More on Krome Gold, by gimleteye

Almost two years ago, I began sharing with Eyeonmiami readers NYU economist Nouriel Roubini's analyses of the current economic situation.

Among other outstanding observations, Roubini has traced macroeconomic and monetary policies to the corruption of a growth model based on McMansions and SUV's. Roubini's observations correspond with what I have seen here, in Florida. My point of view is informed by fighting land use battles at the level of local and state government-- and witnessing the enormous gaps between the purpose, intent and result of federal laws protecting the nation's air, water, and public lands.

What was clear-- and is now even clearer to more people in light of the housing market crash -- is that the abnormal growth of suburbs in the nation's fastest growing regions could only exist through fiscal irresponsibility by so-called stewards of the public treasury. You will find in our index "housing crash" ample discussion how Miami was the epicenter of the housing market bust and how the political origins of the boom here, in South Florida, tied to the world-wide credit crisis; irresponsibility that nonetheless allowed great private wealth to be created through cost shifting, hidden public subsidies for growth, and the deformation of representative democracy to serve the needs of Wall Street and the Growth Machine.

From many points of view, the building boom in Florida was unsustainable-- local decision makers like the unreformable majority of the Miami Dade County Commission rubber-stamped zoning changes in farmland, permits, and infrastructure demanded by big engineering firms and their patrons on blue ribbon panels appointed by county commissioners and governors.

To the extent that laws protecting the air, water, rivers, lakes and Everglades existed, they worked mainly to fuel armies of consultants, lawyers, and engineering firms.

As long as credit was easy, there was nothing blocking the way of "growth" other than pesky civic groups or clusters of activists; most could be co-opted-- and were-- in the mad scramble for charitable donations and the crumbs pushed off the feeding table by successive governors, legislative leaders, and their campaign contributors.

Yesterday I wrote about Krome Gold and its pleasing fenestration: a window on the broken model of suburban growth and the last tranche of speculators frantically scrambling for some way for public entities, like local government, to make them whole on investments that are worth only half of what they paid in 2005 and 2006. I am certain that some of the Krome Gold investors and the nearby 7,000 planned housing development by Lennar, called Parkland are intimately familiar with decision makers in Washington DC, and conversations how to bailout the housing industry now fallen on desperate times of their own making.

It is obvious enough-- and some of our readers posted terrific comments yesterday about the bedraggled landscape and empty subdivisions that Krome Gold investors find themselves in the midst of. This time we need "jobs", this time we need "growth". These will all be rationalizations used by Holland and Knight attorney Juan Mayol to change the underlying zoning on the property.

On September 19th, the Miami Dade County Commission will entertain the application by Krome Gold to permit a 173 acre lake excavation. The prospective developer claims the lake is integral to its planned equestrian center and multi-million dollar homes, that aren't selling and will not sell anytime soon elsewhere in the area. The county's own planning staff recommends denial, on the grounds that it is inconsistent with the master plan for the area.

But there has been no discussion, at least in the sunshine where all could hear it, about the underlying financing and economics of the project.

As Roubini points out, a significant factor in the depth of our national economic crisis is the failure of banks and lending institutions to be honest with shareholders about the cratering value of its outstanding loans. It would be interesting to know the underlying financial arrangements of the limited partnership and exactly how the lending institution/s for the project characterize the debt and mortgage. What is the financial condition of the institution that holds the mortgage? How have they rated the paper?

These are not typically details that are ever revealed in the context of major zoning decisions. I recall how more than a decade ago, the private entity HABDI-- configured of some of the same investors in Krome Gold-- presented the County Commission with a report by Integra, an economics consultant still active in Miami, showing $10 billion in positive economic impacts if the no-bid contract to redevelop the Homestead Air Force Base was granted as an exclusive 99 year lease. None of the investors was required to demonstrate the source of funding, except to say that at some point in the future it would post a $100 million bond.

As a result, Natacha Seijas--then the figurehead on the prow of the HABDI ship-- was able to commit tens of millions of taxpayer dollars to fund planning for a project that ultimately disappeared in the sands of time; violating laws in the process the way a boat plows through sargasso weed. A lot has changed since that time: the housing boom came and passed. Some of the principals acquired and built their own bank: US Century. And they are giving back some of their fortunes to cover the carrying costs of land acquisitions purchased at speculative values in the full expectation that they could extract gold from farmland at the edge of the Everglades. That's why it is called, Krome Gold.

As individual citizens, we cannot run our family budgets without accounting for all the expenses according to our income. But that is not how the wealth creation model of suburbia works; it depends on leverage and it depends on ordinary citizens not caring too much how it happens or who, exactly, is making it happen.