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Category Archives: real estate 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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Cassville Aldermen take on Cassville Board of Adjustment to challenge carport variance


It might seem odd to you that the Cassville board of aldermen would appeal a decision of the Cassville board of adjustment, since the board of aldermen appoints the members of the board of adjustment, and both boards are a part of the same city government. It seems odd to me that the point was not raised by the respondent on appeal.

Under Missouri statutes, boards of adjustments have some independence, and the appeal of the board of adjustment’s decision to grant a variance is the novel method that the Cassville board of aldermen chose to maintain the uniform application of their zoning regulations.

In Board of Aldermen of Cassville v. Board of Adjustment and Gerald Shaffer, nobody raised the question of whether the Board of Aldermen had the right to attempt to control the board of adjustment by appeal to circuit court. The Southern District of the Missouri Court of Appeals reversed the decision of the board of adjustment, with the effect of requiring Shaffer to remove the portion of his carport that extend over the setback line.

What are these boards?

A board of aldermen, under Missouri’s statutes for fourth-class cities, is the governing body of the city. It is the city’s legislative body, by adopting ordinances, and also the city’s executive branch, by giving orders to the mayor and city administrator. The mayor doesn’t even vote, except to break a tie.

The board of adjustment is authorized by Missouri’s planning and zoning statutes for cities, (Missouri counties have separate planning and zoning statutes) specifically sections 89. 080 through 89.110. Section 89.090 gives boards of adjustments three kinds of power:

  1. to hear and decide appeals of errors made by the planning and zoning staff,
  2. to hear and decide other appeals, as required by city ordinances, and
  3. to hear and decide applications for variances from the city’s codes relating to construction and alteration of buildings and the use of land.

The board of adjustment has the power to reverse, affirm or modify decisions of the planning and zoning board and its staff.

Under section 89,110, persons aggrieved by the decision of the board of adjustment may appeal the board’s decision to the circuit court of the county. Rather than hear evidence, the circuit court reviews the record of the proceedings of the board of adjustment, as though the circuit court were an appellate court.

Why did the Cassville board of aldermen take this matter so seriously?

Was the Cassville board of aldermen aggrieved by the decision of the board of adjustment to allow  Mr. Shaffer to have a carport that extended closer to his property line than the five feet allowed by Cassville zoning regulations?

In most challenges to the right of a party to appeal a board of adjustment’s decision, Missouri courts have been reluctant to give that right to just anyone who claims to be aggrieved. In other cases, neighbors who did not protest the decision at the board of adjustment hearing have been denied the right to appeal, as has a St. Louis alderwoman.

Regardless of the issue of whether the Cassville board of aldermen had the right to appeal the decision, the aldermen apparently wanted to hold the board of adjustment to compliance with the standards of the Cassville ordinances pertaining to variances.

Variances for structures and uses

Variances from strict application of zoning codes are allowed when the board of adjustment (or another board having such powers) has determined that the criteria for granting variances have been met. Cassville’s ordinances required that all five criteria contained in the ordinance be met, all highly subjective except that the hardship alleged to exist must not have been created by the owner or applicant and that the condition for which the variance is required must be unique to the property.

The Court of Appeals judges agreed with the Cassville aldermen’s contention that nothing about the Shaffer property was unique and that the alleged hardship–which was that visitors might have to walk to his door in the rain–was trivial.

 

Subdivision developer gets nailed for assessments and has no special developer rights


Missouri Western District Court of Appeals just affirmed a trial court’s judgment in a way that will resound with homeowners’ association (HOA) boards across the state, many of which are struggling to raise sufficient revenues to take care of streets and amenities, even though many of the developer-owned lands that benefit from the streets are apparently exempt from assessments.

Lenders that have foreclosed on developers may find that this opinion undermines the lenders’ ability to claim to enjoy the developer’s exemption from assessments on lender-owned land. Parties purchasing land from lenders, hoping to have the status of the former developer, may find themselves heavily in debt to the HOA, perhaps blaming the lenders who sold them the land.

In Woodglen Estates Association v. Dulaney, Dulaney obtained 17 parcels of land from the FDIC. This land had once been owned the original developer Braeman, then passed through the hands of a few different parties, before ending up with the FDIC, which had taken the parcels of land from a failed bank.

The Woodglen Estates Association hired an auditor to review its finances. The auditor discovered that land owned by Dulaney had not been assessed for several years. The association then sued Dulaney, and Dulaney asserted two defenses:

  • As successor to the original developer, Dulaney should be exempt from assessments on land it owned.
  • Much of the land that Dulaney owned in Woodglen was in “parcels,” not having been subdivided into “units,” so that it should not be assessed.

The appellate court looked at the line of Missouri case law that holds that the special rights and privileges of a developer, typically reserved in the declaration of covenants for the subdivision, do not automatically pass with ownership of the developer’s real estate. These rights, called “developer rights,” “declarant rights” or “development rights,” may be assigned, but a party claiming to hold these rights has to be able to prove to have acquired them by assignment. Dulaney had no proof of assignment of declarant rights.

To make matters worse for Dulaney, the Woodglen declaration did not contain an exemption for the developer’s real estate–which is a common feature of declarations–and the appellate court noted that developers do not receive an automatic exemption. Under current Missouri law, other than in condominiums, a developer may lawfully reserve an exemption from assessment for its own real estate. The original developer simply failed to create the exemption when filing the declaration and made the mistake of including land in the declaration that was not ready to be developed.

Dulaney argued that its “parcels” were not subject to assessment, since only “units” and “unit owners’ could be assessed. The appellate court noted that some of the declaration’s provisions were ambiguous when addressing the respective rights of owners of units and parcels, but the assessment provisions were clear:  “each owner shall be obligated to pay to the Board such sum as shall have been established….,” without distinguishing between owners of units and parcels. The legal description attached to the declaration had included Dulaney’s parcel, placing this land under the provision of the declaration.

For lenders, the lesson is that any loan documents for a development loan should include a security interest in the declarant rights, and any documents showing the recovery of the developer’s real estate should include a specific assignment of the declarant rights. When the lender sells the former developer’s property, the conveyances to the purchaser should include the assignment of declarant rights. These issues are covered in more detail in this essay.

Addressing water supply issues in the Western Ozarks


Imagine this headline:

Taneycomo trout die as officials refuse to release water from Table Rock Lake

It’s not far-fetched. Something similar happened in the fall of 2011 below Lake Tenkiller, in the Ozarks of eastern Oklahoma, where low water levels resulting from the prolonged drought left that reservoir with no unallocated water. You can get an idea of the reactions from this article in the Sequoyah County Times.  All the water in Tenkiller was spoken for, and the trout fishery suffered.

What’s this about allocation of water? In reservoirs managed by the Corps of Engineers and other federal agencies, the reservoir storage capacity is allocated to various uses. For example, some of the storage capacity in Table Rock Lake is allocated to the Southwest Power Administration, a government agency that sells electricity to private and public utilities. In some reservoirs, some of the capacity is allocated to municipal water supplies or industrial users of water, such as Sequoyah Fuels, mentioned in the article about Lake Tenkiller. The Corps of Engineers is also obligated to store and release water to meet statutory mandates relating to maintenance of adequate water levels for barge traffic downstream. In the western United States, a “recreational allocation” is made to support the whitewater rafting industry.

Water scarcity is moving east, and the pace seems to be accelerating. Jim Milton’s blog, Oklahoma Water Law, does a great job covering water supply issues in Oklahoma and neighboring states. On his blog, you can read about Oklahoma’s proposed comprehensive water plan and conflicts between rural water districts and municipalities, the Tenth Circuit Court of Appeals upholding Oklahoma’s statutes prohibiting the export of water to another state, and the fight over water in Sardis Lake, where Oklahoma City’s attempt to buy the water has been blocked, at least for now, by the assertion of federal power. In reviewing recent blog entries, I was struck by the intensity of the water disputes in eastern Oklahoma and Kansas; Missourians need to pay attention to what is occurring just over the state line.

The Tri-State Water Resource Coalition has been exploring the alternatives for future water supplies for the Western Ozarks. Its annual conference, Securing Our Water Future, will be held in Springfield on November 17 and 18. I’ ll be giving a short presentation at this conference to contrast Missouri’s lack of any allocation system with the ways that surface water and groundwater are allocated in Kansas and Oklahoma. A copy of the text of my presentation is here.

Missouri and Arkansas have had the luxury of pretending that water is free. Unfortunately, the supply is finite. The Tri-State Water Resource Coalition is providing leadership and a forum for discussion. We need wise leaders to learn from the experiences of Kansas and Oklahoma, so that we can be better stewards of the water we all need.

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

Pondering intentional flooding: why are we in this mess?

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The random aspect of tornado damage is one thing. But people have put themselves in the paths of floodwaters. Now the Missouri River’s flood is moving downstream. Who knows what it will do to the Mississippi?

But can you blame people for building homes and businesses in the floodplains? We spent billions to control our rivers and create an economy that depends on our controlling them.

Have we lost the ability to manage our environment, or we were just kidding ourselves that our engineering ability (incorporating politically-mandated compromises) would be effective?

I ponder these things in a longish essay: Unnatural disasters: flooding from managed rivers and what to do. Of course, I don’t know what to do. Maybe you have an idea.

Please read and comment.

Recording a real estate document gives notice, but lack of recording doesn’t?


By Missouri statute, the recording a document relating to real estate in the office of the county recorder of deeds gives notice to all of the contents of the recorded document (called an “instrument”):

Every such instrument in writing, certified and recorded in the manner herein prescribed, shall, from time of filing the same with the recorder for record, impart notice to all persons of the contents thereof and all subsequent purchasers and mortgagees shall be deemed, in law and equity, to purchase with notice.

Is lack of recording notice that something did not occur, even though it should have been recorded?

According to the Missouri Court of Appeals, in the case Warren County Concrete v. Peoples Bank & Trust and Warren County Title Company,  purchaser of real estate had no duty to check to see whether a release of a deed of trust had been recorded, even though the purchaser had provided the money to pay off the deed of trust to a title company that closed the transaction.

The purchaser claimed to have no idea that the bank had not released the deed of trust until four years later, when the purchaser received a notice that the bank was foreclosing on the property. A year later — more than five years after the purchaser closed its purchase of the property — the purchaser filed a lawsuit against the bank and the title company, alleging that they were obligated to record the release.

The bank and title company claimed that the five-year statute of limitations period had run for negligence and breach of contract, and the purchaser was out of luck. The trial court agreed.

The purchaser appealed, claiming that the statute of limitations only began to run when the purchaser became aware that he had been wronged, which would have been the date the notice of foreclosure was delivered to the purchaser.

In the appeal, the bank and the title company argued that the purchaser should have checked the recorder’s office after the closing to make sure that the release had been recorded. The appeals court reversed the trial court’s judgment, stating that the burden of searching the public records after the closing was “a duty we are unwilling to place on the purchaser.”

The Court of Appeals was probably influenced by the injustice that would result when a purchaser hires a title company to close a transaction and provides money to pay off an existing loan, but the title company fails to follow up to make sure that the lender receives the payoff and records a proper release.

The Court of Appeals’ opinion isn’t specific about the reason for the mix-up, but it looks like the bank recorded a release after receiving the payoff, but that the release described a different piece of real estate than the piece that purchaser bought.

Glaize Creek Sewer District blows condemnation case, but gets new chance


At a condemnation trial, Glaize Creek Sewer District (in Jefferson County, Missouri, just south of St. Louis), didn’t put on any admissible evidence of damages to the Gorhams’ property. The Gorhams put on proper evidence of damages, showing that the value of their property after the sewer line was installed declined by $29,000. The Missouri Court of Appeals reversed the jury verdict of zero damages (based on an appraiser‘s unsubstantiated opinion testimony), and sent the case back for a new trial.

Two things are unusual about this case: Read the rest of this entry

Kimberling City’s acceptance of sewer system didn’t negate contractor’s warranty


Kimberling City occupies several ridges and valleys where Missouri Highway 13 crosses the heart of Table Rock Lake. You would have a hard time finding a place where the installation of a sewer system was more difficult and expensive per customer, due to the steep and rocky terrain and the necessity of pumping the wastewater collected in each valley over the hills to eventually reach the treatment plant.

Kimberling City grew from almost nothing to a population of nearly 5,000 since the completion of the dam that created Table Rock Lake in 1959. Permanent residents and vacationers are attracted to Read the rest of this entry

What good are economists if we don’t listen to them?


Economists, as a group, have been criticized for not predicting the collapse of the economy in 2007 and 2008, even though there were a few lonely voices. We need to learn to listen to the ones who sometimes tell us what we don’t want to hear.

Here’s Raghu Rajan from his blog, Fault Lines: Read the rest of this entry

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