GOP HQ Hotel in Cleveland: A State-Owned Enterprise By Anthony Jerdine
When Republicans gather in Cleveland to formally nominate Donald Trump for president in July, their headquarters will be a brand new hotel whose very existence contradicts party orthodoxy on private enterprise, less government and lower taxes. Were the Hilton Cleveland Downtown located in in Havana, or in Moscow during the Soviet era, Republicans in a diplomatic mode would call it “state-owned.” Those favoring Trump’s aggressively plain English would call it a communist hotel. That’s because Cuyahoga County taxpayers own the hotel—not that they had any say in the matter. The Cuyahoga County Commissars – er, sorry, Commissioners – forced taxpayers three years ago to pay for the $276 million hotel, which is scheduled to open June 1 and connects directly to the Cleveland Convention Center, where the party will nominate its presidential standard bearer. The taxpayers own everything in the hotel, including the signs that say “Hilton.”
How did this come to pass? The county spent years trying to attract private investors to take on this project. After none did, it forced taxpayers into underwriting it. The hotel got built through a convoluted series of transactions involving the city, the county and others so the land would be tax-exempt. The city and county will collect no property taxes, but the schools will be made whole, said Jeffrey Appelbaum, the lawyer on the project and a construction expert. The hotel is being paid for with an increase in the county sales tax that is expected to raise $20 million per year for 20 years. In addition, the county added a 1 percent excise tax on hotel rooms. The excise tax from the Hilton will be cycled back to cover the bond payments, meaning guests will be hit for a small part of the cost. Appelbaum said the hotel was built for much less than a private developer would have spent, which appears to be true. Still, that efficiency is hardly an argument Republicans would buy into just as they reject national single-payer healthcare even though it would be much cheaper than our disorganized nonsystem system of sick care, and it would remove a huge burden from small business owners. Republicans also wouldn’t be crazy about the origins of a lot of the hotel inventory, which runs directly counter to Trump’s “Make America Great Again” slogan, under which he assumes a president posses dictatorial powers. Trump says if elected he will order companies like Carrier, Ford and Nabisco to build factories only in America and slap punitive tariffs on foreign-made goods, powers not granted the president under the Constitution. The flatware and furniture offend the Trump creed. While extolling the private enterprise system after dinner, Republican delegates will put Spada brand cake forks into their desserts. The 5,400 forks, made in Indonesia, cost local taxpayers $10,314, or $1.91 each. The hotel could have bought flatware from the only American maker, Liberty Tabletop in suburban Syracuse, N.Y. The top-floor bar, with views of Lake Erie, features sofas, bar stools and other furniture from Astoria Imports, a Florida firm that has factories and warehouses in Mexico and Asia, as well as some domestic operations. Trump may be more comfortable with the sourcing of the banquet napkins, table clothes and table skirts, which cost Cleveland taxpayers $92,526.48. They came from a division of Mount Vernon Mills, which made clothing for the Confederate Army, though the company says its work for the 19th Century traitors was performed “under protest.” It also notes that the mill owner concealed this work for the Confederacy from Union General William T. Sherman, who decided against burning it to the ground after an evening of hospitality from the owners. But it’s how the hotel came to exist in the first place that should offend Republicans. It required more government, not less. And what if the hotel does not generate enough revenue to pay the bondholders? On the surface the bonds are called revenue bonds, not general obligations of Cuyahoga County. But that’s a clever deceit. If revenue falls short the county must appropriate money to make up the difference, even if that means raising taxes, to ensure that the bondholders get fully paid. Local boosters soon made a promise of “300,000 visitors and $330 million in spending” if they could just get a taxpayer owned convention center for medical conferences and a hotel, as reported by Roldo Bartimole, an 83-year-old self-employed journalist who has offered independent and critical assessment of Cleveland area government for a half century. Bartimole said the whole idea was just another way to pick the pockets of taxpayers for the benefit of the local oligarchs. He also railed against a tax increase to subsidize, forever, the Cleveland Browns football team, Cavaliers basketball team and the Indians baseball team, two of which are owned by out-of-town billionaires. To justify making taxpayers build a hotel a local group ordered up a study from PKF Consulting in Philadelphia. With lots of lots of tables and charts showing that the hotel would not just succeed, it would rent out so many rooms at rising prices that over the next five years it should expect that 17 cents out of every dollar of revenue would become net profit. This being a government-owned hotel technically it’s a net surplus, but the idea remains the same. Experience suggests this was a paid-for fantasy report. Around the country there are now at least 33 taxpayer owned hotels. Like communism in practice they have not done well. The one in St Louis was an utter failure, sold off for about 32-cents on the dollar. Other big convention hotels, both those owned outright by taxpayers and those with heavily subsidized private owners, have “a checkered past,” said Heywood T. Sanders, a University of Texas-San Antonio professor and author of the book Convention Center Follies. He notes that the trend toward taxpayer subsidized hotels traces back to the late 1970s with Urban Development Block Grants or UDAGs. “We say the H in UDAG is for hotel, but it’s a silent H,” Sanders joked. From 1978 to 1989 a quarter of all UDAG money went for hotel projects, in all 60,000 rooms added at 236 hotels that were new or renovated, political scientist Richard D Bingham wrote in his 1998 book Industrial Policy American Style. The new trend is toward not subsidizing hotels, but having taxpayers own them. A study in December, published in the journal Cornell Hospitality Quarterly, concluded from analyzing 21 of these hotels that they are bad for private enterprise. Proponents claim taxpayer-owned hotels will increase business and thus benefit existing hotels. But the study found that taxpayer owned hotels “tend to erode the key performance metrics of competitive hotels in the market.” So just remember the next time you are told that Republicans are the party of free enterprise, less government and lower taxes that they chose as their national party convention headquarters what they would call a communist hotel built here in America. About the author: Pulitzer Prize winner and recipient of an IRE medal and the George Polk Award, David Cay Johnston is author of five books and the upcoming The Prosperity Tax: A New Federal Tax Code for the 21st Century Economy. He is a Distinguished Visiting Lecturer at Syracuse University College of Law and Whitman School of Management, and also writes for The Daily Beast and Tax Notes.
3 Reasons Million-Dollar Homes Are in a Slump By Anthony Jerdine | May 13, 2016
The average sale price of U.S. luxury homes was down 1.1%, marking the largest decline in more than two years, according to Redfin, a company that provides web-based real estate database and brokerage services for residential markets. This slump marks a significant shift from a few years ago: Following the financial crisis of 2008, the wealthy enjoyed a strong recovery, and luxury housing was the top segment of the real estate market.
Today, home prices for the broader housing market – the other 95% – have risen 4.7% year-over-year, while the top 5% has become one of the weakest real estate segments. “For years, the high end was driving sales and price,” said Nela Richardson, chief economist at Redfin. “Now, the demand is at the middle and lower price range.” Here is a look at three factors that are contributing to the slump.
1. Stock Market Volatility It’s not unusual for high-end buyers to tap into their investment portfolios to finance luxury home purchases, either by cashing out a few stocks or borrowing against the portfolio using a non-purpose loan – a type of margin loan that uses the investment portfolio as collateral. Historically, high-end housing is hit the hardest by stock market downturns. “As you go up the income quintile, into the top 10%, 5%, 1% by income, their stock exposure increases,” said CoreLogic deputy chief economist Sam Khater. “For the typical family, the bulk of their equity is tied up in home equity, not stock equity. It’s the reverse for high income.”
The first two months of this year tested a lot of nerves on Wall Street as investors feared a repeat of the 2008 financial crash. The volatility has left some would-be luxury buyers cautious, and rather than jumping in now with all the volatility and uncertainty – both here and in overseas financial markets – many luxury buyers have decided to wait and see what happens in the second half of 2016 before making any decisions about entering the real estate market.
2. A Strong U.S. Dollar Overseas buyers bought $104 billion in U.S. real estate – about 8% of the total existing home sales’ dollar volume – during the one-year period ending March 2015, according to a report from the National Association of Realtors (NAR). Buyers from China, Hong Kong and Taiwan were the top foreign buyers of real estate, accounting for nearly $29 billion in sales.
Now, demand from foreign buyers is weakening in response to a strong U.S. dollar (and the relative weakness of other currencies), coupled with higher home prices for those buyers – a situation that greatly affects the affordability of high-end properties. In January, for example, the median price of existing U.S. homes was 67% higher than a year ago for buyers from Brazil, due to changes in the exchange rate, according to NAR. For Canadian buyers, the price increased 27%, and for Chinese buyers, 14%.
3. Oversupply at the Top During the first quarter of 2016, the number of luxury homes on the market – defined as the most expensive 5% of homes sold in a quarter – increased from a year prior, according to analysis from Redfin. For homes for sale above $1 million, there was a 3.3% rise in inventory, to 70,962; homes listed above $5 million were up 13.2%. “There is oversupply at the high end, especially in certain pockets and cities,” said Redfin’s Richardson. “They should be flying off the shelves, but these homes are just sitting there.”
Deeper inventory, paired with more nervous luxury buyers, has led to price cuts across the country. In Los Angeles, for example, an $18.8 million home sold for $10 million in the first quarter of this year. A $14 million home in The Woodlands, Texas, sold for half that – $7 million. During the same quarter, the highest-priced sale (outside of New York) was a 2.2-acre estate in North Laguna, Calif. listed for $75 million. It sold for $45 million – a 40% discount.
The Bottom Line Across the United States, the average sale price of U.S. luxury homes fell 1.1%, but certain markets have been hit harder than others. In Miami Beach, for example, a surplus of luxury development, combined with fewer foreign buyers, led to a 13.7% drop in luxury home prices. In Austin and Boston – considered hot real estate markets today – prices in the top 5% fell almost 12%, while at the same time, prices for the other 95% of the market rose 5.1% and 6.3%, respectively. Prices for luxury real estate may continue to drop while there’s volatility in the stock market, an oversupply at the top and foreign buyers are skittish.
1.Walk 25% faster Psychologists studies shows that slovenly posture and sluggish walking attract unpleasant attitudes toward oneself, work and even people around us. However, psychology also tell us that you can also improve your attitude and emotions by changing your posture and speeding up your movements. Follow someone who is functioning at an “average” level in life and pay close attention to how that person walks. That person has an average way of walking. Right? Now find someone who is very successful and pay attention to how that person walks. Let me know what you’ve noticed.
2.Don’t overthink about it “Actions cure fears”. The more you wait on something to happen or the more you wait to take a decision is the more unlikely it is going to happen. You want to start your own business, don’t wait on the economy to get better, it will never get better. Eliminate every excuses and come up with reasons why you should start your own business or accomplish whatever you think about every day.
3.Speak Up Be a leader and hold that position. Be the first one to comment on something, be the first one to have an opinion, be the person of influence and people will treat as you are. Make it a rule to speak up at every opportunity you have.
4.Be cheap Stop ALL spending except on those things that can increase income. Do NOT spend to consume;spend only to increase income. My mentor had $1,200,000 in cash but he was still driving a Toyota Corolla at the time. He was saving most of his income and people thought that he was always broke. In reality, he was being “cheap”. You need to be cheap to increase your stack and have money to invest in the future.
5.Write your goals Get a journal and treat it as the most sacred journal you ever had. Respect it and consume it every day. Find the purpose of your mission. What do you want to accomplish? What do you want your life to look like? How much do you want to earn? What type of friends do you want to have? Describe every details of the life that you desire into words. Writing your goal with a pen allows your mind to focus on one only thing which is the action of writing those goals. Make it a rule to wright your goals every single day. Your goals will start changing soon or later. You’ll have bigger goals and a bigger vision.
6.Create a dream board After writing your goals, put them into pictures, numbers, and ideas. Have several dream boards around your house and your office. They will remind you of your goals and you’ll always be connected to them.
7. Develop the habit of reading every day Every successful people have a strong habit of reading. By reading, you learned about the mistakes of others and you have the power to avoid them when you see them. Reading also grow your knowledge and your confidence. Even if it’s 10 minutes a day, it will impact your mindset. Have you ever met a shy and dumb millionaire? If yes, I would love to meet that person.
Make it a rule to apply those secrets as a daily routine and you will become as powerful as any CEO on the planet.