Are we losing another
institution?
Some thirty years ago there was a story circulating that, somewhere in the
Mediterranean, Jackie Onassis threw a tantrum on her husband’s yacht when
she ran out of those lint roller things. As the legend continued, the crew
had to contact the company that made them and have a hundred, thousand, or
whatever, flown in from their headquarters in Flint.
The company was Helmac, named for its founder, Helen McMurray, who took a
relatively simple idea and turned it into a multi-million dollar manufacturing
and sales business. In fact, with the exception of Buicks, NCAA Division 1-A
basketball players, and Michael Moore, Helmac’s lint rollers may well have
been Flint’s best known product.
But now, Buick’s gone, Mateen Cleaves and Morris Petersen are in their final
year of eligibility, and Michael Moore is spending time harassing Lucienne
Goldberg instead of Roger Smith so, only Helmac remains....but for how long?
Monday evening’s news led with a story that Helmac was considering a move
of its operations (and 120 employees) to Georgia, not because management wanted
to, but because they were being forced to. Forced? Well, it turns out that
a long anticipated move to Grand Blanc township hit a snag known as election
year politics.
Helmac planned to build a new manufacturing facility at the southern end of
township, which had agreed, in principle, to a 50% tax abatement for 12 years.
However, state law requires that, for a company to move from one municipality
to another, they must have an exit visa from the city their leaving if
tax abatements are involved. And, according to sources, Mayor Stanley
refuses to sign. So, the company may have no alternative but to leave the
state.
The irony of it all is that exit visas were in the news several weeks ago
when the City of Troy refused to allow jobs to leave for a new General Motors
facility in nearby Warren. At the time of the exit visa refusal, Troy’s Mayor
said that Warren didn’t need the new plant, but if a needy city was going
to gain from the move, the council would have authorized the transfer. Furthermore,
she specified that they (the council) would have supported a move to Flint.
The irony? Flint had already signed an exit visa for the jobs it was losing
to the same Warren facility. So, apparently the Mayor believes moving jobs
fifty miles to the Southeast is okay, but moving them a dozen miles south
isn’t.
The following day (Sept. 14) the Journal covered the story in a front
page article and quoted Todd Brien, the new President of the Flint-Genesee
Growth Alliance, all but conceding that Helmac was moving to Georgia. Brien
noted that “Georgia was putting a hell of a package on the table” and the
move might just be “a good business decision.”
But the question that needs to be asked is whether Flint’s handling of the
situation over a two year period was responsible for Helmac’s decision to
begin looking out of state.
Chasing business from the County is hardly a new phenomena. Business flight
from the area is part of the county’s lore, and it continues to this day.
In fact, just a couple of months ago we wrote of a situation where an area
businessman, after becoming increasingly frustrated with local governments’
lack of cooperation, and outright obstruction, decided to move his manufacturing
facility, and approximately 30 jobs, to Gaylord.
What’s fascinating is that the Growth Alliance is expected to bring about
economic cooperation. Of course, Flint is one of its primary supporters. Does
one see potential conflict here?
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Wonder what conference they were at?
I was in a reasonably good mood last Friday while returning from the two
day “Legislative and Business Leader Forum on Growth Management” in Traverse
City. Although the brochure promoting the forum suggested “Sprawl” was
an evil, spurring too much land development and reducing our cities to pockets
of poverty, the usual anti- sprawl rhetoric was all but absent from the event.
The forum’s 17 sessions merely focussed on incentives for regional planning
and urban development with hardly a word about farmland loss and sprawl.
However, when I got too the office late that afternoon, I was rather shocked
when Laura held up page #3 of Friday’s Journal with an article on the
forum titled “Smart growth designed to fight sprawl.”
The article quoted two state representatives (one whose mental and emotional
stability has recently been questioned due to actions directly related to
the growth management issue) who, in direct interviews, attacked “unrestrained
development, gobbling up farmland, pollution, along with shopping malls, subdivisions
and factories” in the suburbs, all issues that were ignored in the summations
of the 17 sessions. But, I guess, they make good copy!
The problem is, anyone reading the article, with no additional knowledge of
the article, with no additional knowledge of the conference, would be subject
to the distorted notion that the issues stated were its actual focus.
Barry
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Critical Business & Industry News
A Business Week article in early September suggests the U.S.
Forest Service is retreating from its historic policy of selling off timber.
The article points to the current director of the service, Michael Dombeck,
who oversees the management of 192 million acres of government owned forest.
It states that, historically the agency “has tended the forests as a cash
crop.”
But since Dombeck took over in 1997, he’s held “the annual timber harvest
to about one-third of the totals typical in the 1980s.” A graph accompanying
the article shows that the annual timber cut on Forest Service land fell from
around 12.5 billion board feet in 1988, to barely more than 3 billion last
year.
A spokesman for the timber industry accuses Dombeck of attempting to “end
forestry on public lands,” claiming it will cost jobs in his industry.....
and that’s not even taking into consideration its effect on lumber dependent
industries.
The UAW and Daimler Chrysler reached an agreement on a national contract
as we were going to press. Although details haven’t been released as of 1:00
p.m., all reports suggest that the new national contract will be the “richest”
in many years.
It’s been reported that GM opened its offer with a 2% wage increase plus a
$500 lump sum payment the first year, 3% the second, and a $1,500 lump sum
payment the third year. It also proposed job security that would practically
guarantee life-time employment for workers with 10 years seniority. Daimler
Chrysler’s offer was reported as similar.
What was expected to be a sticking point was the intent to offset the lifetime
job guarantee with flexibility in shifting parts making jobs to suppliers.
The UAW was asking for help in organizing those suppliers. It will be interesting
to see how it was resolved.
The ripple effect of the Farm Crisis could well cost the taxpayers
even more than we’ve been reporting. A recent report found that the Farm Banking
industry, after experiencing tremendous profits during much of this decade,
is now facing severe problems. More farmers are delinquent on their loans,
and the farmland used for collateral is plunging in value. In fact, 15% of
the USDA’s $10.6 billion in loans are currently delinquent. And, the agency's
issuance of new loans is up more than 36% over the past year.
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The Seinfeld
Section (it’s still about Nothing ; in particular)
Can’t help but update the lead note from this section two weeks ago;
the Barry Sanders saga. Tuesday we found that Mr. Sanders would
be willing to pay the Lions the $5 million plus that he owes them. That is,
if they will release him from his contract so he can sign with another team.
Now since this Veritas is being mailed on Friday, by the time you read
this the Lions will likely have lost to Green Bay. But remember, they upset
a heavily favored Seattle team in week one, and the offense looked surprisingly
good. Of course, they never got in a hole on first down during that game because
they didn’t have Sanders losing yards on a third of his carries.
And now, for another malcontent ready to walk-out on his team. Anyone
who saw perennial Republican Presidential candidate Pat Buchanan’s appearance
on MSNBC this past Monday would have to surmise that the former journalist
definitely intends to seek the Reform Party nomination. In his appearance
he continuously attacked the two major parties as being too much alike and
continuously attacked the Republican establishment. He reinstated his anti
foreign intervention positions and his skepticism regarding trade agreements,
making it clear that he’s very much in line with Reform Party founder Ross
Perot.
Of course, the party’s most prominent official, Minnesota Governor Jesse Ventura,
who is, politically, nearly identical to the few traditional Republicans left,
will lead the charge for another candidate, probably Liberal Republican Lowell
Weicker, former U.S. Senator and Governor from Connecticut when the party
makes its selection. And he will have considerable impact on who becomes the
nominee.
This one could really get interesting, particularly since, along with Buchanan
and Weicker, the other two individuals most frequently who seem to be mentioned
as potential candidates the most are America’s favorite developer, Donald
Trump, and recently the name of ultra left wing Democrat, actor/director Warren
Beatty.
What’s those numbers on the side of the carton mean? On the first day
of school in late August, students in one of San Francisco’s elementary schools
were served milk that was 3 months old. The city’s Bureau of Environmental
Health investigated the situation, and its assistant director reported the
following: “One of our inspectors told me that he was talking to a food handler
today, and the person was confused about what the expiration date means.”
Atlantic City’s been good to Michigan. With the Miss America contest
set for Saturday, USA Sunday Magazine reported that only three states, California,
Ohio and Pennsylvania, have been the home to more Miss Americas than Michigan.
With 4 to our credit, Michigan is tied for fourth with three other states.
Interestingly enough, New York’s only had 3 (not counting Vanessa Williams,
who had her title taken away).
Poor Al Gore. It’s starting to appear that, by the time the Iowa
caucus takes place at the end of January, he could easily be considered the
underdog for the nomination.
However, his problems don’t really seem to be his ties to Bill Clinton as
is so frequently reported. They actually relate to the fact that many Democrats
have become skeptical of his ability to win next November. And privately,
many party leaders and insiders consider him a total dufus.
Hillary’s #1! That is, the most controversial first lady in America’s
history, according to the current issue of George. And, interestingly
enough, the former 1st Lady that she talks to, Eleanor Roosevelt, was #2.
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Association News Update
Well, it’s hard to believe that it’s almost the fourth quarter, but
we’re less than two weeks away, meaning that the Fall Parade is set to open
two weeks from Saturday. Although the event still has 22 entries, there have
been some changes since a couple of participating builders were forced to
switch models this past month. So, now we have four models in Swartz Creek,
and only three in the Fenton/Linden area.
The Parade promotion begins next weekend with the first TV spots running Sunday
(9/26) evening in prime time. It also appears that a Journal story
on the event will be published that morning.
Housing Quarterly is in the final proof stage, as of this afternoon,
and will be printed and in the mail next Friday. We’re mailing approximately
3,500 copies this time, and there will be some available for distribution
at places of business. Call if interested.
Congratulations to Kal, Mark and David Nemer of Woodside Builders on
the feature story in “Michigan Builder” and being named as one of the
75 fastest growing building companies in the nation by “Builder” magazine.
Their company has been tied to this association since the early 1970s, and
Kal was a director since 1975, and served as President in 1983.
IMPORTANT!! Once again we’re reminding anyone who plans to
attend the NAHB convention in January must get their application
into the association office by October 1st to be assured of hotel accommodations
with the Michigan delegation......If you’re planning on attending and don’t
have a registration form, call us immediately.
Last Tuesday the Board of Directors voted to provide the same type
of Christmas Party that was so well received last year. It’s set for the Beechtree
on Wednesday evening, December 8th, and will include dinner, hors d’oeuvres,
entertainment, et. al.
Look for details in the October 4th issue.
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Economic Update: This “New Economy”
still baffles the pros
At the beginning of September the Conference Board released its primary
gauge of future economic activity and, as expected, its index of leading economic
indicators was up 0.3% in July, suggesting there will be no downturn in the
next six to nine months. Also that day, the Commerce Department said that
spending on construction projects fell 0.5% during the same month, a big surprise
to analysts who collectively had anticipated a rise of 0.3%.
The construction report had analysts doing some serious “head scratching”
since its figures were at odds with housing data that showed an incredibly
strong market. How could construction spending fall for the fourth consecutive
month during a period when its primary sector was on a tear? Welcome to the
“New Economy.”
There’s been a lot written about the “new economy” from the perspective
of productivity controlling inflation by offsetting higher employment costs,
along with technology based growth keeping the economy humming. But due to
this “new economy” many of the old rules don’t seem to apply, making
forecasting more difficult and bringing unusual reactions to to reports of
economic data. So, this week, when the inflation data at both the consumer
and wholesale levels were fine, the bond market hardly reacted while stocks
tumbled. And, when the surge in industrial production was reported Thursday,
the stock market plunged again, despite the previous week’s employment report
which showed manufacturing employment had fallen off. At the same time, bonds
recovered to approximately their level of one week earlier.
Employment
Although fewer jobs than expected were created in August, the nation’s unemployment
rate fell to 4.2%, the lowest in 24 years. The economy created approximately
124,000 new jobs for the month, the lowest number since May. But the best
news may have been a moderate rise in labor costs, just 2 cents per hour,
well below the 5 cent forecast.
After rising in July, manufacturing employment took its biggest plunge since
the GM Strikes in summer of ‘98, while construction jobs fell by 29,000.
The other news in the employment arena came the news that U.S. employers announced
57,253 job cuts in August, 54% higher than during the same month in ‘98, which
brought total cuts for the year to 495,510, roughly 38% above the cuts for
the first eight month of last year.
Manufacturing
The decline in manufacturing employment noted above came as quite a surprise
since it followed the release that factory orders grew unexpectedly fast in
July. Although analysts had expected a 1.8% rise, orders grew by over 2% according
to the Department of Commerce.
Two weeks later the Department reported that a big surge in automotive manufacturing
sparked a 0.3% rise in industrial production during August, following a 0.7%
rise in July.
Perhaps the most important factor in the industrial production report is that
factories are still operating well under the 83 percent of capacity rate considered
to be inflationary.
Prices
When do prices jump without any cause for concern. Only when energy is solely
responsible. Last month wholesale prices were up 0.5%, while prices at the
Consumer level rose 0.3%. But in both cases energy was nearly the only culprit.
The core rates of inflation (without food and energy) fell 0.1%
at the wholesale level and rose a very mild 0.1% for consumers, both slightly
better than forecasts.
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Housing Industry/Mortgage Market Update
As we’ve recently reported, new housing activity through the month
of July was up 32% in Genesee County, according to Housing Consultants, the
Clarkston firm that monitors local building departments throughout Southeast
Michigan. And, an analysis of their statistics shows that half of the increase
in activity was related to multi-family rental projects, a sector that was
nonexistent in 1998.
This week we also checked the July report from the Census Bureau, and found
similar numbers. The breakdown of Census figures show that single family and
condos are likely up 17.7%, while total permits are up a whopping 40.1%, to
1,489 through the seven month period (the numerical difference is related
to the fact that the bureau’s figures are for the Metropolitan Flint area,
and take some jurisdictions beyond Genesee County’s borders).
What will $500,000 buy in the housing market? That question was posed
in a Wall Street Journal article that attempted to spend roughly 1/2
million in nine markets. They found everything from a one year old custom
built, 4,600 square foot home in Fargo, to a nearly 50 year old, 925 square
foot home (listed as a total tear down) in Palo Alto. Following are
some of the more interesting units available in some of the most highly visible
markets:
Beverly Hills - bargain basement compared to Palo Alto. 2,200 sq.ft.;
3 bedroom, 3 bath, townhouse overlooking a loading dock. The primary attraction
is the school system (for parents who obviously missed the Fox network’s Wednesday
schedule in the mid ‘90s).
Greenwich, Connecticut - 2,166 sq. ft. on a 1/5 acre lot in a “state
of disrepair.” But the realtor says that, when it’s “done over,” it will be
a $650,000 house.
New York - a 1,032 square foot, 1 bedroom, apartment, but with a washer
and dryer, along with a swimming pool on the 15th floor. Awesome!
Perhaps most interesting is that the publication had a similar article back
around 1983. At that time the question was, what will $180,000 buy. We guess
they feel the price level of executive oriented housing has risen by 178%
over the past sixteen years.
As you can see by the graph on this page, mortgage rates took another
slight jump since the August 30th issue. However, in the ever changing environment,
they could be up or down a quarter point by the time you read this, particularly
since we’re publishing on Friday. Anyway, a week ago the average quote in
Southeast Michigan was 7.53% with 1.65 points. Most quoted 7.5% with 2 points.
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