Florida Commercial News - Land, Development, Building, Business

Land Developers in South Florida must work with numerous authorities within the State of Florida as they move from conception to completion of a wide variety of projects.  For ready reference, here is a link list of those Florida agencies most often involved in land development issues:

1. Agriculture and Consumer Services
2. Department of Community Affairs
3. Department of Environmental Protection
4. Department of Housing and Community Development
5. Department of State
6. Department of Transportation
7. Fish and Wildlife Conservation Commission
8. South Florida Regional Planning Council
9. South Florida Water Management District
10. Southwest Florida Water Management District
11. St. Johns River Water Management District

Governor Rick Scott has declined $2.4 billion in federal monies that would pay for one of those speedy, sleek, bullet train lines that would initially move people to and from Orlando and Tampa, and in its second phase would whip over to Miami to allow for access to the Miami airport. 

This meant jobs.  It meant money coming into Florida's economy at a time when the economy is hurting.  Badly.  That's in the short run. 

In the long run, it meant a nice new transportation route that would improve our state and national infrastructure (let's not get started on how bad our roads, highways, rails, etc. are failing now - it's bad, we all know it) as well as build a better Florida marketplace.  Land development would welcome this bullet train, it's exciting to think about (or it used to be). 

Here's what is being bandied about today - criticism is running deep and fast:

From the Miami Herald in an editorial entitled, "Scott’s high-speed imprudence: OUR OPINION: Jobs-creating train deal merits bids not death," the Herald points out that not only is it arguable that Governor Scott lacks the constitutional power to make this call, but he is also "...putting his ideology before common sense...."  The Herald estimates that Florida will lose the opportunity to put 14,000 people to work in the first phase, and 25,000 in the second phase of the proposed construction. 

Susan Milligan of the U.S. News and World Report opines in her editorial, "Florida Gov. Rick Scott Plays Politics with High-Speed Rail Funds," that this can only be political stubborness on the part of Governor Scott, pushing the button on the deal simply because it has a "Stimulus from Obama" label on it. 

She makes a very interesting point, taking facts from the Orlando Sentinel:  seems there are companies in the private sector that have said they will pay the money needed to build both phases of the bullet train project - so there's really no money reason to say no to it.  Milligan goes so far as to suggest that Governor Scott has an agenda to doom Obama's plan - or perhaps that he cannot view a life where we ride daily in public transportation instead of jumping into a car.

What is Governor Scott's position? 

According to Bloomberg, he's joining with three other governors (all Republican) in rejecting the rail money because it means that taxpayers will have to be burdened with the expense. 

Meanwhile, you can read the Governor's official statement here, where Scott explains his position, as follows, and decide for yourself if Florida just got kicked when it is down:

My decision to reject the project comes down to three main economic realities:

o First – capital cost overruns from the project could put Florida taxpayers on the hook for an additional $3 billion.

o Second – ridership and revenue projections are historically overly-optimistic and would likely result in ongoing subsidies that state taxpayers would have to incur. (from $300 million – $575 million over 10 years) – Note: The state subsidizes Tri-Rail $34.6 million a year while passenger revenues covers only $10.4 million of the $64 million annual operating budget.

o Finally – if the project becomes too costly for taxpayers and is shut down, the state would have to return the $2.4 billion in federal funds to D.C.

• The truth is that this project would be far too costly to taxpayers and I believe the risk far outweighs the benefits.

• Historical data shows capital cost overruns are pervasive in 9 out of 10 high speed rail projects and that 2/3 of those projects inflated ridership projections by an average of 65 percent of actual patronage.

• It is projected that 3.07 million people will use the train annually. Keep in mind that Amtrak’s Acela train in Washington, D.C., Boston, Philadelphia, New York and Baltimore only had 3.2 million riders in 2010. And that market’s population is 8 times the size of the Tampa/Orlando market.

• President Obama’s high-speed rail program is not the answer to Florida’s economic recovery.

• We must make investments in areas where we will get a return for the shareholders – Florida’s taxpayers.

• Rather than investing in a high-risk rail project, we should be focusing on improving our ports, rail and highway infrastructure to be in a position to attract the increased shipping that will result when the Panama Canal is expanded when the free trade agreements with Colombia and Panama are ratified and with the expansion of the economies of Central and South America.

• By capturing a larger share of containerized imports entering our seaports, expanding export markets for Florida businesses and emerging as a global hub for trade and investment we can create up to an additional 143,000 jobs according to a recent chamber of commerce study.

• It is absolutely critical that we make smart investments with taxpayer dollars, whether state or federal, and I believe our state will be better served by spending these funds on projects that will benefit Florida and not turn into a spending boondoggle.

• The answer is to reduce government spending, cut government’s leash on our state’s job creators and then hold that government accountable for the investments it makes.

Private lenders are monitoring this week's latest from the Obama White House, where a "white paper" is expected shortly that will provide details on how Fannie Mae and Freddie Mac are going to be phased out.  There has already been the revelation that President Obama will be recommending that these two home mortgage programs be terminated, and that the federal government ease itself out of the mortgage marketplace. 

This news comes within three years after the feds took over both Fannie Mae and Freddie Mac.  It was in September 2008, that the Treasury Department placed both of the entities under its conservatorship. 

The transition is expected to go slow, and no one knows at this point the timing that will be proposed, or what the feds have in mind for future involvement in residential real estate finance.  We have to wait for the White House white paper on the details - and probably for a long time after that - because this isn't going to be a smooth and simple change. 

It's not a break-up between the government and the finance market, it's much more like a divorce.  This is true enough, even before we consider that Congress has got to have its say on things. 

What's at stake for Florida and the rest of the country is determining how homes will be financed in the future, without these programs.  After all, Fannie Mae and Freddie Mac at one point were almost an established American tradition. 

Fannie Mae, the nickname for the Federal National Mortgage Association (FNMA) has its origins in the Great Depression; it was initially a publicly traded company established as part of the New Deal back in 1938.  Thirty years later, Congress took the entity under the government's wing, sponsoring it as Fannie Mae provided security for mortgages by offering mortgage-backed securities, so financial institutions could take their funds and lend again.  The result was more lending, and a bigger national mortgage market. 

Freddie Mac, more formally known as the Federal Home Loan Mortgage Corporation (FHLMC), began in 1970 as another vehicle to grow the secondary mortgage market.  Freddie Mac bought mortgages on the secondary mortgage market from a variety of lenders, and would then combine its purchases into a pool which it then sold to real estate investors.  Freddie Mac, along with Fannie Mae, worked to increase the lenders' ability to lend -- and therefore, worked to expand the American mortgage market. 

According to the Wall Street Journal, Fannie and Freddie have accounted for nine of 10 new loan originations last year. 

So, what does this mean to Florida?

The impact will be huge.  Already, over in China, which has purchased Fannie Mae and Freddie Mac product to the tune of half a trillion dollars, there are concerns that the bondholders aren't going to be left holding the bag on any losses here.  According to the Atlantic, China (and assumedly the other bondholders) would prefer for the American taxpayer to do that. 

Meanwhile, a wide variety of players in the real estate industry are coming together to denounce and warn against the death of Fannie Mae and Freddie Mac.  As compiled in a report today by the Huffington Post, there is a huge concern by realtors that this action by the federal government will result in an end to the American mortgage market, where the dream of home ownership is a thing of the past.  Small banks and credit unions, meanwhile, are worried that this will be another way for big banks to take things over, running the smaller lenders out of business. 

In a talking points memo issued by the National Board of Realtors (read it here), the bad things that may happen here include:

1. reduce housing access and affordability for those who are willing and able to become home owners;
2. create higher profits for America’s big banks;
3. create more “too big to fail” banks, leading to greater consumer risk and taxpayer exposure; and
4. hurt the economy and hinder job creation and growth.

President Obama's formal White Paper is expected to be released to the public tomorrow.

Things are happening down here in Florida, good things, despite the doom and gloom reports that pepper the financial news these days.  Here's a prime example of how land development and real estate deals are still going on in The Sunshine State - and how the media is picking up on these hints of better times ahead:  this week, the Wall Street Journal's real estate blog focused upon Starwood Land Ventures and its recent buy of an Orlando master planned community.

What's happened is that Starwood Land Ventures scooped up a planned community in Orlando called Summerlake, admittedly at a bargain price that was less than half the original asking price in 2005.  Starwood's goal is to profit through resale:  offering the 1500 home sites that cover its 557-acre Orlando master plan to custom home builders who will be catching the wave of the upcoming real estate upturn. 

That's right:  Starwood is putting millions of dollars into Florida land because of a belief that there will be demand for new homes in the Orlando area.  A $28,000,000 commitment to Florida's brighter future - good news for all of us. 

From its own press release (which did get picked up by the local media): 

"Summerlake is an integral part of Orange County's Horizons West master plan," said Mike Moser, Starwood Land Ventures' east region president. "We are investing in high quality real estate in the best submarket in Central Florida. We plan to strategically select top builders that will enhance the community's lifestyle and charm and provide high quality residences for our future homeowners."

Summerlake is a 557-acre property located 1.5 miles north of the Disney property and 17 miles Northwest of the Orlando International Airport. The community has more than 1,500 home sites approved for development with nearly 450 of them being fully developed and 30 homes completed. When homebuilding commences later this year, home prices are expected to start in the high $100,000's. Eventually more than 3,000 Summerlake residents will enjoy the high-end resort-style recreational facility, clubhouse, pools and tennis courts expected to open in 2012.

Let's hope we see more media coverage with economically encouraging news stories like this.  They are out there.