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Roundup 4-25-2014

April 25, 2014

Transportation – What We Should Already Know

There was a strangely direct column in the Times this week about transportation that really did not say anything groundbreaking, but is worth reviewing nonetheless, especially because of its relative lack of fluff and rare directness:

Amid the parochial arm wrestling over what kind (if any) of mass transit lies in its future, the Tampa Bay metro area remains surprisingly blind to the bigger trend.

We have no idea why such ignorance would be surprising, especially in light of the aforementioned parochialism (we would argue the  ignorance is willful and cynical rather than just parochial, but we’ll go with parochial for now). Anyway, what is the trend?

America’s love affair with cars is waning.

Since 2004, Americans are driving less. Fewer teens and young people are getting driver’s licenses. People are looking at a wide range of alternatives to driving, such as using public transportation and taxi services, car-sharing and bike-sharing opportunities. More people are moving to walkable, less car-dependent downtowns like St. Petersburg — witness the apartment building boom under way.

A tough economy is a big factor. Young adults, hit hard by the recession and forced to take lower-wage jobs, find the costs of owning a vehicle, pegged at an average $14,000 a year, can be too burdensome. Some folks are giving up cars completely. Others are adopting a lifestyle called “car light” by using their vehicles only when there are no other options.

A former New York Times bureau chief in Detroit and author of several books on the U.S. auto industry, Maynard says the idea of living car-light is fueled by changes in the economy, social practices, Web innovations and environmental concerns. Those changes “are being accompanied by some new transportation resources that weren’t available even five years ago, such as bike sharing, car sharing and a wider availability of mass transit. Each of these developments, in its own way, has contributed to individual decisions to cut back on automobile use. Each adds up to a significant change in the way Americans view cars.”

Even accepting that cars will likely remain the major transportation option, that is interesting. So why should we care?

“You can make a pretty strong argument that cities need to be attuned to what millennials want,” she said. “That is their future generation. If you are a city without mass transit in a meaningful fashion, these people will make decisions about jobs and lifestyles based on costs. And if that includes the necessity of buying a car — on top of college debt — then they may decide it makes better sense to head to places like Phoenix or Atlanta or Washington, D.C. People need to be looking ahead at these trends.”

We’ve already heard such tales. Greg Celestan, last year’s chairman of the Greater Tampa Chamber of Commerce and the CEO of a Tampa area defense business, tried to promote two young associates from his firm’s office near Washington, D.C., to the Tampa headquarters. The two asked Celestan if Tampa offered transit options beyond driving everywhere. He told them to stay where they are.

It is an increasingly overheard business story. Many talented young people want lifestyles that do not require them to rely heavily on or even own a car. Zipcar, for example, is a car-sharing service prominent in major cities across the country that’s popular with young urbanites. But it’s not available here.

Right.  Not everyone is looking to have a symbiotic relationship with their car.  Many people, especially among target demographics, want options.  Those things are not available here because of our culture of short term thinking; resting on our laurels; overly burdensome, protectionist policies (read PTC); and acting like history actually ended with the collapse of the Soviet Union.

Hillsborough’s model of development is still a baby boomer model (and we are not the talking Jobs and Woz version baby boomers).  Our competitors are already 20 years ahead of us while our elected officials, from our legislative delegation to local officials, are still bickering about irrelevancies, rationalizing things like the PTC, and many, especially in Hillsborough County, pander to fringe elements and people with a vested interest in maintaining the status quo.

Our being way behind the curve should not be a surprise to anyone, especially in terms of public policy. That is the government that was chosen.

So, what does this all mean?

Typical of Tampa Bay, change is slow. (ed. Or non-existent) Especially if it involves a metrowide mass-transit system. Even if Pinellas County wins voter approval this fall for its proposed transportation package, there is no guarantee Hillsborough can deliver on its own transit package in the coming years.

There are consequences to our regional fiddling.

As America’s love affair with the auto cools, young people want better transportation options. Metro areas that refuse to tackle the challenge of quality mass transit may find themselves deemed irrelevant by the best-run businesses that want to operate where the most innovative workers choose to live.

In other words, it means being left further behind by our competitors, by good jobs, and, very possibly, by our young professionals and present day students, who will (logically) move somewhere else to find the best opportunities and amenities they want. (Why should they wait another generation to maybe get here what they can have right now somewhere else?)

Of course, we have choices.  It is just that, so far, politicians’ pom-pom waving notwithstanding, most of the Tampa Bay area’s choices have been bad.  Hopefully that will change, but the evidence for that is decidedly mixed (or the column in question would not have been written).

Transportation – PTC as Shark Tank Panel

Speaking of transportation and choices, as readers will know, Uber and Lyft have started functioning in the area despite the foolish rules of the protectionist, competition stifling elected officials of the PTC.  Moreover, despite suggestions by a member of the PTC that it should reform, no reform has happened or even been proposed.

So far the PTC has not firmly cracked down on Uber and Lyft.  Thankfully, this week the executive director of the PTC (who replaced someone who somehow managed to write his own performance evaluations and put raises in consent agendas – the rules in question now are from that era way back a year ago), this week, told us the real problem the PTC has with Uber and Lyft:

Officers with the Public Transportation Commission, who have the power to make arrests, have engaged in “educational interactions” with about a dozen drivers for Lyft — a rival hired-car service that also launched in Tampa recently — and issued warnings to another six, said Kyle Cockream, executive director.

The interactions have concerned the need for different insurance when using a personal vehicle for private hire.

Lyft cars are easier to spot; the grill is adorned with a giant pink mustache. Cockream said he did not know whether officers have talked to any Uber drivers.

“We’re not opposed to Uber or Lyft,” Cockream said. “It’s their business model we have a problem with. An outside entity can’t just come in and operate outside the law.”

(The PTC can arrest people?) As made clear from the above (and contrary to a Times editorial), what bothers the PTC is not safety or insurance or any other possibly rational issue. What bothers the PTC is the innovation of having someone other than the cartel its exists to support doing this work.  It just does not like the business model.

Odd, we did not realize that Hillsborough County had a command economy, though the PTC does have an ethics history somewhat reminiscent of some command economies (and sometimes it does seem like Hillsborough has a post-Soviet, oligarch-based economic model).

And, while we agree with the Times that safety regulations are fine (though that is not what is at question), too often, such regulatory power is used as an excuse for protectionism and manipulating the market.  That is the case here.

But there is a bigger point here: Uber was founded in 2009 and is in 70+ cities.  It wanted to enter this market in 2012.  It is now 2014.  In other words, we are not even talking about innovation – we are talking about catching up – and our elected officials cannot even deal with that.  They cannot (or will not) make even this relatively simple change to the way they do business to bring us into the present.

This is just another example of how woefully behind the curve we are as an area, and many, if not most, of our elected officials (who make up the PTC, after all) are big part of that. They can talk about reform, innovation, and the future all they want, but their actions (or lack of action) indicate that they are not even interested in catching up, let alone moving forward.

That is the real sales pitch our elected officials are giving to companies and young professionals they say they want to attract.

Economic Development – Whither the Venture Capital?

In the week where the Mayors of Tampa and St. Pete got together to talk about how they are going to pump up/marketing local startups (not that we think that will do anything or is really their purview – unless they are going to start coding – but the cooperation between the mayors is nice – now about the Rays . . .), we learned that Florida still lags in VC funding, though how much can be debated.

Florida’s slice of the nation’s venture-capital pie shrank dramatically in the first quarter as deep-pockets investors steered much of their wealth elsewhere, according to the latest survey of U.S. venture capital firms.

Companies in the Sunshine State attracted nearly $72 million from January to March, down 86 percent from $132 million in the prior quarter, the study said. Florida fell to 14th among all states after ranking eighth in the fourth quarter of 2013 — its best quarter in six years.

* * *

Florida’s dip in the latest poll, however, may reflect just a temporary lull, since the state has consistently posted more than $100 million in venture financing since early 2013, said venture capitalist Jim Boyle, an Orlando-based partner with Inflexion Partners.

“I wouldn’t read too much into it at this point,” he said. “Over the last nine months, there has been more activity and evidence of some larger dollars coming into deals in Florida. It’s still a developing venture market, and deals do fluctuate here. But it is getting better.”

Moreover,

Venture capitalists and angel investors pumped $72 million into Florida companies during the first quarter of this year, and two-thirds of that flowed into seven South Florida companies, according to the MoneyTree report from PricewaterhouseCoopers and the National Venture Capital Association released Friday.

* * *

Overall, funding in Florida ventures was up sharply compared to the first quarter of last year, when $20 million was invested, but down sharply from the $132 million raised in the last quarter of 2013.

“Right now we are in the ‘Goldilocks’ phase of the angel-entrepreneur-VC market cycle, meaning we are seeing quality deal flow, solid management teams, truly innovative technologies, and valuations are still reasonable — not too low, not too high,” said Rhys L. Williams, president and co-founder of New World Angels. “This said, we are just now beginning to see the first signs of the next stage in the cycle, where every second person is seeking to get into the act, and where valuations sought by entrepreneurs begin to lose touch with market realities. As long as the IPO [initial public offering] window remains wide open, and the public markets are healthy, we will see continued expansion of the tech economy.”

* * *

Nationally, venture capitalists invested $9.5 billion in 951 deals during the first quarter of 2014. Quarterly VC investment activity rose 12 percent in terms of dollars but fell 14 percent in the number of deals compared to the fourth quarter of 2013, when $8.4 billion was invested in 1,112 deals.

The biggest investments were in San Francisco companies Dropbox, $325 million, and Airbnb, $200 million.

So VC is down from last quarter but up from the first quarter last year.  Florida, the third or fourth largest state depending to whom you are listening, is between 11th and 8th in VC funding.  Ok.  That’s a mixed bag.  (But note the perspective creating fact that the $525 million for two San Francisco area companies is more than seven times what all of Florida got.)

We have one question – where is the VC to the Tampa Bay area?  We do not even make it on the report’s regional data spreadsheet (actually nowhere in Florida does).   If 2/3 of the money (about $47.5 million) went to South Florida and at least $14 million went to the Orlando area, where is our money? (there is only $10 million or so for the whole rest of the state – or 50 times less than two deal in San Francisco.)

Not very good for an aspiring hub of innovation. Apparently, the Mayors have their work cut out for them.

Economic Development – The Continuing Bizarreness of Bass Pro Shops

This week, Bass Pro Shops broke ground.   Despite talk about work on Falkenburg Road (that will be required because the Estuary/Bass Pro Shops development will burden the road more, and, therefore, should be paid for by the developer anyway), as you can see from this image in the Tribune, there is a lot of road work that serves only to give access to the developer’s (and Bass Pro Shop’s) property.

From the Tribune – click on picture for article

But handing taxpayer money to sprawl developers is normal in Hillsborough County. (Of course, that is $6+ million for mostly access roads into strip stores when the east-west MetroRapid costs only $22 million but is unfunded. $6 million would go a long way to getting it done.  Oh well.)  What is really odd, though not unusual for local media, is this from the Tribune article:

Early this year, county officials approved a deal that split the difference between the two pro- and anti-incentive positions.

The Estuary developers will first pay for about $6 million in road improvements along Falkenburg Road and into the project site. After construction is done on several parts of the project, and developers receive a “Certificate of Occupancy” to open to the public, the county will cut them a check for $6.25 million. The chief proponent and booster within the county, Commissioner Ken Hagan, said that’s an investment that will break even within three to four years, as the property begins to generate both property taxes and sales taxes.

So giving the developer money is the compromise between giving the developer money and not giving the developer money?  In what universe?

The real question is why the developer couldn’t just pay for the roads itself, especially when money for transportation is in short supply, and, in some ways more important, why Hillsborough County thinks it is such an unattractive market that the County has to use taxpayer money to subsidize retail.

Of course, that is a question the Tribune does not address.

Economy – Housing Muddle

While there have been a number of articles on the local housing market’s rebound and rising prices, too little has focused on one segment of the new market that is especially problematic – investor purchases.  This week, the Times had an article laying out some issues.  You can read the whole thing yourself, but we wanted to highlight a couple of things.

So to capitalize on what analysts call a swelling “rentership society,” deep-pocketed investors began parachuting into the parts of the country hardest hit by the housing bust. That includes Tampa Bay, where the homeownership rate plunged last year to its lowest point in nearly 30 years.

Seven of the biggest investors here — Blackstone’s Invitation Homes, Colony American Homes, American Homes 4 Rent, Silver Bay Realty Trust, Pretium Partners (once called Fundamental REO), Beazer Pre-Owned Rental Homes and Waypoint Homes — were ravenous, buying all in cash. The nation’s largest home landlord, Invitation Homes, has spent $400 million locally, a Times analysis found, and owns 44,000 homes nationwide.

Investors landed here at a time when the average household’s spending on rent is near its highest point in the last three decades, Zillow data show. Tenants here pay 32 percent of their income toward rent and utilities, compared to 27 percent in 2004.

But even at that baseline, market watchers said, investors have set rents surprisingly high. The median Colony American Homes rental in Tampa Bay, online listings show, costs about $1,600 a month, 33 percent higher than this area’s median house rent. The priciest is $3,695 a month.

Colony declined to comment for this story. Invitation Homes spokesman Andrew Gallina defended its national rates as 30 percent cheaper than apartments on a square-foot basis.

Murphy of Home Encounter said investors showed “some big gaps between projection and reality” on what renters here could afford. Holding that hard line has crimped the number of homes investors have been able to rent.

“They’ve been very non-negotiable,” said Jack McCabe, a Deerfield Beach housing consultant. “They’d rather let a home sit empty than taking a lesser amount of rent.”

In other words, the investors are raising house prices and rents beyond what the market would normally do – and, given our local incomes, our market is particularly constrained.  That is problematic on a number of levels – it prices buyers out of the housing market, it sucks up disposable income in rent, and

Managing the homes is a more delicate ballet than investors’ shock-and-awe spending spree. Yet it is vastly more important, because their success depends on squeezing out growing returns.

If their operations run into trouble, Federal Reserve analysts warned in December, it’s not just investors who will pay the price. Management failures could force a massive sell-off that could sink property values, lead to widespread home vacancies and “raise financial stability risks” for investors and homeowners alike.

Most of this arises because

“You have a guy in a huge tower in New York buying homes in Tampa, but they don’t understand the local market,” said David Guarino, a senior research analyst with John Burns Real Estate Consulting. “They got in thinking it’d be easy, and they’d make a lot of money … but they’re starting to understand it’s not as easy as they thought.”

We don’t know about huge tower, etc., but the basic point is valid.

We have nothing against investors, and they certainly have a right to buy up houses and rent them out.  The problem is that it distorts the local housing market hurting buyers and renters and, simultaneously, makes the local economy appear to be stronger than it is.  Moreover, that rent money is being removed from the local economy because most of the investors are not from here.

So next time you read an article indicating our economic vitality by discussing the rebound of the housing market is, just keep that in mind. (And read articles like this one which talks about price rises here outpacing the nation but also notes that in other areas housing prices are reaching all-time highs while we are still 37% below 2006 levels even with all the investor money and this one about prices rising while sales fall.  very carefully.)

This is just another problem with focusing so much on real estate and low wage retail as economic drivers.  It would be nice if the elected officials would really take note.

Of Flights and Demand

For years, we heard that demand for international flights did not exist and therefore there was no reason to try to get them. That approach was endorsed by most of the political officials (which helped stagnate service at the airport), including many who are now on the flight bandwagon (and taking credit for flight expansion, though we give those who are now on board credit for correcting their views).  Those who argued for more flights often argued that 1) there was demand and 2) that flights create more demand.  This week in an article on Pinellas tourism (which is going great) we learned:

The most encouraging metric in the Annual 2013 Visitor Profile report released this week was the number of Latin American visitors who came to Pinellas. There were 96,000 such visitors in 2013, an increase of 22,000 people.

Tampa Bay has long struggled to compete with Orlando and Miami for Latin Americans. But the 30 percent leap in that segment was the biggest increase in any Pinellas feeder market.

That’s especially encouraging because in mid December, Copa Airlines started flying four days a week between Tampa International Airport and Panama City, Panama. It is the bay area’s first direct flight to Latin America. (ed. if you don’t count nonstop in the early 80s to Mexico City)

So if Pinellas could attract 96,000 Latin American visitors without direct flights for most of the year, Minich said, imagine how many might visit in 2014 after a full year of flights.

“That number’s going to be way higher this year,” Minich said. “Those flights are doing really well, and we’re getting huge interest.”

He credited 2013’s strong Latin American numbers with the marketing effort Pinellas launched mid-year to push the new Copa route in Central and South America.

Even more encouraging, Minich said, is that Pinellas hotels are signing package deals with Latin American tour operators. Last month his agency hosted about 50 such operators during the Firestone Grand Prix in St. Petersburg.

Pinellas has spent decades building its European market. In 2013, the number of visitors from Europe breached the 1 million mark for the first time. There were 1,015,052 European visitors in 2013, an increase of 16,281.

Minich said that Pinellas’ efforts to grab Latin American market share will pay off much quicker than its effort to attract European tourists did.

“Now that we’ve got the flights, that market is going to grow so much faster than how long it took us to grow the European market,” Minich said. 

In other words, the longtime advocates of pushing for international flights, including the late Chairman of the Aviation Authority Board who pushed to change the policy and get the present Airport Director over political opposition, were right.  (Though we do wonder why Pinellas does not have more marketing to Latin America to build the market and why it took so long to start.)

When can we get more flights to bring build even more markets?

Ybor – More History at Risk

We have written often about Jackson House and the Bro Bowl and noted that it seems the area often neglects its built history, so much so that the phrase “demolition through neglect” is a common refrain.  Thankfully, many of the historic buildings in Ybor City have not suffered that fate, but they are not immune from the risks.  This week, a Tribune article discussed some of the most important Ybor buildings, the social clubs.

They’re saddled with shaky finances, aging buildings and shrinking memberships. They survive largely by renting their historic headquarters, a strategy that puts them in competition with dozens of more modern venues across the city. They rely on the dedicated-yet-graying volunteers like Asturiano’s Damas (ladies) and Caballeros (gentlemen) to keep things going.

“You can’t do it without them,” said Pannier, herself a volunteer.

But love and dedication don’t keep the lights on.

Financially, all four clubs are on shaky ground. Three of them — Asturiano, the Italian Club and Marti Maceo — ended 2012 with deficits, according to their most recent federal tax filings and audits conducted that year at the request of Hillsborough County.

Asturiano’s $11,000 deficit in 2012 was a far cry from the $180,000 deficit it posted in 2009. But that doesn’t mean the club is out of the financial woods yet.

“When we ended last year, it was pretty desperate,” Pannier said. She estimated of Centro Asturiano was $12,000 in the red in 2013.

The Cuban Club Foundation, which owns the building that houses the Circulo Cuban, squeaked into the black that year thanks largely to $200,000 in rental income during the week-long Republican National Convention.

It is sad, but all is not lost, even though there are problems.

Last month, Manteiga got Tampa City Council to close an alley between the Cuban Club and El Pasaje, the office building that’s its neighbor to the south. Demolition crews will remove the masonry walls that separate both buildings’ rear parking from the alley, creating a combined space Manteiga said will hold up to 4,000 concert-goers. The majority of the income will to go to the Cuban Club, he said.

As with the other clubs, the Cuban Club is likely to pour any new revenue into the upkeep of its iconic building. The buildings lend Ybor City much of its historic character, but they’re also money pits.

“The maintenance of these buildings is astronomical,” said Italian Club president Sal Guagliardo. The club has relied on state historic preservation grants to cover some of the costs, but those funds are drying up, he said.

* * *

The Cuban Club and Italian Club both carry large mortgages on their buildings from earlier renovations.

The Cuban Club’s $879,000 loan comes due June 30. Manteiga said the club has carried the debt for many years and will refinance it when it comes due. The Italian Club owes a balloon payment of $1.3 million at the end of 2015. 

Ok, so there are a few business plans but there is also a challenge.  Is there any help?

Two years ago, Hillsborough County commissioners set aside $2 million to help the four clubs maintain their buildings. Centro Asturiano put $540,000 into air-conditioning for its 1,000-seat stage theater, among other improvements. Sociedad La Union Martí Maceo used its $248,000 on renovations to its 1950s-era building on Seventh Avenue.

“It’s about 95 percent complete,” said Marti Maceo president Sharon Gomez.

The Cuban Club is still working on the business plan commissioners required as a condition of getting the money.

The Italian Club is also waiting for its grant. Guagliardo said the club wants to use money to pay down its mortgage — a use commissioners specifically forbid.

Guagliardo said the club would have spent the grant money on emergency repairs it was forced to start before the money arrived. For that reason, they see the money has reimbursing the club for needed repairs. So far, the county hasn’t been convinced.

First, good for the County is doing something to help.  It is also understandable that the County would not want taxpayer money used just to reduce debt without having any guarantee of needed repairs occurring.  We also understand the demographic challenges.

On the other hand, debt service can be a burden that impedes all progress.  There should be some provision for using money to ease that burden to the extent it actually makes the clubs more stable so that the buildings can be maintained properly.

This is a complicated issue.  It would unforgivable to have the buildings decay to the point they have to be demolished.  On the other hand, public funds should not be freely disbursed. (Unfortunately, the article does not really give any detail about the issues the County has with the Italian Club plan.)  Whatever they are, the issues with all the clubs need to be worked out.

List of the Week I

Our first list this week is Niche Ink’s 25 Best Cities and Neighborhoods for Millennials.   The methodology can be found here.  The list has best metro areas with the best neighborhood in each metro, which we will put in parentheses. (* is for metros with rail)

Coming in first is NYC* (Greenpoint, Brooklyn), followed by Austin* (South River City), DC* (Clarendon, Arlington), Chicago* (Wicker Park), San Francisco* (Cow Hollow), Boston* (Spring Hill, Sommerville), Denver* (Speer), Dallas-Ft. Worth* (Oak Lawn), Minneapolis-St. Paul* (North Loop), San Diego* (Little Italy), San Jose* (Old Mountain View), Raleigh (Morrisville), Seattle* (East Lake), Columbus, OH (Victorian Village), Pittsburgh* (Shadyside), Phoenix* (Tempe), LA* (Palms), Charlotte* (Third Ward), New Orleans* (Lower Garden District), Salt Lake City* (East Central), Houston* (Midtown), Indianapolis (Fishers), Richmond (Shockoe Bottom), Orlando* (Lake Eola Heights), and Atlanta* (Ardmore).

Once again, most of the usual suspects plus a few others, and we are not on the list.

List of the Week II

Our second list this week is the Daily Beast’s List of the America’s Greenest Cities 2014.  The methodology is on the right hand side of the linked page.

The greenest city is Honolulu, followed by San Francisco, Seattle, DC, Portland (OR), Sacramento, Salt lake City, Grand Junction (CO), Atlanta, San Diego, Boston, Spokane, Anchorage, Reno, Santa Barbara, LA, Denver, NYC, Albany, Minneapolis, Albuquerque, Phoenix, West Palm Beach, and Miami.

Once again, many of the usual suspects plus a few others, and we are not on the list.

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