Sembler + Tax Abatement = Taxpayers Lose

Another bail out, can't blame them for trying. If you don't already receive these updates from Represenative Mike Jacob please visit his website @ http://repjacobs.com/ to read more. The following article came over this morning in regards to the proposed Sembler Tax Abatement/bailout.

"Sembler + Tax Abatement = Taxpayers Lose

After spending some time crunching the numbers this weekend, this simple equation sums up the conclusion I have reached. And I'm not the only one reaching this conclusion.

The DeKalb Development Authority will meet this Thursday, June 18, at 8:00 a.m. at 150 East Ponce de Leon Avenue, Suite 400, in Downtown Decatur. The meeting time and location isn't posted anywhere on the Internet. You have to call the county to get it.

The Sembler tax abatement proposal is on the agenda. There is no word yet as to whether a final vote on the tax abatement will occur at this meeting. At a minimum, it will be discussed.

Thank you to everyone who attended last Monday's community meeting about the tax abatement. It is estimated that more than 250 people attended. I also want to thank State Rep. Fran Millar for serving as the on-the-spot emcee for the meeting, Commissioner Jeff Rader for his thoughtful remarks and for his efforts to draw the DeKalb County Commission's attention to the shortcomings of the tax abatement, and Jeff Fuqua of the Sembler Company for taking the time to explain his company's position to a skeptical public.

I believe the public is right to be skeptical. I have reviewed the KPMG analysis of the 20-year tax "benefit" that Sembler and the Development Authority are claiming the county government and the school system will receive if the 20-year tax abatement is granted. Courtesy of Jim Walls' "Atlanta Unfiltered" blog (more on Atlanta Unfiltered below), you can review the document containing the KPMG analysis here (click for link).

The KPMG numbers indicate to me that the proposed Sembler tax abatement will REDUCE the county government's and school system's operating funds, if you subtract from the padded totals (1) the revenue that the county government and school system will receive whether or not the tax abatement is approved, and (2) the revenue that doesn't defray any county or school operating costs. Please take a look at the somewhat difficult-to-read page 3 of the KPMG document, and I'll show you what I mean.

First, the analysis counts one revenue source that doesn't go toward operational (instructional) costs of the school system, but instead goes only toward school construction:

ESPLOST Revenue = $4,098,287

Also, the analysis counts one revenue source that doesn't go to the county government or school system at all, but instead goes to MARTA:

MARTA Sales Tax = $40,982,873

In addition, the analysis counts two revenue sources that will go to the county government and school system whether or not the tax abatement is approved, because the buildings that would generate these revenues are at or near completion:

Property Tax on Non-Abated Buildings = $45,594,544
Property Tax on Personal Property of Renters = $5,761,440

None of the above sources should be counted as part of the tax "benefit" to county government and school system operations. The following sources, however, should be counted:

HOST Revenue = $36,024,362
Property Tax on Personal Property of Retailers = $5,817,997
Business Licenses = $3,185,756

When you add these three numbers together, the total of the actual tax "benefit" is $45,028,115. From that amount, the following three amounts must be subtracted:

Value of the Tax Abatement = ($51,699,253)
Cost of County Services = ($11,321,760)
Cost to Educate Children Living in the Project = ($10,990,000)

The result is a NET LOSS to the county government and school system of $28,982,898 over the 20-year life of the tax abatement. Worse yet, this doesn't account for Commissioner Rader's point at last Monday's meeting that many of the "new" tax revenues claimed in the analysis are actually existing tax revenues that are being shifted to the Town Brookhaven project from elsewhere in DeKalb County.

Granting this tax abatement is bad policy. It will place upward pressure on your property taxes. That problem will be amplified the more often the Development Authority decides to give away the shop to developers whose projects are victims of the real estate market.

Don't just take my word for it. Jim Walls, a former AJC investigative reporter who now runs his own blog, Atlanta Unfiltered, did his own math and wrote an article reaching a similar conclusion, albeit with a lower price tag. You can read Jim's analysis here (click for link).

If you're available this Thursday at 8:00 a.m., I encourage you to join your neighbors at the Development Authority meeting. It is crucial to show the non-elected, unaccountable Development Authority that the public is watching.

DeKalb Watering Restrictions Eased

DeKalb County and the Georgia Environmental Protection Division (EPD) have eased the outdoor watering restrictions that were in effect as a result of the recent drought.

Under the new rules, odd-numbered street addresses can water on Tuesday, Thursdays, and Sundays. Even-numbered addresses can water on Mondays, Wednesdays, and Saturdays.

To help with water efficiency, it is recommended that residents avoid any outdoor watering between 10:00 a.m. and 4:00 p.m."

What are New Home Sales Doing?

Well the report is out, New Home sales have increased nearly 5% in the last month which is a direct correlation to the drastic decrease in price homes have taken over the last few months. Currently, the median price of a new home is just short of 18% YTD. This is significant data because it shows that the real estate market has seen the worst of times or is bottoming out and is slowly starting to show signs of recovery. I don't predict we will see new or resale homes decrease much more in price especially in the Atlanta market barring the government makes the right financial decisions in its attempt to free up lending. This $8,000 first time home buyer income tax deduction iontroduced was a step in the right direction, but the key now is to get lenders to unlock their vaults and allow some of the credit to flow.

New Mortgage Rules Aimed at Consumers

The Department of Housing and Urban Development plans to announce Wednesday morning its final version of new rules designed to help Americans shop for mortgages more effectively.
The rules update requirements of the Real Estate Settlement Procedures Act, known as Respa, a 1974 law that sets federal rules for home-purchase transactions.
Among other things, the new rules, debated for years, are supposed to help consumers compare terms on loans offered by different lenders and limit the ability of lenders to offer final terms that are far different from initial estimates given to potential borrowers.
Many Americans now in default on their mortgages say they didn't fully understand the terms of loans they were encouraged to take during the housing boom. One big problem is that legally mandated disclosures are so voluminous that almost no one ever reads them before signing.
Lobbyists said HUD appears to have dropped a provision that would have required a lengthy "script" to be read to borrowers at the closing table, setting out the terms of the loan. Lenders had complained that the script would raise costs by taking up too much time. A HUD spokesman declined to comment on any changes.
Mortgage industry groups have called for HUD to withdraw the planned rules and instead work with the Federal Reserve to create a coordinated set of disclosure rules stemming from Respa and the Truth in Lending Act. The Federal Reserve has responsibility for making rules under the latter law.
But the Bush administration, which was forced by intense industry opposition to withdraw an earlier set of Respa rules in 2004, has insisted it would complete the process this time.
The Obama administration is likely to try to go well beyond the new Respa rules and look more comprehensively at disclosures lenders are required to make to borrowers, said Howard Glaser, a mortgage industry consultant who served as a senior HUD official in the Clinton administration. "This won't be viewed as sufficient to restore borrower confidence in the mortgage process," Mr. Glaser said.
There is general agreement on a need for simpler forms of disclosure. "In today's market, people shop more effectively for a new flat screen TV than they do for a mortgage," the Mortgage Bankers Association, a trade group, told Congress in testimony earlier this year. But the association said HUD's planned rules failed to simplify the process.

House Rejects Bailout Bill, Real Estate Leaders Talk about Impact on Housing

RISMEDIA, Sept. 30, 2008-In a stunning vote, the House of Representatives on Monday rejected the Bush administration’s proposed $700 billion rescue of Wall Street by a vote of 228-205. According to published reports, 132 Republicans voted against plan, only 66 in favor and 138 Democrats voted in favor with 95 opposing the measure.

It was unclear what would follow, however supporters scrambled to bring the bill up for consideration again as quickly as possible. On Wall Street, even before the vote was complete, stocks began tumbling. The Dow plunged as low as 700 points before rebounding slightly.

The decision came after lawmakers attempted to hammer out a plan to share spending controls with the current administration. The failed plan to initiate the biggest bailout in U.S. history had tentative support from both presidential candidates.

The failed plan would have authorized the Federal government to acquire a massive package of devalued assets from beleaguered financial companies to shake loose seized credit. The proposal had been designed to end a vicious downward spiral that has battered all levels of the economy.

As a result, hundreds of billions of dollars in investments based on mortgages have soured and cramped banks’ willingness to lend.

The government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies’ future profits. To help struggling homeowners, the plan would require the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers’ monthly payments so they can keep their homes.

Sen. Chris Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee seemed to empathize with homeowners and average citizens who barraged lawmakers’ offices in recent days skeptical of the plan.

“I don’t know of anyone here who wants the center of the economic universe to be Washington,” said Sen Dodd, a top negotiator on the bailout. “The center of gravity is here temporarily. … God forbid it’s here any longer than it takes to get credit moving again.”

Leading up to the decision, some top real estate industry leaders and analysts agreed that something had to be done, but didn’t necessarily buy in to the bailout plan as a quick fix for volatile corrections or declining trends in the housing market.

Lawrence Yun, NAR chief economist essentially likened the bailout to the biggest jumbo mutual fund the government established for itself, ever. In a commentary to members September 22, Yun said he inclined to view the proposal, “as the biggest sovereign wealth fund investment to date.

Yun pointed out that several sovereign wealth funds have been investing in Wall Street firms and mortgage-related debts since late last year.

“Singapore, South Korea, United Arab Emirates, Saudi Arabia, and China were among the countries putting up a few billion dollars in the hopes of turning a big profit once the housing market recovers,” Yun wrote.

He explained that the principal goal of the new Treasury authorization is not to make money but to unclog the financial pipelines so most Americans, the primary investors in the program, can begin borrowing again.

“Knowingly or not, the 75 million homeowners and 100 million taxpayers have now become the key stakeholders on the side of housing market recovery,” Yun added.

While NRT President Bruce Zipf did not downplay its historical importance, he was somewhat philosophical in referring to the current situation as part of a cycle.

“This is just on a different level and at a different scope,” Zipf said. “There’s a cleansing period going on, it’s just a question how long this cleansing period will go on for.”

He remained certain, in the end, there will still be people buying and selling homes and an industry to lend the money for them to do it.

“Everybody may look a little different, with a different name and a little bit of a different structure, but this is an evolution,” Zipf said.

He said when it comes to counseling everyone from brokers to agents to the clients about declining trends in some of its markets, NRT has been doing that for years. And it appears in several of those troubled markets, the counseling is paying off.

“In some of our markets, we have been witnessing declines for up to four years,” he said. “And the good news is, in some of those markets we’re now seeing unit sales greater than the price declines. This certainly signals a rebound in the market.”

He said particularly in lower priced markets, trends are looking up.

“Price means more than anything now,” he said, adding that home owners and potential buyers should still look to the real estate market as a good long term investment.

“Real estate will never reset to zero,” he said.

Carter Murdoch, Ph.D., compliance and marketing executive for the Realtor Builder Mortgage Services Group of Bank of America said industry-wide, mortgage rates are remaining somewhat consistent. It’s the Fed that has found itself with “no bullets in the gun.”

“The number of lenders has dropped by historic proportions, thereby making it tougher for all borrowers to find funding,” Murdoch said.

Murdoch not only shared Zipf’s observation that several declining markets are showing some renewed spark, he goes as far as predicting those markets whose home values have fallen the farthest will recover the fastest.

Although the federal bailout appeared imminent, he said the fix will take some time.

“The reality is the liquidity crunch it will take a minimum of six months, possibly more than two years to shake out,” Murdoch said.

He said as a result of the economic slide in recent days, the “velocity of money has almost come to a standstill,” and a bailout is a first step, “priming the pump” to help restore overall confidence in the financial markets.

Bob LeFever, an industry consultant as well as president and CEO of The LeFever Group, illustrated that in some powerful circles of influence, the economic shakeup is all but past. He illustrated his point recalling a conversation with a broker at a boutique real estate firm in Newport Beach, California - the heart of financially shell-shocked Orange County where the extinction of virtually all its major financial services giants has cost thousands of jobs.

He said over one recent weekend, after the bailout was proposed, that firm closed four deals - one for $20 million, one for $17 million, one for $12 million and one for $8 million.

“The agents said the reason people did it because they felt the government proposal will redefine the bottom of the real estate market,” LeFever said. “People with money, understand that the crisis is over.”

He said the final twist to the whole national financial debacle is the government bailout. But at what cost will it come?

“I liken this to a hurricane,” LeFever said. “First comes the wall of water. Then the eye of the hurricane comes over - the eye of the hurricane is the government stepping in with a $700 billion package.

“Now the aftermath is coming. This mess ain’t going to get cleaned up in 72 hours,” he added.

LeFever suggested consumers who don’t have to buy or sell might want to hold tight to see how the back end of this historic hurricane shakes out.

Rei Mesa , is President of Prudential WCI Real Estate in Florida, the company has over 40 locations and more than 2,000 real estate sales associates serving 17 counties throughout Florida. That state took one of the hardest hits from LeFever’s so-called financial hurricane.

He said it will be tough to tell the full impact of a government intervention.

“I’m disappointed it didn’t happen sooner, but it’s absolutely needed,” Mesa said. “Short term it’s going to affect our sales, but in the long term it’s going to bring some long term benefits.”

He, too, pointed out the availability of continuing historic low interest rates, and feels the affordability factor will soon follow, spurring the market among those who have the credit worthiness to qualify for loans.

Moving ahead, Mesa said it’s more critical than ever for everyone on the front lines dealing with consumers be as informed as possible about goings on in not only the world of real estate, but the arena in which the financial aspects of real estate transactions play out.

“We’re looked upon by the consumers as individuals who provide guidance,” Mesa said, “and quite frankly stay engaged. It’s not a necessity, but a requirement to stay informed.”

The good news Mesa sees coming out of the bailout is a leveling off of foreclosures in the short run, and a return to accessible financing for homes which are generally correcting to a more affordable price range, especially for first time buyers.

And the potential worst-case outcome?

“The most negative outcome would be more stringent requirements for qualifying for a mortgage, even for those with good credit,” Mesa said. “And if what we do today does not curtail impending foreclosures, obviously it will continue to erode values in real estate. This will make it that much longer and much harder to return to a balanced market.”

Breaking News about Downpayment Assistance

Chairman Frank and HUD Secretary Preston Negotiate DPA Agreement Chairman of the House Financial Services Committee, Barney Frank, has discussed publicly the fact that he has negotiated an agreement with HUD Secretary Steve Preston that will provide for the continuation of privately funded downpayment assistance. The agreement allows HUD to impose risk-based pricing on downpayment assistance transactions which provides Secretary Preston the fiscal protection he seeks for the FHA insurance fund. According to an Inman News article published today, Chairman Frank is quoted as saying "The FHA loved the ban on down-payment assistance (but) hated the ban on risk-based pricing," Frank said at Saturday's hearing. "That seemed to me to offer an opportunity. So (HR 6694) will replace both bans with middle ground -- and it will pass the House, I can guarantee you. What you want to do now obviously is talk to your senators. We think it will go through there -- it has the approval now of the Secretary of HUD." Thanks to the advocates of downpayment assistance, there is significant momentum in this direction. Nehemiah urges all supporters to continue their campaign to save DPA by contacting their Senators and request a swift passage of pro-DPA legislation. Read the entire article:http://www.inman.com/news/2008/09/10/congress-weighs-reprieve-seller-funded-gifts More exciting developments: join Scott Syphax, President and CEO of Nehemiah Corporation of America, for a 30-minute virtual town hall meeting on Thursday, September 11, at 10:00 AM Pacific / 1:00 PM Eastern. Visit the Events page on www.DPAGroundSwell.org for more information.

President Bush Sign HR 3221 -

President Bush has signed H.R. 3221, the Housing and Economic Recovery Act of 2008. This will assist an estimated 400,000 homeowners facing foreclosure by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan. The bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas. The bill permanently increases the conforming loan limit to $625,500. In February, the Economic Stimulus Act of 2008 was signed, temporarily raising the conforming loan limit in high-cost areas to $729,750 from $417,000 until December 31, 2008. The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area’s median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area’s median home price, up to $625,500. Both new loan limits will be effective at the expiration of the economic stimulus limits on December 31, 2008. Provisions of the legislation include: • A temporary increase in mortgage revenue bonds to refinance subprime mortgages. • New regulator for Government Sponsored Enterprises to restore investor confidence in GSE loans and help the market and economy stabilize. • First-time home buyer tax credit, which allows first-time home buyers to receive a tax refund worth up to 10 percent of a home’s purchase price, up to a maximum of $7,500. The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years. • Temporary raise in the loan limit for the Veterans Affairs home loan guarantee program to the same level as the economic stimulus limits until the end of 2008. • Adjustment to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), allowing sellers to provide the non-foreign affidavit to a qualified closing entity and not just the buyer. • The setting of minimum requirements for mortgage originators, which mandates fingerprinting of loan originators and establishes a nationwide loan originator licensing and registration system. The requirements do not apply to those only performing real estate brokerage activities unless they are compensated by a lender, mortgage broker, or other loan originator. States will have the ability to implement more stringent laws. • The creation of a National Affordable Housing Trust Fund to help cover the cost of the FHA rescue plan for the first five years and develop affordable housing in subsequent years. • The Treasury Department’s proposal to create a federal backstop program to ensure the financial well-being of Fannie Mae and Freddie Mac. • The FHA’s inability to insure loans that utilize a seller-funded down-payment assistance program. Down-payment assistance from family, employers and other nonprofits is still allowed. • The Community Development Block Grant Programs’ $4 billion allotment for communities to purchase and refurbish foreclosed homes

Positive News for a Change in the Housing Market

U.S. home sales contracts signed in June unexpectedly rose, boosting an index of pending sales to the highest level since October, though it was well below the year-ago level, a real estate trade group said on Thursday.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in June, was up 5.3 percent to 89.0 from a downwardly revised 84.5 in May.
It was the highest reading for the index since October, when it was at 89.8.
Some analysts said the main reason for the June improvement might be that banks were aggressively marking down prices on foreclosed properties to get them off their books. But even that is a sign that housing markets are being brought into order.
"There are some bottom feeders coming in to buy some of these homes in distressed situations," said Andrew Richman, managing director for SunTrust's personal asset management division in West Palm Beach, Fla.
The pickup in June signings sharply contrasted with forecasts by economists polled by Reuters who had expected contract signings to decline 1 percent.
Video: CNBC's Diana Olick breaks down the housing numbers.
The association's senior economist, Lawrence Yun, said the swing in monthly signings "indicates a housing market in transition," but said it nonetheless was encouraging.