KeNo's Housing and Economic Portal: Monday March 29 Housing and Economic stories

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Aurora, CO City Council approves "blight" plan to benefit developers - (www.aurorasentinel.com) An empty field at the intersection of Interstate 70 and E-470 was deemed blight Monday in a narrow vote, paving way for a controversial public financing plan for a private developer. The vote was part of their regularly scheduled meeting. After a public hearing on the issue, city council members voted 6-4 to blight the vacant field, setting in motion the beginnings of a $1.5-billion, mixed-use development project that would be partially public-financed. Council members Molly Markert, Ryan Frazier, Renie Peterson and Melissa Miller opposed the project. Lend Lease, an Australian-based developer with offices in Denver, plans to develop the 503-acre parcel of land into the Horizon Uptown project, which would include office space, residential homes, a school and a library. Lend Lease has asked the city for $90 million by way of a Tax Increment Financing district. About $60 million would be diverted from school districts to fund the project and would be backfilled by the state. At the hearing, critics of the plan said public money shouldn’t be given to private developers, and farmland shouldn’t be considered blight. “I am opposed,” said Aurora resident Elizabeth Watson. “It’s out on the prairie and I can’t understand why it would be a blighted area.”

Miami-Dade hospital system nears insolvency - (finance.yahoo.com) The city's major hospital network, which runs Miami's only round-the-clock trauma center and is a safety net for the poor and uninsured, is running out of money and could close, a predicament that illustrates the precarious financial state of many hospitals around the country. The Jackson Health System will have little cash on hand by the end of March if it does not receive a $67 million advance from the county, said Marcos Lapciuc, treasurer of the Public Health Trust, the institution's governing board. "We are very close, if not already in, a health care death spiral," Chief Operating Officer David Small said. Jackson could run out of cash and shut by May or sooner, Lapciuc said, and the county mayor said officials were preparing to advance the hospital some money. "Sadly, it's not all that unique," Larry S. Gage, president of the National Association of Public Hospitals & Health System, said of financial difficulties like the one Jackson is facing.

County responsible for paying Jackson's union workers - (www.miamiherald.com) With Jackson set to run out of cash in two or three months, the county attorney says Miami-Dade must keep paying Jackson's union workers -- but not others. If the Jackson Health System runs out of cash, the county would be responsible for paying Jackson's 10,500 union workers, but not necessarily the other 1,500 employees, according to a legal analysis by County Attorney R.A. Cuevas Jr. It's unclear exactly how big a tab that might be, but it would be a huge chunk of the $86 million of salaries and benefits that the public hospital system spends each month. At present, Jackson is expected to run out of cash in May or June unless drastic cuts are made. This revelation on the county's responsibility comes just before a special meeting scheduled for Wednesday by the Miami-Dade County Commission ``to really understand the issues . . . being faced by the community's safety net hospital,'' according to the memo from Chairman Dennis C. Moss, who ordered the meeting. Cuevas' memo explores many issues in the relationship between Jackson and the county and raises the possibility that Gov. Charlie Crist might set up an oversight panel to administer the financially troubled institution, much the same way that Gov. Lawton Chiles created a financial emergencies board in 1996 to get the city of Miami back on track.

Can California declare bankruptcy? What about Greece? - (www.slate.com) California passed a gas tax last week to help make up for its nearly $20 billion budget gap, the latest in a series of measures to right the state's teetering economy. The country of Greece is in even worse shape, with accumulated debt higher than 110 percent of GDP, set to reach 125 percent this year. Can a state declare bankruptcy? Can a country? No and no. Chapter 9 of the U.S. bankruptcy code allows individuals and municipalities (cities, towns, villages, etc.) to declare bankruptcy. But that doesn't include states. (The statute defines "municipality" as a "political subdivision or public agency or instrumentality of a State"—that is, not a state itself.) For one thing, states are said to have sovereign immunity, as protected by the 11th Amendment, which means they can't be sued. In other words, they don't need any protection from angry creditors who would take them to court for failing to pay their debts. As a result, states can simply borrow money ad infinitum.

Developers New Scam: transfer tax paid to developers, forever - (www.housingwatch.com) Apparently, developers feel they haven't been getting theirs. With new home development stalling, developers seem to think that the only way they can increase profitability is to build it into their work. Behold then, the latest financial scheme from the housing industry: a flip tax that gets paid to the developer every time the home gets sold. Not surprisingly, developers are embracing the private transfer fee -- a sort of lien attached to a newly built house (or land), reports the Washington Post. Every time that house is sold over a 99 year period (thank God we're not talking about 100 years!!), 1 percent of the price gets kicked back to the original developer and, in some cases, is shared with their investor partners. When you figure that the average homebuyer these days keeps a house for about 6 years, that's one hell of a revenue stream for developers and their investors! Reportedly, a New York company, Freehold Capital Partners, is signing up developers for this fee scheme left and right, though it refused to tell the WashPo just how many clients it now has. It's Web site, however, claims the owners of $300 billion in real estate projects have now gone into business with it.

Defaults Signal Bursting Muni Junk Bubble After Surge - (www.bloomberg.com) Investors in search of better returns poured $7.8 billion into high-yield municipal bond funds last year, pushing assets to a two-year high. They may start experiencing losses as early as this year as default risks grow. “People are starving for yield because rates are at zero,” said Paul Tramontano, co-chief executive officer of New York- based Constellation Wealth Advisors, which manages about $4 billion. “They’re taking more risk than they think.” Below-investment grade munis are typically issued by companies raising debt through a municipality for a project with a public interest such as hospitals, nursing homes, housing developments and sports stadiums, said Eric Jacobson, director of fixed-income research for Morningstar Inc. “In order to be muni-junk, you really have to be junk,” said Gary Pollack, who helps oversee $12 billion as managing director of fixed income for Deutsche Bank AG’s Private Wealth Management unit in New York. “I wouldn’t touch them.”