Florida's illiquid assets, by gimleteye

I haven’t seen anything like this week’s action at the Miami Dade county commission in a long, long time. Momentous votes totaling billions of dollars of investment were taken on practically no information, by commissioners claiming to represent progress and the people.

The day’s opening presentation by the South Florida Water Management District outlined more than $1.5 billion in new water infrastructure requirements to ensure that growth proceeds apace, notwithstanding an historic drought gripping the nation's southeast.

There were no questions, just praise for Florida's largest county and the county commissioner, Natacha Seijas, who had single-handedly provided for the growth of suburban sprawl and its grandees, the political elite of Miami, who grew wealthy by foisting the costs of quality of life, transportation, and environmental "sustainability" to future generations of taxpayers.

It was enough to gag and it was only nine thirty in the morning.

Then came the former legal counsel to Miami developers, now assistant secretary of the federal housing agency, Orlando Cabrera to update the commissioners on the "rescue" plan for its takeover of the Miami Dade Housing Agency, ransacked by lobbyists close to county commissioners. The African Americans on the county commission, on whose watch the theft and scandal occurred while they were obsessed with zoning approvals for production housing developers encroaching westward to the Everglades, tried their best to appear concerned for the needs of their constituents, some of whom were in the audience and oblivious to the subtext playing out in full daylight: that their own elected representatives were responsible but not accountable.

Next came the Urban Development Boundary, originally intended to contain the costs of infrastructure and to protect the Everglades.

In voting to override Mayor Alvarez’ earlier veto of approvals to move developers’ applications to bust through the UDB, the county commissioners had already shown that fiscal reality or protecting the environment plays no role in its deliberations. (Tomorrow, the county commission will vote to approve a zoning request to lead to two new nuclear reactors on the edge of Biscayne National Park. The utility, Florida Power and Light, is waving around $11 billion in economic impacts: another strand of lights for the Christmas tree!)

Then came the billions represented in the rest of the day’s agenda: a professional baseball stadium, a professional soccer stadium, a two billion dollar tunnel under state lands in Biscayne Bay, and museum park, and a bailout for the Carniverous Performing Arts Center, a $500 million investment that can scarcely afford to keep its lights on: all to be funded through the expansion of two Miami community redevelopment agencies, hounded by past scandals and financial irregularities.

The Miami Herald has been vague on where Miami mayor Manny Diaz believes the money will come from, perhaps because the intended incremental investments for the CRA's may or may not come from billionaire investors in Dubai and Turkey who don't necessarily believe in Christmas.

Well. This is Miami and it is a time for grandiose schemes especially when a recession is brewing, when layoffs are imminent when budgets are falling to pieces, and when government is filled with Republicans who advertise themselves as fiscal conservatives.

The point was driven home yesterday in a phone call from a real estate investor friend who called me from the Florida Keys: there’s a fifty month inventory of single family homes from Marathon to Key Largo. In November and December, 30 home sales closed and 80 new properties came on the market. Just south of Miami, whose elected officials are breaking open champagne over multi-billion dollar infrastructure investments--local governments are laying off and firing.

This morning two stories attracted my attention. I needed some amuse bouche after so much bile.

Polk County’s Lakeland Ledger reports, “county commissioners Monday rebuffed local planning activist John Ryan’s suggestion that they work together to pass a charter amendment that would put limits on new residential development…Ryan, a member of the Polk County Planning Commission, unveiled the proposal in October. It would amend the county charter to limit residential growth within a defined urban growth boundary.”

I felt like raising my hand, like the over-eager fourth grader in the front row. “Excuse me, under no circumstances give control of an urban boundary to county commissioners! Look here!”

Polk county commissioner Bob English opposed Ryan’s amendment. ‘This is going to be another layer of chaos,’ he said, and argued it flies in the face of representative government.”

Ah, my hand flew up… to keep the bile down.

Because that is exactly the closing argument offered by Miami city manager Pete Hernandez to the Miami Herald on Sunday, “There comes a time, I think, when the elected officials have to assume the responsibility that the people placed on them, and they have to make tough choices. Otherwise things would never get done.”

Which brings me to the second story of interest, reported yesterday by Bloomberg but not, apparently, worth reprinting by the stone-cold editors of the Miami Herald: “Florida got Lehman help before run on School’s funds”.

Bloomberg reports, that last June, former Governor Jeb Bush was hired as a consultant by Lehman brothers,“the same firm that had sold the state fund $842 million of mortgage-backed debt in July and August. Those securities defaulted within four months, and totaled more failing debt than any other bank sold the state, Florida records show.” .

“Until November, the Florida pool was the largest public money market fund in the U.S. It held cash for about 1,000 school districts, towns and local agencies in Florida.”

Bloomberg doesn’t say whether the terms of Jeb’s consultancy were based on a monthly retainer or a percentage of theft.

Back in 2002, when Jeb was governor, the state of Florida lost $398 million investing in Enron stock while the company was going down the toilet. It was a stretch that Jeb was personally involved in trying to lift the fortunes of a Bush family loyalist, Ken Lay. On the other hand, it was the same time frame in which Enron's subsidiary, Azurix, was promoting its plan to "privatize" Florida's water resources with the help of Jeb's key political allies. Azurix' coming out party was festively called, "Liquid Gold".

But it’s a different deal with Lehman. Jeb! knew that the mortgage bonds he helped to sell his buddy Coleman Spinaovich, “who earned $180,213 in 2006 as executive director of the State Board of Administration “ and who he had put in place, was in financial derivatives that had made fortunes for his developer backers in Florida, like Florida’s largest homebuilder WCI Communities Al Hoffman, now ambassador to Portugal, who had been his campaign finance chair as well as finance chair for the Republican National Committee during the two campaigns of George W. Bush.

The damage to Florida from the Jeb Bush governorship totals far more than the $1.2 billion of investments for which someone generated massive fees and commissions.

The true damage is fraudulent claims for representative democracy.

As to the exact content of the subprime mortgages in the state investment pool whose value simply disappeared—maybe the school teachers, the firemen, and the government employees whose paychecks are written on that state fund will be the ones to investigate whether the bond originators at Lehman were packaging mortgages from Florida developers who are Bush family loyalists.

In the meantime, hold onto your wallets.