*** IN DEPTH REPORT ***
Chuck Marchand stated in his Letter to the Editor of the Nisqually Valley News last week,
“Every week, we have in the “letters to the editor” – people criticizing each other over towers, Wal-Mart, police, the mayor and NASCAR.
It’s great to have the privilege to debate such things….
Do you want to really have the “American Spirit?” Then spend less time vilifying your brother and sister, and more time serving them…”
While Mr. Marchand makes a point, he overlooks that this is a Constitutional Republic where government is of the people, by the people and for the people. That requires participation by the people to tell the government their desires, not the other way around. Our elected officials took an oath to support the Constitution, which is to serve everyone.
I believe standing up and questioning our government, including local officials, is mandated by us, the people, for this Constitutional Republic to continue.
With that as prologue:
I have heard the council say on several occasions that the developmental approvals are necessary for growth to
obtain property tax revenue to fund city projects and that since residential tax rates are so much lower then industrial/commercial property tax rates, the city needs alot of homes. I have always thought of that as the basis for approving such tremendous growth as showing a lack of knowledge about the economics of procuring revenue for a municipality, bringing with that kind of thinking for fellow citizens ensuing traffic, water, sewage and environmental issues. Unbridled growth to raise tax money to provide services? Where does growth end, when all of the city’s land is developed? There are other ways.
Now, the unwise decisions approving so many homes & developments here is on the precipice of coming home to roost.
This is very easy to understand as explained in the New York Times August 10:
“What’s been happening in financial markets over the past few days is something that truly scares monetary economists: liquidity has dried up. That is, markets in stuff that is normally traded all the time – in particular, financial instruments backed by home mortgages – have shut down because there are no buyers…
The origins of the current crunch lie in the financial follies of the last few years, which in retrospect were as irrational as the dot-com mania. The housing bubble was only part of it; across the board, people began acting as if risk had disappeared.
Everyone knows now about the explosion in subprime loans, which allowed people without the usual financial qualifications to buy houses, and the eagerness with which investors bought securities backed by these loans. But investors also snapped up high-yield corporate debt, a k a junk bonds, driving the spread between junk bond yields and U.S. Treasuries down to record lows.
Then reality hit – not all at once, but in a series of blows. First, the housing bubble popped. Then subprime melted down. Then there was a surge in investor nervousness about junk bonds: two months ago the yield on corporate bonds rated B was only 2.45 percent higher than that on government bonds; now the spread is well over 4 percent…
When liquidity dries up, as I said, it can produce a chain reaction of defaults. Financial institution A can’t sell its mortgage-backed securities, so it can’t raise enough cash to make the payment it owes to institution B, which then doesn’t have the cash to pay institution C – and those who do have cash sit on it, because they don’t trust anyone else to repay a loan, which makes things even worse.
And here’s the truly scary thing about liquidity crises: it’s very hard for policy makers [meaning the President, Congress, Governor, Mayor or City Council] to do anything about them.
But when liquidity dries up, the normal tools of policy lose much of their effectiveness. Reducing the cost of money doesn’t do much for borrowers if nobody is willing to make loans. Ensuring that banks have plenty of cash doesn’t do much if the cash stays in the banks’ vaults.”
Now, let’s do an assessment for Yelm:
1. “Consumer spending growth slumped in June, while the construction sector was pulled down by the dreary housing market,” according to the Commerce Dept. last month.
You can figure the consumer has clamped their pocket book further for July & August. Even Wal-Mart waved the red flag this week cutting its outlook.
2. Business Week says builders helped fuel the housing crisis by rushing into lending they knew nothing about.
“Traditional mortgage companies and banks unleashed a barrage of loans, many to borrowers with iffy credit histories who didn’t bother to read the fine print about upwardly mobile interest rates. Wall Street egged on the often-reckless underwriting by buying vast quantities of home loans for repackaging as securities. Now that the boom has fizzled and foreclosure rates are rising, the important role of large homebuilders as lenders is also coming into sharper focus.”
HMMM! Let’s see if Tahoma Terra & Thurston Highlands or Quadrant want to be in the lending game now.”
3. What has sold these homes in Yelm is “zero down” and “adjustable rate mortgages.”
Zero down is over–no lender will go for that now, says the Washington Post. A buyer has to “show the money” to get to be a mortgage holder.
Adjustable rate mortgages are wiping out the uninformed home buyer as the rates skyrocket.
“1.7 million people who will lose their homes to foreclosure this year and next,” says the New York Times.
Today’s Olympian says, “More than 50% of banks tighten lending rules.”
4. This city council agreed to fund a water study for a private developer to the tune of 2/3 of a million dollars without a written agreement or contract with that developer for repayment of their part of the study. With things the way they are, what assurances do the city taxpayers have that the city will be repaid if that developer pulls out?
5. Were I developers invested in the next phase of Tahoma Terra, Thurston Highlands & the City of Yelm with the 2008 budget session just weeks away, a 2007 budget the largest in city history, and the city’s ability to provide water in question, I would be shaking in my boots.
I can only say to the city that it’s time for Yelm to pull in the belt and prepare for a potentially rocky road in the coming months ahead, for certainly this will trickle down as funding expected from state and other sources, like for a bypass, may soon be in jeopardy.
On July 31, 2005, then Mayor Pro-Tem Ron Harding was quoted in the Tacoma News Tribune saying Anyone in elected office really has to serve the best interest of the entire city.
I ask you, has the best interest of the entire city and greater community been served by our elected officials?