded – because we want to do something else with this property-- any potential residential/mixed-use/quality of life development at this site would have no funding source and the county would be holding title to a big, open field for which they paid $17.3 Million in LOST dollars to acquire—with no identified funding source for additional storm water, roads, and utilities infrastructure. 

If this is the catastrophic decision that ultimately gets made (which I will not support)-the only winners will be the developers that will invariably purchase this piece of property from the county for a good price. 

They will then attempt to cram this property with even more residential development, they’ll try to double or triple their money off the backs of the taxpayers, and they’ll create very few lasting jobs.  

They’ll look like geniuses as they make us look like dunces if we go this route.

I certainly don’t support that happening, and I do not support any residential development on the OLF 8 site. 

We need to stick to the plan, create jobs, and diversify the jobs base here in Escambia County.

And, when comparing development types—we must make appropriate comparisons (not simplistic, rudimentary, 6^th grade level ones).