Valley Futures

“We suffer from a fiscal cancer,” explains U.S. Comptroller General David Walker. “It is growing within us. And if we do not treat it, it will have catastrophic consequences for our country.”

So begins I.O.U.S.A. – one of the most disturbing documentaries of the past year.

 

The film spotlights our nation’s mounting fiscal crisis – providing both a contemporary lens and historical context for understanding how today’s “debt-driven society” emerged, and what we might do to resolve one of the most intractable difficulties of our time.

“The facts aren’t liberal or conservative,” as one of the film’s observers, explains, “The facts aren’t Democrat or Republican.”

This is an issue that affects us all.

Begin with a question: how high is the federal debt?

Millions?

Billions?

Try 8.7 trillion dollars.

Just how much money is that?

One way to wrap your mind around the enormity of this number is to compare it with the United States’ GDP.

The federal debt, as a percentage of GDP (Gross Domestic Product), is 64%.

Put another way, the U.S. government is now borrowing 22 cents of every dollar it spends.

The film’s heroes are Americans working tirelessly to educate the country’s citizens about the nature of the crisis: the Concord Coalition, a think tank focusing on the fiscal crisis, concerned young people, politicians like Paul Tsongas, Ross Perot and Ron Paul (no mention of Ralph Nader, oddly). The villains? Gutless government officials seem to bear the brunt of the film’s quiet outrage.

I.O.U.S.A. suggests that the 21st century United States faces four serious deficits at this particular moment.

1. A Budget Deficit

In 1789, the national debt was $70 million dollars – 40% of the federal budget. The Founders worked quickly, the film suggests, to pay this down. A series of wars – Civil, Great, World War II – brought cycles of financial hardship to the federal government. During the last thirty years, the U.S. government has seen more than 30 annual budget deficits, and only five surpluses. But it was the Reagan years, oddly enough, given the “Morning in America- Government is Bad” rhetoric, that saw the federal budget deficit skyrocket, with a moment of sanity during the Clinton/Bob Rubin “go go” 1990s.

2. A Savings Deficit

This section opens with the brilliant “Saturday Night Live” skit mocking “saved money” (Steve Martin at his best – “Shouldn’t I buy stuff before I have the money”?) and focuses on Americans’ propensity to spend cash they don’t have. Citizens’ savings rate is the lowest it has been in decades, a result of our “live for today, easy credit, consumption-oriented” attitude. Is this a result of personal choice? The film suggests that a variety of forces are at play here: the collapse of a “sound money” supply and the Federal Reserve’s tendency to encourage enthusiastic paper money printing and debt-driven spending in the name of fighting inflation. The film channels Texas republican and maverick Ron Paul here, the champion of a strict/hard money policy, taking on Alan “irrational exuberance” Greenspan, the Federal Reserve chairman, in Congressional hearings.

3. A Balance of Payment/Trade Deficit

The U.S. is dead last among all nations if the world in terms of a “trade deficit.” Which is to say – the United States is buying more than we are selling, with foreign creditors carrying much of our borrowed debt. China, the country (along with Saudi Arabia and Israel) with whom the U.S. has a special relationship, is the second largest holder of U.S. T-Bills, and makes all of our stuff in their factories, saving us the trouble of doing little more than buying their manufactured goods. Need I say more?

4. A Leadership Deficit

So – we owe roughly $70,000 per American family in debt, according to Seymour Hersh’s “National Debt Clock.” And, while the deficit doubled on Mr. Bush’s watch (such as it was), it is too easy to blame one party or another for a systemic and long-term problem that has a variety of roots: see the very heart of our national banking system, for example, and our own personal predilections.

As this crisis’ “toxic mix” deepens – entering 2009, we’re staring a $10 trillion federal debt in the face – what can we do?

As individuals, we can pay down our own personal debts, stop spending money we don’t have, SAVE money (huh?), do more with less, explore local currencies, support local and employee-owned businesses, and explore other financial alternatives to the current status quo, including living within our means. Easier said than done, of course.

At the national level? Full disclosure: I’m a secessionist who believes that the U.S. Empire is too deeply broken to fix. The Roman Empire fell, the film suggests, for three reasons: moral decay, imperial overstretch, and domestic financial collapse. No easy answers here, especially because elite lending classes (read: the rich and powerful) have figured out how to game the system to their best advantage, leaving the rest of us poor slobs holding the “debt bag” and wondering: what the heck is going on?

I.O.U.S.A. helps to answer this very important question.

Tags: Arts and Media, Land Bank, Local Currency by Rob Williams
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BACKGROUND - The critical need for affordable, workforce housing in the Valley has been well documented. Some communities have helped to address this problem by forming a Land Bank. A Land Bank is a mechanism to facilitate the production of affordable housing by providing land that developers or households with modest income can feasibly purchase and develop for affordable rental or owner occupied housing. In the typical Land Bank model, land is acquired by the non-profit Land Bank organization using a combination of public funds, private donations and loans, and then ultimately sold to developers of affordable housing or individuals and families who will do their own development. Often this property is “banked” for some holding period to ensure that it will be available for future needs.

Land values in the Valley are very high relative to wages and incomes of permanent residents. With very rare exception, even the least expensive parcel on the market is too expensive for the development of affordable dwellings. Site development costs only exacerbate the problem. It does not seem feasible that a Land Bank could buy land at “retail” prices and then resell it at “wholesale” prices so that it can be used for affordable housing. Relatively low cost building sites are required to make housing affordable, so another way to acquire land - at less than market rates – must be developed.

PROPOSAL – The Mad River Valley Housing Coalition (MRVHC), which is a non-profit corporation, should develop a process for acquiring land, at below market value, for single and multifamily workforce housing, for both owner occupied and rental houses. The land should then be sold to lower income individuals and/or affordable housing developers – like Central Vermont Community Land Trust, Habitat for Humanity, and others – at below market, affordable prices.

HOW TO ACQUIRE LAND ? - Various acquisition sources and mechanisms by the MRVHC could be considered. For example, outright donations of property should be solicited from individuals and business owners. This would be similar to tax deductible charitable donations made to a conservation land trust. Donors should be actively targeted in a coordinated way. MRVHC should also advertise its needs. There may be large parcels in the Valley from which one or two small parcels could be subdivided that would not negatively impact the use and enjoyment of the larger parcel by its owner or interfere with future development opportunities. Individuals might also choose to make a bequest to become effective upon their death.

Subdivision developers might be encouraged to donate a small lot or to sell it at an “affordable” price. This could provide a tax benefit to offset capital gains or an infusion of cash early in the project to help cover start-up costs. In smaller subdivisions, the developer might be actively encouraged to make use of density bonuses offered by all Valley towns. Technical assistance to the developer to help understand the benefits and to reduce their risk might provide incentive.

Donations or bargain sales (at less than fair market value) of town owned property could be another source. Tax delinquent properties, although they probably can’t be donated by towns or sold without bid, are still a potential source of less than market value lots. Foreclosure sales could be another source of below market value properties.

Many businesses need help in attracting and retaining employees. They might be encouraged to facilitate workforce housing by pledging funds to the MRVHC for land purchases. This might be combined with other forms of employer housing assistance to further reduce the price of housing for employees. Finally, purchasing options to acquire land and other lower cost control mechanisms should also be considered.

NECESSARY BACKGROUND WORK - MRVHC needs to develop a process to screen acquisition opportunities. First it should conduct a study of potential parcels in the Valley to determine those that might be solicited for purposes of this program. Any development or other restrictions on the property will need to be researched. Ideal sites would be those that are close to town centers and schools, and those having low development costs. Land that has a dual purpose – both conservation and affordable housing would be especially desirable. However, the need is so critical that MRVHC shouldn’t be too selective in choosing parcels.

Once a list of parcels is generated, the best way and best person to approach each potential donor can be determined. A presentation for potential donors needs to be developed that will detail alternatives for giving (i.e. outright gift, bequest, life estate retention, etc.) and related tax and other benefits.

Additionally the MRVHC will need to continually track potential subdivisions and engage developers at the earliest stages.

The Land Bank will need to keep expenses to a minimum and be self-sufficient. A budget needs to be developed and will need to include such costs as: property maintenance expenses, such as property taxes, engineering / feasibility studies, appraisals, transfer fees & taxes, option costs, and miscellaneous administrative costs. Grants for feasibility studies may be available from VHCB. Legal help will be needed to explain tax benefits to potential donors or developers and represent the Land Bank for property transfers, title searches, etc. Other funding sources must be determined. It is possible that some interim bank financing may be necessary for certain parcels. Perhaps the Valley towns would agree to forgive some of the property taxes while the MRVHC has title to the land.

Certain management issues need to be solved. Mechanisms, such as affordability covenants, should be determined to insure long term affordability of the parcels (and any subsequent related housing). MRVHC will need to establish a process to determine the selling price. It must be low enough to be affordable but high enough to cover operating and unique parcel expense.

There must also be a process to determine to whom parcels acquired by MRVHC will be sold.

CRITICAL SUCCESS FACTORS – In addition to the obvious one of finding and acquiring suitable parcels, the Land Bank is unlikely to be successful unless there is widespread and enthusiastic town government and community support. The MRVHC should develop and education and communication program to help people understand the critical nature of the housing affordability and its long term impacts on the viability of the Valley. It will take many volunteers, including some with key skills – real estate, legal, etc., in order for the Land Bank to be a viable, long term success.

Tags: Land Bank by John Donaldson
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