PANDA
Platform Issues

The Economy


The Economy

The present strategy of "reinventing" the region's economy has us disposing of what we have in the vain hope of some imagined moneymakers which have yet to materialize.  This policy of ignoring currently productive operations and driving them out ofthe region is not only foolhardy, it is economically dangerous.  Instead, we should start with what we have, build upon it, and make that stronger:

These are the region's greatest assets.  With an enlightened leadership and a little encouragement they can be combined through the free market into a viable economy for our region's future.  But it can only happen if we choose leaders who think differently.

The following are specific PANDA measures necessary for strengthening the region's economy:

  1. Pursue wealth-based economic activity rather than money turning Our leaders are presently saying they are helping the economy by paying people to tear down valuable assets that we can never afford to replace.  In their place they are putting up boxes with thin skin facades that are scaled for passing automobiles rather than people.  Having little or no lasting value, about the best thing that can be said, is that these can be considered temporary.  We need to preserve our substantive assets and build upon their place in our community, not upon their rubble!   TOP /\

  2. Discourage extraction-based business activities The present approach is to court businesses that move in overnight and use our market to reap profits which they ship elsewhere.  Those that are worst leave behind pollution and distruction of the environment, after having taken all they can.  We need to foster long term enterprises that are an integral part of the community.  These tend to be many of the businesses that are here now (the ones our present leaders are ignoring and forcing to leave); we should be encouraging them to stay and grow here.   TOP /\

  3. Stop the present game of  investment musical chairs The government must actively discourage and withhold all public support from the present process of investment musical chairs which merely translocates resources from one area of the region to another.   TOP /\

  4. Build economic strategy around multi-modal transportation The region's capability for multi-modal transportation (integrating air, water, highway, and rail) is being ignored when it should be the backbone of our economic strategy.  We have possibly the best multi-modal potential in the country and there are steps we can be taking to capitalize upon it.   TOP /\

  5. Rapid rail between the airport, the City, and the rest of the region As part of a regional rail network, we have the capability of a 10 minute connection between the airport and Downtown.  It can be built using standard rail technology within just a few years and would be compatible with the proposed maglev test project (its right-of-way could easily be shared an elevated Maglev track).  We do not need to turn our backs upon the future potential of maglev, but neither should we hold hostage the present well-being of the region while we wait an indeterminate time for it to be perfected.   TOP /\

  6. Encourage re-growth of the manufacturing sector Despite present propaganda, Pittsburgh is very near the center of the primary area for new investment in manufacturing facilities in United States.  With the best potential for multi-modal transportation to over half the country's population, we stand to be a logical choice if we capitalize upon it.   TOP /\

  7. Reuse old industrial sites for clean industry instead of subsidized luxury housing The region needs to use the valuable land to produce more than a few jobs for domestic help. Even after the tax deferrals for such housing has ended, it can never completely reimburse its subsidies, as the taxes paid are less than the interest on the public's expenditures.  Furthermore, we can't expect the hilly countryside of southwestern Pennsylvania to compete with the flat farmland of Ohio, only an hour's drive away.  TOP /\

  8. Use the old LTV sites to expand CMU, Pitt, and medical institutions Rather than taking over the Oakland neighborhoods, the old LTV sites on both sides of the Mon should be used for riverfront campus extensions of the educational and medical instutions.  There is a rail line and extra right-of-way running in between CMU and Pitt, and it connects them with the old LTV site just 3 minutes away.  A shuttle and regular regional service could easily link new riverfront campuses with a station built in Panther Hollow between CMU and the museum.  There is room enough for other uses too; high technology based businesses would be especially compatible, especially when connected to the airport by a rapid rail line.   TOP /\

  9. Stop all subsidies for real estate speculation Subsidized real estate speculation adds new, excess capacity to an already overabundant market. The oversupply undermines present property values, which in turn encourages a "disinvestment" in existing communities and hastens the region's decline. It is therefore essential to remove all subsidies and actively discourage the creation of excess commercial and residential capacity, both in the suburbs and in the city!   TOP /\

  10. Implement a moritorium upon all new projects receiving public support   The planning for all of the projects receiving public support has been based upon a flawed process which incorporated deliberate distortions.  These were used to create a false justification for huge subsidies underwriting more real estate speculation.  The planning process must be redone correctly from the bottom up and any projects must be analyzed to determine their real impacts upon the community.  Under no circumstances can we afford to get caught up in the self-profitting fantasies of subsidized speculators who wallow at the public trough!   TOP /\


 
--  Concepts of Negative Investment  -
Dissuaded Investment - vs - Divestment - vs - Disinvestment
Distinctions worth understanding

What is negative investment?  Simply put, negative investment is either the liquidation or consumption of one's capital investment.  While at times it can happen quickly across a community as in a massive series of liquidations, more often it tends to occur as a prolonged consumption of properties extending over a period of time.  Either way, where it is employed it is usually seen by investors as the most efficient way to gain the most return from their investment.

Negative investment is a primary factor in the decline of traditional communities, and there are subtle yet significant distinctions among the associated phenomena which must be understood if we are to successfully revitalize our traditional neighborhood communities.

What is the first indication a community has entered a downward spiral of negative investment?  At its leading edge is a precursor phenomenon which for lack of a better term may be called dissuaded investment.  This occurs when able investors decide either to not make an initial investment or to not expand their current level of investment within a community.  There will always be some investment propositions which do not withstand scrutiny, however, when the level of investment drops below a regional average, it can be a symptom of impending decline.

The thought of turning away big spending projects tends to panic politicians who are addicted to chasing the money.  Once stagnation or decline become apparent in their district, they become positively manic and in pursuit of a quick fix they often approve policies or take actions which actually dissuade beneficial investment.  In the end, rather than averting decline, they accelerate it.

The irony is that while politicians are loath to turn away any big projects, dissuading investment is not always bad.  In fact, it may be quite beneficial, especially where the dissuaded investment would destroy valuable community assets such as historic structures, public facilities, community character, etc.  Unfortunately, the speculators with harmful projects, being only too willing to grease the necessary hands, more often than not win their approval even where there are intense citizen objections.  The result is to once again exacerbate an overall community decline.

How does negative investment occur?  Negative investment can happen in either of two ways:

  1. the quickest, divestment is simply selling at a profit or loss; or
  2. the long haul approach is to consume the investment through a protracted process of disinvestment, a process which consists of reducing property maintenance or stopping it altogether.

While the first option, divestment, may happen for any number of reasons, its impact upon the community depends upon the buyer.  Nonetheless, the actions of the buyer are also influenced to a great extent by the general investment climate within the community.  Where values are appreciating, new investors will tend to be more willing to make additional investments in their new purchases.  But if values are stagnant, depreciating, or simply below average in appreciation, the new investor, like the majority of other property owners in the community, is instead likely to reduce or withhold additional investment or, worst of all, to partake in a prolonged viscious cycle of disinvestment.

Disinvestment, is the most insidiously debilitating form of negative investment.  As investors recover the value from their investments by consuming them, it becomes an irreversable downward spiral with the entire community caught in its grip.  By not spending for necessary routine maintenance, the investor is, in effect, spending down their capital as the value of their property deteriorates to nothing.  As conditions stimulate people to passively remove more and more of their investment value, it drives a community into an accelerating decline.

The first instances of negative investment appear early in the process of community decline as market trends, comparable returns on investment elsewhere, and long range public policy dissuade savvy investors from making new or additional investments in a community.  At this stage, properties are likely to be sold at a profit before their values decline below their original price.  Once divested of their old properties, the former owners simply move on as part of the outmigration to invest in newer properties on the expanding suburban edge.  As a community's decline continues, properties may be dumped at a loss in order to avoid further losses.  Selling out, which sharply cuts an owner from their investment, is the most obvious means of negative investment.  It is also "potentially" more benign for the community.

Of the two forms of negative investment, disinvestment is at once more common, more insidious, and more dastardly in its impact -- both in terms of the indivdual property and the community at large.  By deliberately or inadvertantly reducing regular maintenance of properties, or worse, in ceasing it altogether, the property owner effectively extracts a portion of the property's value in installments.  While it may seem lazy and utterly stupid to deliberately allow a good property to deteriorate, it can actually make good sense to an accountant whenever the amount saved by not doing the maintenance is higher than the loss in property value resulting from its poorer condition.

When is allowing a property's deterioration a wise investment scheme?  When a given property holds a high market value, it makes sense to maintain it because not doing so might cause its sale value to lose more than its cost of maintenance.  For example not investing $1000 a year in maintenance might cause a loss of something over $1000, say $1200, from the sale value of a $200,000 building.  But if the exact same building is in a declining market and has a market value of only $100,000, the same $1000 not spent on maintenance might cause a loss in sale value of only $600 to $800.  Clearly, in undervalued markets property owners can be much better off financially in both the short and long run by not maintaining their properties.

Can a sale-at-a-loss be benificial to a declining community?  Such a sale is only potentially benign if the purchaser is willing and able to maintain the building as though it holds its full value.  In most cases the buyers of undervalued properties do not possess the means to pay the full maintenance costs, and if they do, they are probably savy enough investors to realize that providing the full maintenance needed will cost more money over time than the property is worth on the market.  The likelihood is therefore fairly strong that even a new buyer will engage in the piecemeal liquidation of their investment in an undervalued market.

The "propensity to disinvest" exists in all markets.  An adequate maintenance program requires not only spending additional money but an active investment of time and energy as well.  In a world where the path of least resistence is always tempting, there will be those who opt to avoid the hassle and simply consume their capital.  However, it is in an undervalued, declining market that disinvestment is most likely to occur.  Its impact upon older neighborhoods is especially exacerbated where publicly subsidized additions of new housing and commercial capacity inflate the supply of properties on the market, artificially supressing property values. TOP /\


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