Economy remains turbulent!
EDITOR’S COMMENTARY
RECESSION, DEFICITS, & BUDGET CUTS HAS SOCIETY IN FEAR! By Wayne Hodges
KANSAS CITY, KS – In the aftermath of our nation’s most historic presidential inauguration, many of you sent excellent questions and comments concerning both the local and national economy. Your thoughts were so insightful; I decided to share a couple with the Mass Appeal readers.
These are obviously turbulent economic times. The financial crisis on Wall Street, a declining real estate market, power & energy issues, and the threat of more terrorist attacks has casted a dark cloud of trepidation above the American people. Needless to say, President Barack Obama couldn’t have inherited a more dire economic situation than the one he faces now. Wow! Talk about punitive?
ANDERSON, KANSAS CITY: “Wayne, how does this economy affect homeowners with struggling mortgages? Is there something we can do with less than perfect credit caused by the boat-load of B.S. sold to us, trapping us, and drowning us with the anchor of adjustable rate mortgages (ARM’s) wrapped tightly around our necks? What is the government’s new plan to help us? In all actuality, the boat-load of B.S. was painted with fool’s gold, appearing to be something that it wasn’t. Is there any help out there?”
HODGES: Anderson, unfortunately there’s not much out there right now. The $700 billion federal bail-out was approved largely to assist creditors with removing bad debt from their books. That said, there’s absolutely no question the sub-prime mortgage crisis is high priority with government officials. However, Obama is also burdened with the daunting task of instilling faith and confidence in the panicked American consumer; with hopes of persuading him or her to continue to invest. Good luck!
“There’s no doubt that we have not been able yet to reset the confidence in the financial markets and in the consumer markets,” said Obama. “And my job as president is going to be to make sure that we restore that confidence.” Believe it or not, some investment companies have already started issuing debit cards to their 401K contributors. Even worse, too many money-starved individuals have withdrawn their retirement savings altogether. This is troubling for two reasons. 1) The cash will yield zero percent interest on the street. And 2) the withdrawals will cripple the bank’s ability to sell new loans. In other words, when you make a deposit; the financial institution takes your money and lends it to somebody else. This is how profit margins are established. Without loans, banks are like Popeye without his spinach: pretty weak. There’s also public concern over Obama’s policies as they pertain to corporate tax increases and capital gains. Could new federal income tax guidelines discourage large companies to conduct business on U.S. soil? I guess we’ll soon find out.
Real estate, like stocks and bonds, is also an investment. And with rising numbers in job layoffs, salary freezes, inflation and U.S. unemployment (currently 6.5%), mortgage lenders can ill afford to absorb much risk; and the pool of eligible, qualified loan applicants has dwindled as a result. In addition to lost securities by lending companies, municipalities and local governments are also negatively affected as declining home values usually result in thousands or millions of dollars in lost property tax revenue. When will this disaster end? The president says the time is now. “We’ve gotta set up a negotiation between banks and borrowers so that people can stay in their homes,” said Obama. I certainly hope so, because time is running out.
KRYSTAL, BONNER SPRINGS: “Wayne, I read on a local news website that “Margarita Mama’s” has closed operations at the Legends. Recently, “McBride’s Irish Pub” and “Linen & Things” folded as well. What’s going on at Village West? The parking lots are usually full when I visit. So I’m puzzled as to why we are losing these businesses? Are they not receiving enough financial support? And how big a role does the state of our national economy play?”
HODGES: Krystal, a few months ago, I wrote a column entitled “Money Talks” which focused on the economic imbalances caused by poor median income and new development. Check this out. With a population of approximately 143,000 people, roughly 23% of Kansas City, Kan. residents are living in poverty. Ouch! And the city sports a measly median income of $36,000; compared to $48,000 for the rest of Kansas. Why are these numbers significant? It’s simple. A local economy lives and dies by its disposable income base. To put these shortages in perspective, let’s do a little math. If we invest our annual income losses of $12,000 for ten years at a 5% yield, our total return on investment would be approximately $150,000. Now, I’m sure we’d all welcome the material wealth and capital associated with these types of savings. Well, Margarita Mama’s and the other businesses you’ve mentioned would also be in favor of more cash in your pockets. Why? Because it equates to more spending money; hence, the term: disposable income.
Hey, I’m all for new commerce, economic growth and positive cash flow; especially in Kansas City, Kan. The new “Sunfresh” store and retail development located at 18th street and I-70 is awesome. Multi-million dollar projects, such as the $190 million “Plaza at the Speedway,” hotel resorts, water parks, housing developments, and the proposed casino are pretty cool too. However, let’s not forget this important little fact: the majority of revenue and sales tax produced at the “Legends of Village West” are comprised of tourism dollars. This is both good and bad. It’s good in that Wyandotte County facilities are considered prime destinations for cash-spending travelers. It’s bad in that local residents are financially unequipped to handle the responsibilities associated with keeping those new stores and shops profitable. Here’s the scary part. The recession is certain to diminish the number of tourist dollars Wyandotte County has grown accustomed to the past 4 or 5 years. How will the merchants, many of whom are already struggling, recoup the losses in revenue?
See…under normal market conditions, new retail shops are constructed to satisfy a growing populace. For instance, if a community receives an influx of 3,000 new residents; an investor may find it profitable to build a grocery store. However, in Kansas City, Kan. the exact opposite is true. Instead, with the backing of the Unified Government, new shops and stores were built with hopes of attracting new residents to “the Dotte” from other counties and jurisdictions. Will this strategy work? Only time will tell. But, keep in mind, the purchase of residential building permits has cooled off drastically as of late. To add insult to injury; over 80% of residential real estate values in Wyandotte County are over-appraised. And the shaky condition of our national economy clearly doesn’t help. Meaning?
Pray for more roof-tops in Wyandotte County to relieve some of the tax burden applied to area residents; then hope the additional savings result in more disposable income. Who knows? Maybe it’ll all balance out?
Wayne Hodges, an MBA from St. Mary University, is the editor of “Mass Appeal News.” He is also an adjunct professor, MPA at Kansas University, and legislative intern with the Kansas Senate. Wayne welcomes your comments at whodges@massappealnews.com
To see President Obama address the national economy, click the play arrow.
March 4th, 2009 at 9:43 am
Your recent article that 80% of real estate property is overappraised has me wondering if filing a “payment under protest” will result in lowering my real estate tax. I did in fact file a protest but was informed the Appraiser’s office does not recognize a need to change the value evan though an independent apprasial was drastically lower. I’m taking my protest to the next level. If you’re intrested I’ll let you know the results. Any tips for me at my next hearing?
Thanks.
March 4th, 2009 at 4:36 pm
Steve, you’re absolutely on the right track. “Payment under Protest” interviews are still part of the informal appeals process with the County Appraiser’s Office. And to be candid, they’re usually pretty ineffective. By appealing to the ‘Kansas Board of Tax Appeals’ (BOTA) you stand a much better chance of winning your case; especially since you have a certified real estate appraisal in your possession. You may also want to document any issues concerning the physical condition of the property under appeal. As well as any environmental problems or physical/functional obsolescence contained within the structure. Please don’t be afraid to fight for ‘fair market value.’ Many taxpayers lose faith, then give up at the informal level; which is a huge mistake. BOTA cases are heard before an arbitrator, usually an attorney or state representative, to help eliminate any biases. Simply put: great move on your part!
September 22nd, 2009 at 7:06 pm
In my opinion, Obama was set up for failure. Capitol Hill needs a scapegoat.