Where do "growth" profits go?

I have a dumb question I am proud of. It is so dumb it is worthy of a citizen of the new Appalachia, as the San Joaquin Valley is known in fashionable political circles. None of the smart people in charge of our Merced County growth are talking about this question, at least in public. And if you don't want to live in the shade of a speculative real estate boom, why -- for Land's sake, son, -- you can go straight back to the old Appalachia, at least as far as our fashionable political circles are concerned.

None other than the president of the University of California said UC Merced would be a high-tech and bio-tech engine for growth, and the implication behind his statement was that no community could ask for anything better than such a thing as that because growth raises all boats and brings the long-sought universal prosperity where pies fall from the sky and money grows on trees.

But, where do the profits from all this “growth” go?

Merced County is in the midst of a speculative housing boom. The local paper reports that, “Housing prices have soared to 77 percent above where they should be,” but a housing industry consultant said they should sink “about 35 percent to 40 percent over a period of three years.”

But the essence of a speculative boom is that is bust, as much a part of it as that 77-percent over value, cannot be predicted. From a speculator’s viewpoint, however, it’s a fair guess the housing prices are just about where they should be – maybe a little low, but not bad if you can flip the property before the bust.

Since most of the investment comes from the outside, would the capital and its profits (or losses) return to the outside? Where does the money go that developers paid farmers and ranchers for their land? Pretty places in the mountains and on the seashore? Farm or ranchland in some other, cheaper state? Where does the money a homeowner receives for his or her house go? If you sell your farm, ranch, or house, it seems logical to assume your money goes with you, elsewhere. What economic incentive would there be for local people who had just sold to buy agricultural land or a house in Merced County at the moment? Wouldn’t they want to go raise some other community’s real estate values? Or would they just blow it on golf, cutting horses, really expensive SUVs or trips to Thailand? Has there been any real public benefit from all this money? Has there been any thought that all this investment and profit should produce some public benefit?

It’s clear that one dumb question leads to others, even dumber.

UC Merced’s vice chancellor for money raising, John Garamendi, Jr., announces a big increase in donations to the school now that the campus is open. Does that money benefit the people of Merced? Nope. Primarily, it gratifies the prestige cravings of the donors, UC research, and UC staff after the large cut for administrative fees is taken. If donors want to benefit the educational progress of the people of Merced, isn’t the best bang for the buck still Merced College, which educates local students in practical skills and transfer credits so that they can attend universities and colleges later?

As far as the Great Merced Speculative Housing Boom is concerned, is that a genuine, huge, Perotian sucking sound we hear?

All that obstructs the glorious flow of the boom are the niceties of the land-use laws. But, if Merced County is nearly devoid of the kind of entrepreneurs who created new industries and jobsites, it is exceedingly rich in the kind of politicians and planning departments adept at getting around the niceties of the law.

To begin, everybody who is anybody in Merced County is his or her own planning department.

There are the county and the incorporated cities, which actually have legally constituted planning departments.

There is UC Merced, which had a completely separate planning department until recently. Now they have turned over development of their UC Community to Lennar Homes, a national home building and another de facto planning department.

There is the county Public Works Department that planned the Campus Parkway.

There are large projects like WalMart and the Riverside Motorsport Park, which create their own plans and count on their own political influence to drive them through the legal land-use authorities. Others in this category would include: Gallo’s Yosemite Lakes, Toronto-based Brookfield Homes, KB Home Central Valley, Inc., Florsheim Land, LLC, Crosswinds Development at Bellevue Ranch, the Gallo/Kelley Stevinson new town, and Ranchwood’s Geneva at Planada. This by no means exhausts the list.

Greg Hostetler’s Los Banos-based Ranchwood Homes is in a class by itself, the local boy who pay wages to other local boys and girls. But, nonetheless, some dumb questions about Ranchwood arise. Does Ranchwood operate on its own money? If not, where do its investor profits go? Los Banos? San Jose? San Francisco? Los Angeles? Chicago? Hong Kong? Does being the local developer mean Ranchwood should be granted dispensation from every local, state and federal environmental law and regulation and public process? Or just the laws it wants to break? Who, for example, granted dispensation to Ranchwood to disk or deep-rip several thousand acres of habitat for endangered species? Who excused Ranchwood from installing a 42-inch sewer trunk line from Livingston, entirely in county jurisdiction, without any county permits, to open a corridor for residential development from Livingston’s pathetic sewer plant all the way to Stevinson? What planning department actually authorized Ranchwood to build settling ponds that flooded this winter in Franklin-Beachwood?

There is also the special category of Fox Hills, a new town near Los Banos, one of whose developers is Steve Sloan, also chairman of the Merced County Planning Commission.

There is the Merced County Association of Governments (McAg, as some locals call it) which claims the land-use authority to act as the lead agency and planning department for an entire transportation plan for the county. Although MCAG tries, and reported having spent $420,000 on its latest multi-year campaign to get Merced County citizens to raise their sales taxes to pay for UC’s roads, it has still not added successful political campaign consulting to its resume of expanding powers. McAg’s latest transportation plan would remove 2,000 acres of Valley agricultural land. Now, what has that got to do with the county’s existing General Plan?

There is Gov, Schwarzenegger’s San Joaquin Valley Partnership (whose vice chairman is San Joaquin County’s most prominent developer), which will define what areas between Lodi and Arvin will become exempt from environmental law and regulation for the purpose of development.

Finally, there is the Great Valley Center (known to some as the Great Valley Economic Development Corporation) a non-profit corporation acting as a regional planning agency to push an eight-county council of governments to create a blueprint of those same areas to be exempted from environmental law and regulation.

All this goes on in the bureaucratic stratosphere while the legally constituted land-use authorities stall on updating their general and community plans, the legally compliant documents that include local public comment that are supposed to guide how these jurisdictions want to grow. Merced County has been so completely dominated by UC, by developers and by grifting hordes of planning and environmental consultants, that its officials no longer even see its citizens and their diminishing natural resources, much less hear public doubt. But, hey, how about that Measure A?

Isn’t the speculative housing boom in Merced County “trickle up and out” economics? It has corrupted and destroyed the land-use authority of local government, charged with balancing the impacts on existing citizens from speculative housing booms, their busts and consequences.

This growth boom creates a magnet for chain retailers, extracting more profits from the community, driving local retailers out of business, making downtown a haven for antique franchises -- all perfect according to the impeccably stupid ideology of the far right business community, dominated by developers and realtors. Who benefits when people who should not have tried to buy homes on adjustable rate mortgages cannot meet their balloon payments, meeting instead their natural predators, the foreclosure vultures? Is there anything less conducive to civic harmony than the naked hand of the real estate marketplace?

Ironically, the workers that have probably realized some benefit from the boom have been those farmworkers able to find work in construction. Personally, I would be skeptical of the ability of a tomato picker to construct a roof gable that doesn’t leak, but who cares in a real estate boom? For the rest of Generation Me, when the real estate deal bottoms out, it will be back to McJobs. While local government planners mutter about preserving land for industry to improve the jobs/housing ratio, some members of the public wonder if the owners of parcels zoned for industry are simply getting a property tax break while they hold the land for residential development.

Speculators and developers have bought thousands of acres of Merced farmland and realize a state subsidy on property tax under the Williamson Act. County supervisors only voted in the Williamson Act in 2000, 35 years after the act was established to help farmers keep their land in agricultural production. It was sold politically under the entirely bogus theory that it would be “mitigation for UC Merced,” language not appearing in the legislation nor contemplated in its intent. However, it was very popular among a select group of large landowners and land speculators, who, by 2000 could not be distinguished one from the other. The late passage of the Williamson Act in Merced County, for corrupted reasons, raises the question of what Merced farmers and ranchers might have been able to achieve with 35 years of property tax savings, had supervisors supported agriculture from the act’s inception.

Watching the founding of UC Merced led some members of the public to revise their entire theory of the American university, deciding that there are really only two divisions left: Science and Technology incubating new high-tech, bio-tech engines of growth; while all departments of what was once called Humanities have become nothing but propaganda incubators. Could a university with a beginning as destructive as UC Merced ever produce anything but weapons of mass destruction? We put our hope in Rep. RichPAC Pombo, R-Tracy and his local supporters: let those super patriots become neighbors of UC’s new level-4 biodefense laboratory. We prefer not to. There is something about proximity to Ebola that does not inspire confidence in a UC education.

After nine months of campus operation, UC Merced’s chancellor, provost, one vice chancellor, its environmental compliance officer and the dean of social sciences have fled. Why? It’s just another dumb question.

Bill Hatch

Merced Sun-Star
Planada...Chris Collins...In Brief
Planada board to hold meeting about development
The Planada Municipal Advisory Council will host a meeting June 29 to discuss the proposed Geneva Estates development.
The meeting will be held at 7 p.m. in the Planada Community Hall at the Senior Annex Building.
For more information, call 385-7366. -- Chris Collins

Hot housing likely to cool...Leslie Albrecht
Housing prices have soared to 77 percent above where they should be, which means Merced is "at risk for a price correction," according to the study released earlier this week by financial services company National City and economic information company Global Insight. When prices dip, they'll probably sink about 35 percent to 40 percent over a period of three years, said DeKaser.Developers and real estate agents alike have been forced to slash prices lately.

Grand Jury scolds planners over service...Chris Collins
A report released by the Merced County Civil Grand Jury accuses the county Planning Department of poor customer service, using faulty computer records, and refusing to carry out an order issued by the five-member Planning Commission.
UCM pledges increase fourfold...Corinne Reilly
Fundraising efforts at UC Merced this year have drawn the most private support in the university's history, with total donations for the year at more than $19 million, according to university officials. Of the 612 gifts made by 462 private donors this year, the largest - at $5 million - will support the university's proposed medical school. The national corporation that made the donation will be publicly announced soon, said Garamendi. Systemwide, UC has brought in more than $1 billion a year for the past five years, according to the UC Office of the President.