April 3, 2003

Inside Veritas -
Article 1 - Granholm Enlists her “Republican Guard” in War on Sprawl (action needed)
Article 2 - Business News & Issues
Article 3 - MAHB’s Policy; The Irony of it All
Article 4 - Taxation and Finance - Changes in the Michigan Single Business Tax
Article 5 - Sewer and Water Update
Association News Update From Laura
Economic Update - War news impact beats economics
BS: Still about Nothing in particular
Housing Industry Update

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Granholm Enlists her “Republican Guard” in War on Sprawl (action needed)

   “This issue of OUR land and how WE best use it has been sitting on the shelf far too long. And every hour that it sits, ten more acres of OUR land disappears. Every year that it sits, sprawl and land consumption win.” With those words to the organizational meeting of her “Land Use Leadership Council,” Governor Jennifer Granholm let it be known that the worst fears regarding her intentions on the land use issue were confirmed.
   When Granholm announced her “Council” during the State of the State address, naming a bi-partisan commission headed by former Attorney General Kelley and former Governor Milliken, a joke making its way through the pro-growth community asked “who is the Republican” (in reference to Milliken’s attacks on the GOP’s Leadership, and its policies)? Well, her choice of verbiage in the opening ceremony suggests there are “Republicans” who should be ideologically comfortable with this message: However, they’re the ones currently guarding the city limits of Baghdad.
   Ideology aside, however, there are “Republicans” who are politically compatible with Granholm’s message, and a few of them have mysteriously found their way onto her Council as GOP representatives.
   Looking at the names on the Leadership Council, we find that 15 of the 26 members are recognizably hostile to suburban growth, or represent organizations that have something to gain by reigning “sprawl” in. And, an additional two members have given the appearance (at various Land Use forums and events) that they’ve “bought in” to the anti-sprawl hysteria. In other words, the 2 builders and 2 businessmen on the council are seriously outnumbered.
   So, with normal group dynamics as they are, Ms. Granholm can make statements about “OUR” land, which “we are gobbling up at a rate that we can no longer tolerate,” and go virtually unchallenged by council members, or even the media whose members seem to accept the premise that “sprawl” is an evil which must be reigned in. Then, when she thanked the council on “behalf of the families whose playgrounds (they) will preserve, the communities whose character (they) will maintain, the farmers whose heritage (they) will preserve, and the cities whose economies (they) will help fuel,” the warm “fuzzies” were just overwhelming.
   But, if we look at the Land Use issue from a perspective of reason, it’s easy to see who presents the real danger to Michigan? After all, housing construction finally received its deserved credit for keeping the nation’s economy running since early ‘01. Unfortunately, it’s impact appears to be overlooked by this council.

   For example:
   · A survey of council members found that protecting the agriculture, forestry,    and mining economies was a close second to Urban Revitalization as the primary    goal of the council. But at the expense of Construction?

   · Reality! According to the Census, combined employment in those industries    was 49,496 in ‘00. Construction, as an industry, employed 278,079, and the    employment multiplier suggests there were an additional 390,000 in construction    related services. But equally important is that agriculture, which employs    less than 20,000, has truly been a drain on public resources, particularly    at the state and national levels (think of the annual multi-billion appropriations    since passage of the freedom to farm act, and the subsequent ‘02 $300 billion    election year bailout by congress). Ironically, as this was being written,    Governor Granholm was off in D.C., begging for homeland security funds from    a deficit ridden Federal Government. However, as she fights to preserve farms,    we doubt she sees the irony.

   Finally, this land is whose land?
What’s most troubling, however, is the lack of challenge to the use of “WE” and “OUR” regarding land and its use. When did the state assume ownership and control of the land being developed across Michigan? Or, when did it become politically correct for an elected official to state such with impunity?
   Perhaps the “Iraq-Republican Guard” analogy is a bit strong, but the implication that the state owns, and/or should control, the use of private land does seem awfully Saddamesque. The statement itself is constitutionally offensive, but it’s apparent the press chose to ignore it. The deck’s fully stacked on this one, and we need your help ... If you’re willing, see below.

Land Use Council Needs Your Input
   The Land Use Leadership Council (lead article) will be holding public hearings Monday, April 28th, in the late afternoon and early evening. They will be held, simultaneously, in Lansing, Grand Rapids and Detroit.
   MAHB wants, at least, 40 builders/associates at each hearing, or 1% of its membership on that day. BAMF currently has 5 committed to attend, and we are asking for more. If you’re willing to help defend your industry from what's sure to be the ultimate attack on property rights, call Barry at 810-603-2200.

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Business News & Issues

   With vehicle sales running 4.6% behind last year’s level, it didn’t seem as much of a surprise when Ford announced a 17% cut in production (from ‘02 levels). But this year’s sales data show that Ford is one of two major companies (Honda’s the other) with higher ‘03 sales than than the first two months of ‘02. GM, on the other hand, is admitting to cutting production 10% from last year, but that is from a level when the company was running at nearly full capacity in rebuilding depleted inventories.
   For the first two months of ‘03 we find Ford and Honda experiencing solid gains in market share with GM being losing 2.2 percent. We also find Toyota continuing to gain on Chrysler, narrowing the gap of 4.3% for ‘02 to 3.8% in early 2003.

   As we’ve written much regarding health insurance costs in recent issues, we couldn’t help but take note of a March 11th Detroit News article regarding the fact that more employees are contributing to their health costs as the “cost of insurance benefits skyrockets.” The article relies on the 2002 health benefit survey by the “Kaiser Family Foundation,” which found the average cost of the health care contribution by a family was up 16% last year, to $174 per month. The cost was just $52 a month in 1988.
   And, the article notes the economic impact, since families raising spending on health care don’t have the same funds available for consumer items ... so, again, is it any wonder why consumer confidence remains so stagnant?

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MAHB’s Policy; The Irony of it All

   There was a somewhat ironic note in last month’s publication of the MAHB Governmental Affairs Update (GANUP), focusing on the “Approaching Storm” due to the likelihood that land use will “dominate the debate” in the current legislative session. The 1-30 edition included the 13 point “MAHB Land Use Philosophy,” which included the following statement: “Fair and broad-based ways to underwrite the cost of infrastructure investments must be used, ways which complement the sense of belonging to a community, not undermine it by pitting newcomers against existing residents.”
   Of course, financing of infrastructure expansion is, perhaps, the primary issue in the sprawl debate. The anti-growth community claims new sewer and water line expenditures drain public resources, while those of us on the pro-growth side show example after example of how development more than pays its own way.
   And, from a local perspective, we can hang our proverbial hat on the County Capital Improvement Fee (CCIF), where we supported the county’s finance plan to create the sewer and water capacity that’s necessary for continued growth.
   So, upon reading the GANUP, I sarcastically e-mailed its author, “thanking the MAHB for its support of Genesee County’s position” on the CCIF. After all, it was obvious the County was in line with MAHB philosophy in solving the sewer problem.
   Well, historically, my sarcasm seldom sits well with our state association, and this instance was no exception. So, it was little surprise when I subsequently received word, through a third party, that the philosophical statement had nothing to do with the county’s situation, and had, in fact, been written “five years ago.”
   For irony’s sake: Guess who was PRESIDENT of the MAHB 5 years ago? None other than Mike Tobin, who filed the suit against the county’s “fair and broad based underwriting” of the cost of infrastructure funding.

Barry

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Taxation and Finance ---- Changes in the Michigan Single Business Tax

   As you may be aware, Michigan recently enacted legislation affecting taxpayers who are subject to the Michigan Single Business Tax. The new legislation addresses such issues as the accelerated repeal of the SBT; an increase in the gross receipts threshold for purposes of SBT filing; and a change in the definition of gross receipts for purposes of the SBT. Of particular note, the gross receipts threshold for purposes of filing a Michigan Single Business Tax return has increased from $250,000 to $350,000. Depending upon your Michigan gross receipts, you may not be required to file an SBT return this year.
   As part of the new legislation, for tax years beginning after 2009, the SBT is repealed. The SBT rate, which is currently 1.9%, is being reduced annually by 0.1 percentage points over a 23 year period provided that certain revenue targets are met.
   Under former law, the earliest the SBT could have been repealed was for tax years beginning after 2020.
   In addition, for tax years beginning after September 30, ‘03, the definition of gross receipts has been amended to exclude proceeds from the issuance of stock or debt; refunds from returned merchandise; cash and in-kind discounts; trade discounts; federal, state, and local tax refunds; security deposits; payment of the principal portion of loans; property received in a like-kind-exchange; and proceeds from the disposition of a capital asset or land qualifying as business property.
   If you’ve got any questions about this recent legislation or how it affects your SBT filing requirements, please contact a professional tax advisor.

R, P & T

Sewer and Water Update (from previous issue)

   As we reported the "8 month nightmare could soon be over"...then, as we posted at www.bamfhome.com last week, the County Board supported the Drain Commission's bonds for the Western Trunk line. So, it's just a matter of time until the moratorium's officially over. It could come as early as this week...so, check the website for updates!

Beyond Seinfeld: It’s still about "Nothing" in particular (from 8-19-2002)

Government Mandates for “West Nile” breeding

   Last summer the Flint Journal published a Washington Post article regarding the fact that governments are “inadvertently creating vast breeding grounds for mosquitoes — including those carrying West Nile virus — by installing storm water retention ponds.” The article quoted the chief of Maryland’s mosquito control program noting how the ponds “are everywhere and give us fits.”
The article was a reminder of a recent conversation regarding theories behind the creation of Michigan’s original drain code back in the late 1800s.
In those days, the state had a serious problem with another mosquito transmitted disease. Apparently breakouts of malaria reached epidemic proportions at the time, so there was an advantage to eliminating such breeding grounds as wetlands and swamps.
Of course, by the 1970s, no one was concerned about malaria, and environmentalists had converted wetlands into hallowed grounds. So, the state went into its protection mode, and filling a wetland became tantamount to killing an owl or whale or something.
Now, we even take credit for creating more wetlands than were in existence years ago, and we continue to build retention ponds under government mandates. In other words, new laws endanger the very public health and safety they were designed to protect.
Earlier last summer, forestry experts said that the laws designed to protect forests were responsible for the destruction of those same forests (regarding the fires out west)? Maybe it’s time governments quit interfering with matters they really don’t comprehend.

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Association News and Events by Laura

  

General Membership Meetings (March & April)    First, we wish to thank Major Barry Bomier, Army (Ret.) for his enlightening presentation on the Iraqi situation at last month’s meeting. We’re fortunate to have someone with his background (and particularly his Gulf War experiences) in the community.    Also, we want to remind you that the April meeting is set for the final day of the month, at Bonaparte’s, which will be the final General Membership until September.    Although we’ll present full details in the April 15th Veritas (Ironically, the court date for the Drain Lawsuit). Spring Parade now at 41    We lost one, so the Parade’s now at 41 entries. Five week inspections are scheduled for next weekend, but we doubt any others are running behind.    A list of participants is available to members by calling the association office. Housing Quarterly The 96 page Spring issue will be set for mailing an distribution the week prior to the opening of the “Parade.” Since we needed extra color pages to meet the demand for full color ads, we’ll also have color on some editorial pages, enhancing the aesthetics of the magazine as a whole. Any member wishing to distribute HQs at their business should call the BAMF Office so we can hold some for them. Golf Outing Brief The annual Golf Outing will be back at the “Captain’s Club” in Woodfield, where we’ve had our most successful events ... Tuesday, August 5th ... look for details in upcoming Veritas’.

Housing Quarterly    The 96 page Spring issue will be set for mailing an distribution the week prior to the opening of the “Parade.” Since we needed extra color pages to meet the demand for full color ads, we’ll also have color on some editorial pages, enhancing the aesthetics of the magazine as a whole.    Any member wishing to distribute HQs at their business should call the BAMF Office so we can hold some for them. Golf Outing Brief    The annual Golf Outing will be back at the “Captain’s Club” in Woodfield, where we’ve had our most successful events ... Tuesday, August 5th ... look for details in upcoming Veritas’.

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Economic Update: War news impact beats economics

   Since the March 17 issue, Economic news has been taking the proverbial “back seat” to the war. However, there were a couple of notable items that are likely to impact housing.
   As the uncertainty about when the war was going to begin was resolved, the stock market began to soar, while the bond market turned negative. And, it’s the bond market’s turn that has the impact on housing.
   After 10 year treasury yields fell to the 3.6% range, Mortgage Rates set new records around 5.5%. However, bond yields jumped over 4%, and last week’s Freddie Mac survey found 30 year fixed rates back at 5.91%.
   Of course, the markets collectively remain fickle. Just prior to the war’s onset, BusinessWeek wrote “the first air strike will likely mark the end of the (bond) three year rally.” Well, it looked like they were right, at least until last Thursday. Then, beset with worries of executing the war, bond traders started buying and stockholders went back to selling. The stock rally was on hold, the bond rally not necessarily over.
   So, what role does the economy play? If we look at this morning’s activity (admittedly it’s April Fools’), one may suggest none.
   At 10:00 a.m. the Institute of Supply Management released its manufacturing index, showing the sector’s activity fell to its lowest level since November ‘01. Not only that, it was also the first time in five months, and only the third time since the beginning of 2002.
   Later this morning, negative vehicle sales reports began filtering in, along with the report that construction spending was falling. So, how did the markets react to the news? Stocks gained 65 points by noon, and bonds went the other way, back to the mid 3.8 range.
   Why? We can only guess what’s in the collective minds of market players. However, there was positive news on the war overnight as we won a skirmish with the Republican Guard and uncovered chemical weapons’ evidence.
   It makes one think, economic news does take the proverbial back seat to the war, even in the finance industry.

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Housing Industry Update

Housing data not bad for the winter

   It’s an unusual winter when Washington (D.C.) has more snow than Flint , but this year it appeared that even Arkansas and North Carolina were blanketed more than the Vehicle City. But it’s not like Michigan’s winter was mild. In fact, the Midwest had one of its coldest periods in decades. So, with home-building being an outdoor activity, it was likely the industry was battered during winter. However, February’s data were released, we found that housing remained strong throughout the nation, though activity was somewhat below its record levels of late last year.
   For example, Michigan experienced its worst February in 8 years. However, single family numbers were only down about 10% from the average February. And the Metro-Detroit area (including Flint and Ann Arbor) had single family activity down just 3.2% (year to date) from a relatively strong 1st two months of 2002.
   Even the “Flint” sector, despite the moratorium and weakening economy, issued 192 permits, just 15 units less than in 2002 which, coupled with Housing Consultants’ data, shows a significant upturn since January.
   Weather aside, the market still had the advantage of the lowest interest rates in history, which averaged 5.84% during February, and were in the 5.5% range for the final half of the month, so the impact of the cold and wet around the nation was somewhat neutralized.

Housing starts remain near record levels

   The headlines may have said “housing starts plummet 11% in February,” but in reality, activity remained at a historically solid level during the month. While the entire slowdown occurred in the single family sector, with starts falling 13.7% from January’s rate, one must remember that the previous month’s 1.51 million unit rate was more than 11.1% higher than 2002’s all time annual record. And, February’s rate of 1.3 million units was virtually identical to the previous record, set in '99.
   Building permits held nearly even to January, with Multifamily running strong, and single family falling 6.8%. However, the 1.32 million unit rate of single family permits was equal to ‘02’s year end level, which, like starts also set an all time record.

Sales of Existing and New Homes also fall from Record Levels
   Last Tuesday the National Association of Realtors announced that sales of existing single family homes declined 4.3% in February. However, they also noted that the 5.84 million unit rate for the month was “the fourth highest pace since record keeping began in 1968.”
   The following day the Department of Commerce said new single family homes sold at an 854,000 unit rate for the month, a decline of 8.1%. But unlike existing home data, the new home sales rate was the lowest in thirty-one months.
   But what’s interesting between the new and existing sales data, is the regional disparity. For example, existing homes were off 2.9% in the Northeast, while new home activity fell by 36.8%. In the Midwest, new home sales fell 6.3%, but existing sales rose 4.8%. Yet, in the West, new home sales held steady, but it was existing homes that declined 6%.

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