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Category Archives: economic development

Chasing manufacturing jobs? Good luck.


Every civic-minded American believes that prosperity is simply a matter of a factory coming to his town. Not one one that belches pollution, but “light industry” or “clean manufacturing.”

While a few such factories exist and a new one will come to the Ozarks once in a while, I’m doubtful that a policy directed at reeling in these factories should be a major part of an economic development strategy.

In his very brief essay, “Fetish for making things ignore real work,” John Kay breaks down the purchase price of an iPhone, which (ignoring the carrier subsidy, or what Verizon or ATT discounts it to you to get you to sign a contract) is about $700. He says the valuable parts–the camera and flash drive, not likely to be made by Ozarks labor–account for about $200. The assembly and the cheap parts amount to about $20. Most of the rest of the purchase price is returned to those brilliant people who designed the iPhone, its operating system, and its advertising and their shareholders.

Kay’s main argument is relevant to the local economic development director and chamber of commerce committee:

Where will the jobs come from in a service-based economy, manufacturing fetishists ask?

From doing here the things that cannot be done better elsewhere, either because of the particularity of the skills they require, or because these activities can only be performed close to home.

Manufacturing was once a principal source of low-skilled employment but this can no longer be true in advanced economies.

Most unskilled jobs in developed countries are necessarily in personal services. Workers in China can assemble your iPhone but they cannot serve you lunch, collect your refuse or bathe your grandmother.

If you’re wondering where in the USA the good technical jobs are, and which regions are experiencing growth, check out “The emerging technical, professional and scientific sector” by Rob Sentz. Missouri and Arkansas are losers, though the Kansas City area has significant growth.

If we want to have good jobs in the Ozarks, we have to invest our own money and energy. A big and difficult part of this challenge lies in raising expectations of our children, our schools, our civic and business organizations and our elected officials.

Otherwise, the best that many of our children can hope for is a job serving lunches, collecting refuse and bathing their elderly parents and grandparents.

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Workers’ comp reform requires judges to decide whether an injury was caused by work, not just while at work


Near the end of a workday, Jason Pope’s supervisor asked him to move a motorcycle to a showroom on an upper level of the dealership where Jason worked.  He moved the bike to the upper showroom, then tripped walking down the stairs in the dealer’s building. In the fall, he fractured his ankle, which required surgery. He was off work for nine weeks and needed physical therapy over seven months.

Jason filed a workers’ compensation claim, which was denied because Jason failed to prove to the workers’ comp judge that his injury arose (1) out of his employment and (2) in the course of his employment. Under Missouri workers’ compensation law prior to 2005, an employee injured while on the job was not obligated to prove these two factors. Under the old law, workers’ compensation was administered under “no-fault”  system, in which the employer was usually liable unless the employer could show that the injury was not real or was not related to employment.

After the denial of Jason’s claim, he appealed to the Missouri Labor and Industrial Commission, which is a special court that hears appeals of decisions of administrative law judges in Missouri’s workers’ compensation system. The Labor and Industrial Commission reversed the administrative law judge’s decision, ruling the injury to be covered by workers’ comp. The employer then appealed to the Western District of the Missouri Court of Appeals, which issued its affirming opinion in  Pope v. Gateway to the West.

The 2005 changes to Missouri’s workers’ comp statutes took away the presumption in favor of coverage of employee injury claims. Part of the target of the “reform” was to prevent employers from paying for injuries that may have happened at work but which were not caused by the job. For instance, when an employee was walking across a parking lot and a “pop” occurred in his knee, the injury might not be covered by workers’ compensation, since it occurred in a normal life activity–walking–not as the result of a hazard or risk associated with the job.

In another situation arising after 2005, an employee was injured in a fall as she made coffee in a breakroom at work. Her medical records indicated that the employee’s shoes caused her to fall; the court held that the employee failed to prove that her injury was caused by a risk related to her employment.

The Western District framed the issue this way:

we consider whether Pope was injured because he was at work as opposed to becoming injured merely while he was at work.

The court sifted the facts that Jason presented, noting that Jason was following instructions from his supervisor to move motorcycles into the upper showroom. When he fell, he was on his way to check with his supervisor to make sure that he was done for the day. He couldn’t reach the supervisor without walking down stairs. His boots didn’t cause him to fall. His own physiology did not cause his injury. The court concluded that these facts  (and some others)

reasonably support a finding that Pope’s injury was causally connected to his work activity, i. e., a risk related to his employment as opposed to a risk to which he was equally exposed in his normal, non-employment life.

 

Before the 2005 amendments to the workers’ compensation statutes, the cause of Jason Pope’s injury would not have been an issue. The employer’s insurance company would have paid the same claim that it would have ended up paying, sooner though and without two appeals.

Policy should not be made on the basis of an isolated anecdote, such as this true story about Jason Pope.  As the number of similar cases accumulates, the workers’ comp insurance industry will be in a position to determine whether the 2005 reforms save money for employers and are of a general benefit to the economy. For now, there can be no question that the burden of the reforms falls on injured employees, some of them unable to work, and health care providers which are awaiting payment.

 

 

 

 

 

 

 

 

 

Skills gap leaves Missouri manufacturing jobs unfilled


Manufacturing in the United States and the export of manufactured products from the United States is growing. If jobs could be filled, production and exports could rise. Nobody is opposed to products being manufactured in the US for domestic use and for export.

According to an article in St. Louis Today, citing a study by the Manufacturing Institute, with results confirmed by St. Louis area businesses, thousands of manufacturing jobs are going unfilled because of lack of qualified applicants. And technical colleges have additional capacity to provide the needed training.

After World War II, manufacturers of shoes, clothing, furniture and other products moved into the small towns and cities of the Ozarks, taking advantage of a surplus of mostly non-union, low-skilled workers. Manufacturers later arranged for their products to be made in Mexico and elsewhere in Latin American, then in Asia, seeking lower labor costs and less environmental and worker-safety regulation. Most towns in the Ozarks have vacant manufacturing facilities, even though transportation systems and location with respect to markets have never been better.

Universities and colleges are everywhere, offering all kinds of courses in residence programs and at satellite campuses, with opportunities for online education for students of all ages.

Where are the students who want to learn practical mathematics and how to operate computer-controlled design and manufacturing equipment? Some of them are in the military services. Others are working in unskilled jobs, never having become aware of their own potential to learn and earn. Others are in the gray-collar world of retail and services, where hours are long and wages and benefits skimpy.

While the St. Louis Today article blames the shortage of trainees for modern manufacturing jobs on the widespread acceptance of the value of a college education–as though the college credential had value even without skills to go with it–I’d place part of the lack of interest in manufacturing on the bad experience with manufacturing in the Ozarks. In the 50s, 60s, 70s and 80s, the manufacturing workers in the Ozarks experienced low wages and benefits, workplace injuries, frequent layoffs, and union-busting, ending with their abandonment (I am not forgetting that these low-wage jobs were better than no jobs and sometimes were the best jobs ever available in some communities for many people).

Manufacturers locating plants in the Ozarks asked poor communities for subsidies in the form of property tax abatement and general-obligation bond issues to for construction of facilities. Some plants polluted streams or left toxic wastes.

The manufacturing of today is much different. It’s cleaner and safer. Workers with training and skills can earn as much or more than many people who have college degrees and obtain as much or more job security. Here’s hoping that Missouri’s technical schools will be seen as the gateways to the good life, rather than an undesirable alternative to college.

Will Northwest Arkansas ramp up?


Successful businesses spawn–and depend on–other businesses. The scale of Walmart’s success has changed the face of Northwest Arkansas and spilled over to some extent in to adjacent areas. What next?

Matt Fifer and Grace Calloway sketch out a scenario of an astounding escalation in creation of opportunities for building on Walmart’s success: The Boom Ahead–Why Northwest Arkansas Could be the Next Silicon Valley.

Matt’s own career exemplifies what he’s writing about. I met Matt about five years ago, when he asked me to assist him with a small real estate deal in the Table Rock Lake area. He told me that he grew up in Stone County, Missouri, and had graduated from Reeds Spring high school. He worked for Walmart several years after college and rose through the ranks. He left Walmart not long before I met him and started a business called 8th & Walton, which teaches how to do business with Walmart. That business has grown steadily.

As this essay points out, if you can do business with Walmart as a vendor or service provider, you probably have the ability to do business with other large companies. Because so many companies located in Northwest Arkansas have honed their skills in product development and marketing by learning to do business with Walmart, the next stage may be for venture capitalists to move in and provide the funding that will allow many new efforts to succeed.

Branson seeks advice on how to revitalize Highway 76; will designers study the market?


For a decade, the first mile or two of State Highway 76 west of US 65 in Branson has languished. In this section of the Strip, most of the construction of restaurants, motels and retail strip centers took place 30 t0 40 years ago, under the economic conditions and design sensibilities of the time. For most of a year, the City of Branson’s leadership has been working toward a vision for the revitalization of this portion of the Strip.

The City has followed the usual path of soliciting proposals from firms with expertise in land-use planning, incorporating the disciplines of engineering, architecture and design. The City is nearing the point of awarding a contract for producing a plan with design standards that will to some extent dictate the look of this part of the Strip, much of which was heavily damaged by the February 29, 2012 tornado.

Design standards have another effect, which is to set constraints on the returns on investment in land and building. Real estate appraiser Skip Preble takes a critical look at how land-use planners often neglect to evaluate real estate markets when they formulate design standards in “How Marketing Could Boost Land Development,” published on the New Geography web magazine.

Can land-use planners can be expected to examine real estate market data and translate what they learn into practical design standards? How would a governmental body, in adopting regulations incorporating the new design standards, know whether they will work well with the realities of future real estate markets?

 

Taxpayers vs. Ratepayers: Taxpayers lose


St. Charles County wanted to widen a road, which required moving the gas line within the right-of-way of Pittman Hill Road. Pittman Hill Road was created by subdivision plats which designated the road’s right-of-way as a utility easement for gas lines (among other utilities), dedicating the entire right-of-way to the public. 

The County asked Laclede Gas Company to pay for the relocation of its gas lines to the right-of-way of the reconstructed road. Laclede claimed that this amounted to an unconstitutional taking of its property. On a motion for summary judgment, the trial court ruled for the County, requiring Laclede Gas to pay for the relocation. Laclede appealed directly to the Missouri Supreme Court.

On appeal, the County made four objections: Read the rest of this entry

Invest now in vacation property!


In preparing for a short talk about how to convey various kinds of vacation real estate, I arrived at the unbrilliant conclusion that people make decisions to buy vacation real estate (RV lots, lake houses, timeshares) based on what they think they want at the time of purchase, with some attention, but not enough attention, to the future. A short version of my presentation is posted here.

Many decisions to purchase vacation property are made when buyers are in a state of vacation bliss, a kind of wistfulness, that makes them less critical than when they’re on their home turf. They hope the vacation property will be a place of togetherness for family and close friends, where memories are created. Perhaps it will become a retirement home, where the grandchildren will want to visit. The sales techniques for vacation property are addressed squarely at those sentiments.

Many of those good things do happen. But vacation properties have the same drawback as all real estate investments: real estate is immobile. If you must to sell it quickly, the price must be low. You probably can’t sell it yourself, because you’re not there.

Ownership of most objects becomes undesirable. Our family situations change. Rising fortunes suggest that we should upgrade. Declining fortunes require that we sell. Seclusion that initially provided peace now brings feelings of loneliness. Or seclusion is ruined by the tasteless vacation home just built next door. The only time available to be at the vacation property is consumed with mowing and repairs.

Now is a great time to buy, because many owners need to sell. Get some advice about your purchase from people who aren’t going to make a commission if the sale goes through, whom you can confide in about your needs.

The advisors you need when considering purchasing vacation property should be able to advise you on such topics as:

  • the history of the project (subdivision, resort, condominium), including the reputation of its developer
  • subdivision restrictions and plats
  • maintenance fees
  • responsibility for road maintenance
  • recreational amenities
  • water and sewer systems
  • lake or river access
  • police and fire protection
  • homeowner association status and activities
  • distance to medical facilities
  • resale opportunities
  • nearby employment opportunities

The information that you need probably isn’t available from just one person. Take your time in making a decision. Don’t sign anything while you’re in the wistful state.

 

 

 

 

 

 

 

Coverdell decision set aside, as Branson Landing case goes back to trial court

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Using the “plain error” doctrine, rarely used in civil cases, the Court of Appeals for the Southern District of Missouri, in Empire District Electric Co. v. Coverdell, reversed and remanded a January 14, 2010 jury verdict that had awarded Douglas Coverdell and Coverdell Enterprises the north third of Branson Landing and adjacent areas. This decision is dated June 3, 2011.

The appellate decision is based on the City of Branson’s argument that the trial court made a serious mistake by allowing the jury to enter a verdict affecting the property interests of the City of Branson (and others) who did not participate in the trial.  The appellate court accepted the City’s argument that “plain error review” would be appropriate, because the court’s error was “so egregious as to ‘weaken the very foundation of the process’ and ‘seriously undermine confidence in the outcome of the case.’ ” Empire’s appellate arguments were not addressed in the decision, according to a footnote, since the court’s acceptance of the City’s arguments was sufficient to warrant reversal.

The City of Branson did not participate in the trial held in January 2010, though the City’s attorney was present in the gallery of the court room for much of the trial. In an earlier phase of the case, which took place in 2004, the City had won its effort of affirm its title to the west portion of the peninsula shared with North Beach Park. Thereafter, the City was in a monitoring mode, not aware that title to the City’s land, leased to Branson Landing, would be the subject of the trial.

The appellate court tied its decision to the words of Coverdell’s attorney, spoken to the jury, who told the jury in the January 2010 trial that the dispute with Empire concerned only the east part of the North Park Beach peninsula. Coverdell’s attorney is also quoted as telling the jury that the City “has nothing to do with this dispute between Empire and [Coverdell and Coverdell Enterprises.]“

However, the judgment that Coverdell’s attorneys submitted to the trial judge after the juy verdict included 27 acres that included the Belk store and parking lot at the between North Beach Park and the Belk store, as well as some of the area south and west of the Belk store. The trial court’s mistake was to cloud the title of the City and others who were did not participate in the 2010 trial. The owners of much of the 27 acres were not parties to the suit, which appears to be the fundamental reason for reversal of the trial court’s judgment. The appellate opinion refers to City’s statement that the City “as well as numerous other third parties, have interests in that southern tract of land such that Branson was aggrieved by the 2010 judgment.”

The appellate decision gives the City and Empire the right to amend their claims and face Coverdell in a new trial.

Can a city’s utility charges be a tax? It’s a tough case to prove.

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The City of Hermann provides water, sewer, natural gas, electricity and trash pickup to its residents, allowing them no choice of providers. When the City jacked up the rates and transferred the “profits” to other City accounts, some residents resented the City’s flexing of its monopoly power. They sued, claiming that the City’s governing board had sidestepped Missouri’s constitutional requirement (Article X, sections 16- 24, known as the Hancock Amendment) that tax increases be approved by voters. The court had to decide whether a utility rate increase was a disguised tax.

Here’s an overview of the Missouri Supreme Court’s 26-page opinion in Arbor Investtment Company LLC v. City of Hermann, released May 31, 2011, in which the court determined that the  City of Hermann’s utility fees were not taxes.

The Five (or Six or Seven) Factors

The Missouri Supreme Court identified five factors in the 1991 case Keller v. Marion County Ambulance District which may be applied to distinguish user fees (not requiring a vote of the people) from a tax (which requires a vote). These factors, the court pointed out, are not exhaustive, but provide a framework for analysis:

  1. When is the fee paid?
  2. Who pays the fee?
  3. Is the amount of the fee affected by the level of the service that it is for?
  4. Is the fee for a good or a service?
  5. Is the good or service one that has been historically provided by the government?

The City of Hermann’s utility charges are paid in response to monthly billing, after the services have been metered. This resembles a user charge, rather than a tax that is paid annually. Of course, it also resembles a sales tax that is paid upon a sale.

The City’s utility charges are assessed only against utility customers, unlike some kinds of taxes, which are charged without reference to who is using government services. For example, sales taxes are charged to non-resident and residents alike.

The amount of the City’s utility charges, at least above minimums and flat charges, is related directly to use, other than for Hermann’s “communications fee,” which is used to support the 911 network.

The City’s utility charges fees are imposed for goods or services, rather than being a general tax to be used however the City government chooses. This factor was not at issue in this challenge, though the plaintiffs claimed that the amount of the fees were in excess of the reasonable capital and operating costs incurred in providing the services.

The Supreme Court found the fifth factor in favor of a finding of a tax, though the City of Hermann has a long history of providing these services in Hermann. The court indicated that the City’s prohibition of any other provider offering these goods and services supports a finding that the utility charges are a tax, without explaining why, other than to state that the lack of alternatives was a part (a sixth factor?) of the analysis. Even so, a finding that the utility charges resembled a tax on this point was not enough to overcome the opposite findings on the other factors.

Borrowing from its opinion in Beatty v. Metropolitan St. Louis Sewer District, the court looked at a sixth factor, whether the payment was enforceable by imposition of a lien on the user’s property or merely by disconnection or discontinuance of the service. Without taking judicial notice of the fact that many if not most private and municipal utilities have the right to impose liens for non-payment of utility charges–in addition to disconnection– the court considered that a tax, such as a property tax, is secured by a lien, while utility providers have the right to disconnect the services to enforce payment.

The court upheld the City of Hermann’s utility rates, stating, “There simply has been no showing that the amount charged is so excessive as to not constitute the provision of a service or good in return for the amount paid.”

Municipal rates are unregulated, but does this lead to excessive rate levels?

We should be concerned with the quality of the facilities for providing our water supply, treatment and management of wastewater and stormwater, and delivery of electricity and telecommunications services. The infrastructure for these essential things was constructed in the 19th and 20th centuries. Repairing, replacing and upgrading them is enormously expensive and in many cases has been deferred.

But private and governmental providers face stiff resistance in raising revenues to confront these challenges. For many private providers, utility commissions determine the extent to which rate increases are allowed. For other providers, such as cooperatives, homeowner associations and local governments, rate increases are within the discretion of elected officials, who have wide discretion and motivations that may extend beyond the provision of utility services.

In my experience, local governments, looking at water and sewer rates, generally look around to neighboring communities and communities of the same size elsewhere in the state, hoping to stay somewhere below the top. While this strategy may be effective for helping elected officials to remain in office, it may not produce sufficient revenue for maintaining utility systems.

 

The Corps of Engineers can only release water, not solve problems

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As a lawyer, I first encountered the economic ruin and heartache from controlled discharge from a Corps’ reservoir about 25 years ago. The Corps had opened the gates at the Keystone reservoir west of Tulsa, filling the entire floodplain from Mannford, through Sand Springs and Tulsa. My client packaged fresh salads in a building on the edge of the floodplain that was not known to have ever flooded.

The Small Business Administration offered disaster loans to businesses, and my client’s only hope for survival was to accept a loan.

Unfortunately, the six-month interruption of my client’s business resulted in a loss of market share and employees. The SBA loan and insurance didn’t cover nearly all the losses. There was no revenue to cover the regular bills due in the weeks after the flood. The business had been marginally profitable, only because it had little debt. The SBA loan required the owner to sign a personal guarantee. The eventual result of the SBA loan was that my client became bankrupt (at age 70), since the business couldn’t generate enough money to service the debt and pay its other expenses.

I could find no legal basis for challenging the Corps’ management of the Keystone dam and the Arkansas River basin. The Corps operates under broad statutory authority that has many competing goals, the least of which seems to be protecting homes and businesses built in floodplains below the dams.

The Corps has no control over rainfall. In responding to rainfall, or lack of it, the Corps must respond to those who have statutory claims on impounded water for drinking, power generation, irrigation, recreation, and maintenance of the depth of water in navigation channels. The Corps is constrained by the design of its dams and the storage capacity of its reservoirs. To meet all its goals, the Corps has only one tool: controlling the rate of release of water.

Even if the Corps didn’t have governmental immunity from liability for many of its actions, persuading a judge or jury that the Corps made bad decisions would be an enormously expensive and difficult task.

The lesson is that the economic benefits and protection provided by federal and state projects are extremely uneven in application. We should make decisions based on our own situations.

If you’re a beneficiary of a specific federal program, you can probably count on whatever protection that offers, but only for now. If we expect federal, state and local governments to protect us from weather, we end up in the situation we’re already in.

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