Wild misconceptions and real estate disasters
Published 3:18 pm Friday, September 2, 2016
Economist Thomas Sowell suggests answering three questions before approving any public expenditure. “What are the alternatives?” “What is the cost?” “Is there any hard evidence?”
In 2006, the best financial alternative to investing tax dollars in the industrial parks, Quick Start buildings and the salaries of the Economic Development Commission (EDC) would have been to simply leave the money with the taxpayers who earned it.
The real cost of paying $10 million for the industrial parks is the $10 million of private investments individual taxpayers weren’t able to make because we were paying $10 million in taxes.
If $2.5 million were left with local businessmen to reinvest in their firms, then it would likely have earned 10 percent annually. If $2.5 million were invested in mutual funds it would likely have earned 7 percent annually. If $2.5 million were used to pay down credit card balances it would have saved 18 percent annually. If $2.5 million were used to prepay mortgages then it would have saved 5 percent annually. All in all, $10 million invested privately in 2006 would be worth $30 million today. However, the industrial parks are valued at a discount to 2006 prices, and those EDC salaries are a complete loss. The difference in these outcomes, i.e., $25 million, is the true cost of our lost opportunities.
Professor Sowell’s final request for the existence of hard evidence fares even worse.
On March 28, 2003, the executive director of the Economic Development Commission, Tom Thompson, was reported by the Washington Daily News as advocating the shell-building concept because “he researched the issue and discovered that 86 percent of industrial prospects are attracted to a place because a building is available, and 14 percent of industrial prospects are attracted to a place because a building site is available.” On Dec. 4, 2011, the Committee of 100 echoed this exact claim in a paid advertisement in the Washington Daily News.
When the research in question was requested from the EDC, the Committee of 100 and Beaufort County’s commissioners in December 2011 and January 2012, not a single copy of the data in question could be found. Beaufort County commissioners, using daydreams for research, had spent $10 million across a span of eight years without ever asking to see the data they were relying on. The entire episode redefines “gullible.”
Despite the EDC’s “research” favoring shell-buildings, the minutes of the county board meetings in the spring of 2007 show Mr. Thompson along with, then county commissioner, Al Klemm advocating for the purchase of a 270-acre farm that would become the Chocowinity Industrial Park. Mr. Thompson’s rationale was that the property would support his strategy for the anticipated construction of a $220 million refinery by Agri-Ethanol Products (AEP). Mr. Klemm argued for the purchase by describing the Washington Industrial Park as being a “smashing success” and further argued that, with the first industrial park filling up, the county needed to buy more land immediately.
The county commissioners hastily finalized the untimely acquisition of the Chocowinity property just before the indictment and conviction of AEP’s chief executive officer, along with another AEP executive, on federal bribery charges in connection with the refinery’s permitting process. The indictments resulted in the abandonment of the refinery project. The Chocowinity Industrial Park has never attracted a single tenant, while contrary to commissioner Klemm’s predictions, the Washington Industrial Park has neither filled up nor has Beaufort County run out of land.
You cannot possibly make this stuff up.
For 10 years, Beaufort County commissioners naively allowed millions of dollars to be invested in a series of real estate disasters, on the basis of wild misconceptions drawn from non-existent data, by a group of cronies, hobbyists and nincompoops.
For that, shame on them; but if taxpayers allow this to happen again, then shame on us.
Warren Smith is a Beaufort County resident.