(Counterpunch) 50 million barrels of oil are being parked in tankers sitting offshore, lacking buyers. Let’s call it: Parkland. But in Miami, Parkland is a name with another meaning. Parkland is a zoning application to move Miami-Dade’s abused Urban Development Boundary closer to the Everglades.
The Audacity of Parkland: Florida’s squandered promise
Zoning and permitting processes in the United States can be mind-numbingly complex, reduced finally to the most arcane province of lawyers, engineers, planners, their statistics and formulas; but they are the base layer of government and the flip-side of the coin of the realm, through which mortgage debt is securitized, chopped up and sold off to investors seeking a higher return than the hum-drum stuff of direct government obligations secured by tax receipts.
For a century, the promise of development in Florida has had a golden ring. But generations of environmentalists and civic activists have struggled against the promise to preserve today’s quality of life and natural resources; a constantly shifting baseline that only intensifies conflict notwithstanding suites of blue ribbon panels, public/private partnerships, all the king’s horses and all the king’s men.
You don’t have to stray far from Florida’s main arterial highways; the flags waving in the eternal sunshine proclaim one development after another hidden behind stucco walls named liked potions or salves; Sunset Lakes, Miami Gardens, Biscayne Landing, Crocodile Point, and Parkland.
Parkland, as a zoning application, will be heard tomorrow by thirteen members of the Miami Dade county commission and could be approved by a super-majority 2/3rds vote to the State of Florida, unless a promised veto by mayor Carlos Alvarez is sustained.
Today the development target is 1000 acres of row crops supplying winter vegetables to the nation’s industrial food supply. In 2014 if the developers get their way, a sprawling city of 18,000 will grow from those farmlands as a “green” development, green the way a chameleon is green in the grass. What sets Parkland apart is not just the audacity of re-zoning farmland for a destroyed economic model, suburban sprawl, but that the developers are the elite of Miami’s builders, developers and bankers who fomented Miami’s housing market bubble in the first place.
Parkland pits environmentalists, community activists, and professional agency planners against entrenched economic interests who have controlled the county commission for decades. The shareholders of Parkland include bankers like Sergio Pino and Ramon Rasco who know in fine detail how politics they encouraged contributed to the current economic disaster while ordinary investors who bought the Cool-Aid of the housing boom are out of luck and time.
The developers would argue this point in private; that they are not to blame but only followed for profit what the market wanted and what the law permits, but in public, defending a failed economic model has no place. And certainly not in Miami, a premier city in a state where logic, common sense, and fiscal prudence were steamrollered to provide mortgages to any buyer who could be dredged from the melting pot.
In respect to Miami’s role as the epicenter of the housing market boom and bust–Parkland stands out as a supertanker on the horizon.
It floats on the same logic that in a state with a sole source of revenue– from real estate and related transactions– the only way forward is to increase tax base and lift all ships. In the end, it did neither. Today, as 2008 draws to a close, home-owners are left paying taxes on unrealizable assessed values. The tide has dropped far out to sea in Miami, leaving 100,000 foreclosures and more en route.
Tomorrow’s zoning hearing on Parkland will proceed according to a worn-out charade: presentations and powerpoints and last minute proferrings by the prospective developer, improvements to roads, schools and infrastructure well and far above what might be expected– Christmas stocking stuffers. There will be stock speeches by the smattering of opponents who can afford to take the time, and rote talking points by “the neighbors” (the preacher, the small businessman, the mother seeking the best for her children) who are bused in, understanding little beyond the offering of a desultory lunch and a few bucks. Last but not least, there will be county commissioners whose votes had been tallied long before the meeting, by quid pro quo’s and campaign contributions from the developers or their surrogates.
This is how important public hearings on zoning happen in Florida, to be scheduled before holidays or in the dead heat of summer or other inopportune times that best suit civic suppression. But Parkland is different. The Parkland application is a semi-colon on the way to 2009: the Forbes family has laid off the crew of its yacht wintering on the Miami River and is down to a skeleton staff. Good cheer is scarce as hens’ teeth. If you want a sense of Florida this Christmas, forget the Netjet set or the seven hundred a night rooms on Miami Beach. Drive through the suburbs that ring the proposed Parkland development site in far west Dade; cheap housing marketed as affordable, red roofed Mediterranean tiles by the hundred acre now pock-marked with for sale and foreclosure signs.
Parkland’s owners now say that they will not break ground on their development until 2014. What they really mean– this too will not be subject to discussion in tomorrow’s hearings– is that they need a zoning change from the county then the state to monetize land purchased at peak speculative values, the better to foist on European, or Asian, or MIddle Eastern investors / vultures who might be persuaded that all the rosy population growth pushed forward by the Latin Builders Association in 2005 still hold true.
Only, those investors are having trouble of their own– having put so much faith in the US dollar (see, below). But the problems of Dubai are an ocean or two away. Miami Dade county commissioners could approve the Parkland regional development irrespective of the euro, the ruble or the pound; after all, sending the proposal to the state of Florida, that will likely reject the plan and send it to court, is more or less like walking cows to the barn. It is a pattern that simply replicates the drama played out last week at the Dade County Courthouse where last year’s surviving applications to move the Urban Development Boundary were heard by an administrative law judge. All very polite. All just doing their jobs. Isn’t that model clear enough: low-cost legal battle versus the high cost of political independence?
The TV investigative series, 60 Minutes, on Sunday showed how the US economy is about to be hit with a second tsunami of mortgage foreclosures tied to Alt A and ARM mortgages; ie. the middle and upper middle class. The segment featured Miami but did not elaborate how these mortgages comprise the bedrock of Miami’s economic demographics: doctors, lawyers and Indian chiefs who salvaged money from the dot.com bust in 2001 and speculated that real estate always goes up. So much, for that.
The pages of 2008’s economic misery would have to include a foreward on the abandonment of common sense, fiscal prudence, and how the risk to our quality of life, our environment, and job security was privately banked by the the entire supply chain related to unsustainable debt long before the crisis occurred. Their vision of dancing sugar plum fairies was all about paving over Florida wetlands, their twelve days of Christmas about shifting drinking water supplies between watersheds, burying municipal wastewater in deep underground aquifers nestled against drinking water reservoirs, destroying shallow seagrass wilderness, polluting estuaries, rivers and streams all to foster “build it, and they will come”.
So far, president-elect Obama has only promised that new jobs and trillions of dollars will be applied to “green” jobs in a new energy economy. Whether or not those dollars and his force of persuasion can filter, quickly enough, into the minds of decision-makers at the local level requires a feat of great political leadership. The kind of leadership that would reject Parkland out of hand.
So it will be interesting to see what happens to the Parkland development application to move the Urban Development Boundary tomorrow, if only for an indication whether a pulse exists in the base layer of government. The nation’s banks are hoarding cash and bundling up for winter, a luxury not extended to consumers whose lifestyles had already depended on debt and two wage-earners per family. Every minute that government wastes, trying to kick-start the old economic model of growth that will not work for the foreseeable future, is a minute pushing America closer to a Depression.
But don’t take my word: read what George Soros wrote yesterday in the Financial Times (reprinted below). Mr. Soros is a big investor in real estate in Key Biscayne, an island enclave adjacent to Miami; on any night, he could stand on his penthouse balcony and see the outline of dozens of downtown, darkened and empty condominiums and in the opposite direction, twinkling on the horizon of the Gulf of Mexico, the lights of heavy freighters hanging offshore, laden with oil.
Worst financial crisis in 60 years marks end of an era By George Soros Published: December 15 2008 16:28 | Last updated: December 15 2008 16:28 http://www.ft.com/cms/s/0/4807b62a-ca35-11dd-93e5-000077b07658.html The current financial crisis was precipitated by a bubble in the US housing market. In some ways it resembles other crises that have occurred since the second world war at intervals ranging from four to 10 years. However, there is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years. Boom-bust processes usually revolve around credit and always involve a bias or misconception. This is usually a failure to recognise a reflexive, circular connection between the willingness to lend and the value of the collateral. Ease of credit generates demand that pushes up the value of property, which increases the amount of credit available. A bubble starts when people buy houses in the expectation that they can refinance their mortgages at a profit. The recent US housing boom is a case in point. The 60-year super-boom is a more complicated case. Every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and finding other ways to stimulate the economy. That created a system of asymmetric incentives also known as moral hazard, which encouraged ever greater credit expansion. It was so successful that people came to believe in what former US president Ronald Reagan called the magic of the marketplace and I call market fundamentalism. Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest. It is an obvious misconception, because it was the intervention of the authorities that prevented financial markets from breaking down, not the markets But market fundamentalism emerged as the dominant ideology in the 1980s, when financial markets started to become globalised and the US started to run a current account deficit. Globalisation allowed the US to suck up the savings of the rest of the world and consume more than it produced. The US current account deficit reached 6.2 per cent of gross national product in 2006. The financial markets encouraged consumers to borrow by introducing ever more sophisticated instruments and more generous terms. The authorities aided and abetted the process by intervening whenever the global financial system was at risk. Since 1980, regulations have been progressively relaxed until they have practically disappeared. The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on information from originators of synthetic products. It was a shocking abdication of responsibility. Everything that could go wrong did. What started with subprime mortgages spread to all collateralised debt obligations, endangered municipal and mortgage insurance and reinsurance companies and threatened to unravel the multi-trillion-dollar credit default swap market. Investment banks’ commitments to leveraged buyouts became liabilities. Market-neutral hedge funds turned out not to be market-neutral and had to be unwound. The asset-backed commercial paper market came to a standstill and the special investment vehicles set up by banks to get mortgages off their balance sheets could no longer get outside financing. The final blow came when interbank lending, which is at the heart of the financial system, was disrupted because banks had to husband their resources and could not trust their counterparties. The central banks had to inject an unprecedented amount of money and extend credit on an unprecedented range of securities to a broader range of institutions than ever before. That made the crisis more severe than any since the second world war. Credit expansion must now be followed by a period of contraction, because some of the new credit instruments and practices are unsound and unsustainable. The ability of the financial authorities to stimulate the economy is constrained by the unwillingness of the rest of the world to accumulate additional dollar reserves. Until recently, investors were hoping that the US Federal Reserve would do whatever it takes to avoid a recession, because that is what it did on previous occasions. Now they will have to realise that the Fed may no longer be in a position to do so. With oil, food and other commodities firm, and the renminbi appreciating somewhat faster, the Fed also has to worry about inflation. If federal funds were lowered beyond a certain point, the dollar would come under renewed pressure and long-term bonds would actually go up in yield. At that point the ability of the Fed to stimulate the economy comes to an end. Although a recession in the developed world is now more or less inevitable, China, India and some of the oil-producing countries are in a very strong countertrend. So the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the US and the rise of China and other developing countries. The danger is that the resulting political tensions, including US protectionism, may disrupt the global economy and plunge the world into recession or worse. The writer is chairman of Soros Fund Management.