Consequences of Growth for the Sake of Growth

[stjr]

This NY Times article points out the hazards of depending on growth as an industry in lieu of real industry.

Will Northeast Florida take heed or keep investing in suburban sprawl projects like the Outer Beltway and 9B, planning for sprawl that may never come and diverting resources from existing communities?:

Construction That Fueled Growth in the Sun Belt Slows
http://www.nytimes.com/2009/08/28/business/economy/28growth.html?_r=1&hpw

Excerpt:

.....After riding high during the boom, the Las Vegas area, parts of southern Florida, and Southern California’s inland counties have also been brought low by plunging payrolls, billions lost in housing wealth, a continuing epidemic of foreclosures, record government budget deficits and stagnating populations.

These areas share one thing besides their warm climates. To a degree unmatched in the rest of the country, their recent prosperity was built not on manufacturing, technology or natural resources, but on construction and real estate â€" growth for its own sake.

As other areas tasted the excesses of the housing boom, they gorged on it. From 2002 to 2006, about 20 percent of private industry growth in the United States was tied to real estate and construction. In the Phoenix area, almost 36 percent of growth in the private economy during that period â€" more than $34 billion worth â€" came from real estate and construction.

That expansion was driven in large part by capital flows from Wall Street and abroad, which financed a wave of speculative residential and commercial development. Overbuilding, in turn, accelerated the region’s already rapid population growth.

.....Even those who are relatively bullish on recovery for the former hot spots, like David Denslow, a professor of economics at the University of Florida, doubt that the extraordinary population growth seen in past decades will return anytime soon.

“Growth will never be what it was in the 1990s, and by no stretch of the imagination what it was in the early 2000s,” Professor Denslow said. “That is gone.”

It is clear in retrospect that in parts of the Sun Belt, the economic dependence on construction reached unhealthy levels in recent years....

....A strong housing recovery faces serious obstacles in all the former Sun Belt hot spots, however. Among them is the prospect that the population growth to which they have long been accustomed is stagnating, or even beginning to reverse.

Florida’s population shrank recently, for the first time since 1946. According to estimates by the University of Florida’s Bureau of Economic and Business Research, the state lost more than 58,000 residents in the year leading up to April 2009.
...

....Even after housing inventories return to normal levels, builders face another hurdle: a banking industry that has been burned by construction bets in these former hot spots.

“I think the lenders are going to be very, very cautious,” said Jack Kyser, founding economist of the Kyser Center for Economic Research in Los Angeles.

Indeed, the role irrational lending played in driving economic growth in these regions was pronounced. Speculation led to a spree of overbuilding, drawing thousands to cities like Las Vegas and Phoenix for construction jobs. As these new arrivals themselves bought homes, the building boom took on a life of its own.

Retail spending surged, spurring a wave of commercial real estate development, in turn further lifting the construction industry. “We had growth based on growth,” said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas....

[heights unknown]

And when people get tired of places like Miami, Las Vegas, San Diego, Phoenix, etc., then they will be clamoring to find places like Jacksonville, Knoxville, Gainsville, etc. to "get away from it all."

Heights Unknown

[Captain Zissou]

Dave Denslow was my Macro-Economics teacher! Woot!

[stjr]

And when people get tired of places like Miami, Las Vegas, San Diego, Phoenix, etc., then they will be clamoring to find places like Jacksonville, Knoxville, Gainsville, etc. to "get away from it all."

Heights Unknown

Heights, I think you missed the point of the article.  Most people aren't moving to "get away from it all," they are moving to find jobs.  And, growth is not, in and of itself, a sustainable source of jobs.  We should be looking to count on real industry for jobs, not fictitious growth.  Another reason why quality of life, not growth numbers, should be front and center in public forums.

[tufsu1]

I heard an interesting take on Florida last week....basically our economic model was a Ponzi scheme...count on the new residents to pay for the existing ones

[cityimrov]

I asked a similar question in a national politics thread (http://www.metrojacksonville.com/forum/index.php/topic,5919.0.html).  How do you stop people from asking for more and more? 

Though in a way, excessive growth is like tufsu said, a Pozi scheme.  The problem is if everyone participates in that growth and the scheme collapses - bad things happen.  The thing is, usually we're forced to participate by other people whether we want to or not because when the scheme collapses - we're left holding the bag tied by the hands of the people who participated. 

[stjr]

If growth in Florida is no longer dependable, maybe it's time we started reevaluating our priorities - road building, finances and tax structures, zoning and development, infrastructure, etc. - and start emphasizing quality over quantity.  The days of growth excusing us or distracting us from day to day improvements may be over.

P.S.  Note in the article that Broward's sheriff eliminated 177 positions.  It's amazing what has to happen when the going gets really tough.

After Century of Big Growth, Tide Turns in Florida

By: DAMIEN CAVE
Published: August 29, 2009

....So it has been for a century, as Florida welcomed thousands of newcomers every week, year after year, becoming the nation’s fourth-most-populous state with about 16 million people in 2000.

Imagine the shock, then, to discover that traffic is now heading the other way. That’s right, the Sunshine State is shrinking.

Choked by a record level of foreclosures and unemployment, along with a helping of disillusionment, the state’s population declined by 58,000 people from April 2008 to April 2009, according to the University of Florida’s Bureau of Economic and Business Research. Except for the years around World Wars I and II, it was the state’s first population loss since at least 1900.

“It’s dramatic,” said Stanley K. Smith, an economics professor at the University of Florida who compiled the report. “You have a state that was booming and has been a leader in population growth for the last 100 years that suddenly has seen a substantial shift.”

....Florida grew from 2.8 million people in 1950 to 6.9 million in 1970, and by about three million people each decade after that. Even during stagflation in the ’70s, Florida added about 200,000 people a year. More recently, from 2004 to 2006, Florida added about 1,100 people a day, as housing construction’s proportion of the state economy grew to twice the national average.

Now consider Broward County in 2009. The county, between Miami and Palm Beach, was one of the first areas to shrink â€" losing 21,117 people from April 2007 to April 2009, according to University of Florida data â€" and its experience offers a glimpse of what could be on the way elsewhere.

....Florida, in particular, was not built for emptying. Its government, since a 1924 constitutional amendment banned a state income tax, relies heavily on sales and property taxes, which are more closely linked with population growth.

Without it, and as housing prices and property tax revenues have fallen, municipalities have been forced to scramble. Broward County’s schools, which have been losing students for several years, opened Monday with 100 fewer teachers and a budget of $3.6 billion, down from about $5 billion in 2008.

Facing a deficit of $109 million, the county’s commissioners have also reduced hours at libraries and parks, while the sheriff reluctantly agreed to cut at least 177 positions.

...Gary Mormino, a historian at the University of South Florida, St. Petersburg, said baby boomers may be the state’s best shot at another upswing. “The big question is will they choose the same type of retirement as their parents,” he said.

Already, the state’s hold on retirees is weakening, with thousands of disenchanted “halfbacks” moving to Georgia and the Carolinas in recent years. Mr. Smith at the University of Florida nonetheless predicts modest population increases when the economy picks up â€" growth of 150,000 to 200,000 people annually.

Even that would be a downward adjustment from recent history.

See whole article at:http://www.nytimes.com/2009/08/30/us/30florida.html?pagewanted=2&_r=1&hp

[thelakelander]

Our pattern of unsustainable growth has finally caught up with us.  Its past time to embrace quality over quantity.  Unfortunately, we have leadership (i.e. city council budget cuts fiasco) in place that has no real clue on how to properly deal with this type of situation.

[Dog Walker]

I heard an interesting take on Florida last week....basically our economic model was a Ponzi scheme...count on the new residents to pay for the existing ones

Actually, its the other way around.  Our taxes go up as more and more people move into the state because their taxes don't cover the infrastructure costs of having them here.  The profits that go into the pockets of the developers are there because we are covering part of the costs of their developments.

If memory serves there are a couple of studies around that show that every new house built in Florida should have an impact fee of about $16,000 to cover the actual costs it creates for the rest of us.

[tufsu1]

If memory serves there are a couple of studies around that show that every new house built in Florida should have an impact fee of about $16,000 to cover the actual costs it creates for the rest of us.

and there are many other studies that show new large-scale developments more than pay for themselves in impact fees and addiional taxes/revenues.

The truth is probably somewher in the middle

[riverkeepered]

It was only a matter of time before our reliance on the growth machine and our unwillingness to face reality caught up to us. 

The writing has been on the wall for some time.  For instance, studies have consitently shown that growth (at least the kind we have practiced) does not pay for itself and will not sustain an economy for the long haul.  The Cedar Swamp study that was conducted by Arthur Anderson on behalf of John Delaney's administration in 2000 found that for every $1 in tax revenue, it would cost $2.45 to provide services.

Of course, it doesn't require a study to recognize that growth is not sustainable and has its limits.  Common sense tells us that we only have so much land that can be developed, a limited amount of water and other natural resources to go around, and limited public dollars to pay for the necessary services to take care of a burgeoning population.

Hopefully, our economic woes will serve as a wakeup call that we need to begin to focus on "smart growth" and more sustainable industries and opportunities. 

I think Edward Abbey summed it up when he said that "growth for the sake of growth is the ideology of the cancer cell."

Here is an interesting article that recently appeared in the NY Times.

On the Mat, Florida Wonders Which Way Is Up
http://www.nytimes.com/2009/08/16/weekinreview/16cave.html?_r=1

[Dog Walker]

If memory serves there are a couple of studies around that show that every new house built in Florida should have an impact fee of about $16,000 to cover the actual costs it creates for the rest of us.

and there are many other studies that show new large-scale developments more than pay for themselves in impact fees and addiional taxes/revenues.

The truth is probably somewher in the middle

If growth and new development paid for itself why are our taxes higher now than twenty years ago?  And why does New York City have higher taxes than we do?

[tufsu1]

I said that SOME new growth pays for iteslf.....for example, a new house in the suburbs often comes with impact fees to local gvernments for stormwater, transportation, etc....but my new townhome in downtown din't...am I not creating at least some new impact?

As for our tax rate....the property tax rate (main source of revenue for local government) in Duval has been reduced for the past 18 years (albeit that will likely end this year)....and as for NYC, maybe you'd be surprised to know that it has barely grown in thne last 30 years....so maybe there isn't necessarily a correlation between growth and taxes....or you just chose a oreally bad example.

[Dog Walker]

Duval County has no impact fees.  The impact fees in a couple of the surrounding counties are pitiful compared to the costs that the new homes bring to those counties.

We have all paid out more dollars in taxes each year for the last eighteen years to pay for the new infrastructure needed due to uncontrolled growth.  Lowering the rate hasn't lowered the taxes.

Do you know of an example where money paid out in taxes has gone down while the area has seen uncontrolled growth?  Talk to the people in Las Vegas, Phoenix, or Tucson or Austin.

[FayeforCure]

I think Edward Abbey summed it up when he said that "growth for the sake of growth is the ideology of the cancer cell."

Here is an interesting article that recently appeared in the NY Times.

On the Mat, Florida Wonders Which Way Is Up
http://www.nytimes.com/2009/08/16/weekinreview/16cave.html?_r=1

Excellent article!

Florida's Soul-Searching After the Real Estate Bust

And yet if the Sunshine State is a larger-than-life reflection of where the country is heading, then the nation is still stuck, scared and uncertain of how far it wants to stray from the status quo. My travels through Florida make clear that â€" despite the urge to see recovery in improved housing sales â€" the costs of recent real estate mistakes continue to be severe. Change was often discussed during the 2008 election and after the financial meltdown, but Florida these days often resembles the character played by its native son Mickey Rourke in “The Wrestler”: a broken-down piece of meat, damaged and sincere, but a little too messed up to drop familiar habits.

Real estate and fast money, after all, have defined this peninsula since the ’20s, when empty lots of swamp could be flipped for a profit between martinis. Florida has generally relied far more on growth than its counterparts: in 2004 and 2005, housing construction’s share of the state economy was close to twice the national average, according to the Bureau of Economic and Business Research at the University of Florida.

Weaknesses in the approach emerged quietly, even before the bust, as overdevelopment and rising costs started pushing people away. Some were “halfbacks” â€" retirees originally from the North who ventured “halfway back” to Georgia or the Carolinas â€" but young families fled, too. In 2005, Broward County lost 1,756 students, in a district that thought nothing of adding 10,969 in 2001. Since 2004, enough parents have left to shrink the student body by 6 percent.

“They tell me that when they moved in, it was different place,” said Stephanie Kraft, a member of the Broward County School Board. “They’re seeing it change, they’re seeing it go to hell and they’re abandoning it.”

And from an economic point of view, things look much more scary for Florida than any other state:

http://www.calculatedriskblog.com/2009/08/bankruptcy-filings-and-mortgage.html

Here are the four most populous states:

Florida
Population  18,328,340
Bankruptcy Filings Q2 25,415
Percennt Mortgage Loans Delinquent 22.8%

New York
Population 19,490,297
Bankruptcy Filings Q2 16,266
Percent Mortgage Loans Delinquent 11.7%

Texas
Population  24,326,974
Bankruptcy Filings Q2 13,940
Percent Mortgage Loan Delinquent  10.6%

California
Population  36,756,666
Bankruptcy FilingsQ2 53,505
Percent Mortgage Loan Delinquent 15.2%

Take a look at what an outlier Florida is in terms of the severity of our recession: