Draper Boom

In case you've had your head stuck in the sand, the prison move is a done deal.  The Draper site will be abandoned, and in a display of petty vindictiveness and short-sightedness on an effectively criminal level, The Powers are moving it to the airport (There's brilliance for you.  It isn't enough that everyone flying into or out of the principal airport in the state already has a comprehensive view of Jersey-grade industrial blight; now they'll get to see our leading growth industry as well.).  And the yokels who herd Draper down the sheep path are licking their chops.  700 acres of loose land.  It will look like the Oklahoma Land Rush.  And having learned nothing from the Sandcrest, er Suncrest Debacle, Draper will not make sure there is adequate infrastructure, performance bonds, or even a way for the schools to handle the influx.  The fun just never stops.

Boise County Files Chapter 9

As reported by the Idaho Statesman, Boise County, northeast of Boise up Highway 21 through Idaho City and Lowman to the pass over to the Stanley Basin, has filed for Chapter 9, municipal bankruptcy. It seems they screwed up a land use decision, the developer sued them and won a multi-million dollar judgment, and the county come anywhere close to paying.

There are several lessons to be learned from this. First, there are a lot of stupid people on the Interweb Pipes. The Statesman story was apparently linked to a bunch of right-wing websites (Drudge, Free Republic, Town Hall, etc.), and the knee-jerk comments started pouring in from folks who apparently hadn't even bothered to read the article (See comments by Ron Reale, Mark Babb, Christopher K, Teddy Kennedy's SEARCH+RESCUE, Joe Astroturf, Jack White, and golden_elixir for the most egregious examples.), screaming about how liberal Boise deserves this (First, Boise is not liberal, except in Idaho. Second, this is Boise County, not Boise City. Get a map, people.) and how this county was bankrupted by public unions (The Koch Brothers really have their meme rolling, here. You might want to check just how unionized Boise County is. Then check whether any union members caused the loss of the lawsuit.). With "civil" discourse at such a level, it's no wonder nothing is getting accomplished in this country.

Second, municipal bankruptcy is a world of its own. One of the commenters (johnnydoughey) asks a decent question: He thought you couldn't get discharged for liability for an illegal act. Well, there are illegal acts (criminal) and illegal acts (civil penalty). Municipalities can't be convicted of the former and can be excused for more of the latter than private people can. The developer's attorneys have already promised a 921(c) motion for dismissal for a bad faith filing, but I doubt the court will grant this (I wonder if the commenters who are currently complaining about the federal court entering the judgment will also complain about the federal bankruptcy court providing protection from that judgment. They're both exercises of federal authority, after all.). It remains to be seen if the county will come up with a viable plan, though.

Third, if you're going to be in local government, please learn how to make land use decisions. At issue here was a teen treatment facility that the county put so many conditions on, it was economically unfeasible. The conditions themselves, frankly, weren't the problem. Most of the conditions had to do with assuring adequate infrastructure back there in the hills. The problem was that the county had already approved other, larger developments back in those hills that required most of the same infrastructure but had applied no such conditions. In other words, the county was trying to charge all the infrastructure costs of several developments to one development, a constitutional no-no, and that was also discrimination against a special needs facility, a Fair Housing Act no-no. On top of that, county staff and elected officials were apparently advising the opponents on how to build a record to block the development, also a constitutional and FHA no-no. The developer filed suit for damages and nailed the county good.

Folks, if the city slickers are coming to your corner of Hay Seed World to make a quick flip on your cheap land, lawyer up and do what your lawyers say. I guarantee the developer has and is mapping out every move you can make. The Boise County commissioners didn't listen when the Boise County attorney said they were screwing up. The Boise County commissioners didn't listen when the attorneys for the Idaho Counties Risk Management Program (the counties' insurance pool) said they were screwing up and (SURPRISE!) the Program has denied coverage. Locally, Draper didn't lawyer up when it was reviewing SunCrest, and it will be dealing with it forever. Bluffdale didn't lawyer up on the one-acre zoning lawsuit and ended up losing an FHA case (It should consider itself lucky the developer wanted the development and not damages, or else we would have had a Chapter 9 here in South Valley.). Whether you're in private business or public office, it's never a good idea to be your own legal counsel.

Small Business Status

Things are definitely rough out there for small businesses.  The Zions Bank Small Business Index has dropped to its lowest point ever, and everyone expects things to get rougher this year.

But as I've pointed out here and in Utah CEO, just how secure is your job?  Look at the big companies closing down.  Flying J is the 16th largest privately held company in the country, but it was forced to file bankruptcy because its creditors started calling in their markers.  Job cuts can, and will, strike anywhere.  Build an ark now.

Lots of people are starting their own businesses, typically out of necessity (such as the most recent position on their resume being at Lehman Brothers).  They identify something they can produce or market that people will pay for, and they go for it.  You should too.

Try to keep the start-up borrowing as low as possible.  Shoot for zero.  If you need some, it's out there, but it's getting scarcer, so expect to fight for it.  For example, Zions has been the biggest small business lender around here, but it also is Flying J's biggest creditor and owns the mess that is SunCrest, and that just can't help the loan pool any.

Happy Holidays?

And so it is Christmas. And what have we done?

To any objective, ground-level observer (as opposed to the tower-dwelling elite still drinking the Friedman Twins' Kool-Aid), times is hard. Office Depot has axed two stores. Kennecott is set to whack a big chunk of the few remaining, living wage jobs around here. KB Toys finally filed for bankruptcy. Costco's profits are flat. General Growth Properties continues to teeter on the edge of bankruptcy, threatening to leave the Cottonwood Mall site as a huge hay field (which I suppose beats the sewer lagoon Mecham has left in Sugarhouse). R&B SunCrest has scrapped its plan to take over The Incredible Sliding Subdivision, leaving Draper once again holding the bag. Jobs are hemorrhaging in town-sized blocs. Big boxes and anchors are going dark. Even though we've torn half the malls in the valley down, the surviving half are barely surviving. The only reason Sportsman's Warehouse has any chance of making it is because a Canadian farmers' co-op wants to buy it and use it as a Merc for its members. And having leveraged itself to the moon to follow gas prices earlier this year, Flying J has now had to file bankruptcy.

How did it come to this? It boils down to a simple fact, folks: We bought a load of hooie. We bought that everyone could own a home. They can't (I don't own a home now, and I won't be buying one soon. If you're smart, you won't either.). We bought that financial experts could take large piles of garbage and make them squeaky clean by dividing them into smaller piles of garbage. How's that again? We bought that we didn't need to grow or make things any more; we could all sit in offices and generate paper and electrons all day, and that would be a sustainable economy. Yeah, right.

We bought and swallowed so much crap, we finally exploded. Just how surprising is it really that we now find ourselves standing here with our guts hanging out?

So what do we do next? So far I don't hear anyone in the halls of power even asking the right questions. So I'll start with this: We've dumped $3 trillion on saving the finance industry; we spent $3.8 trillion (in current dollars) to fight World War II. We fought WWII to save our country and way of life. What sort of country and way of life are we saving with our current spending?

Choosing a Bank

This used to be a fairly simple process. Convenient location probably dictated your choice. Maybe you knew somebody at the branch. If you were really interested, you'd check interest rates and fees.

Not so simple any more. Now you have to worry about whether the bank is going belly-up.

Case in point. I've banked at Washington Mutual for years. Now it's gone, swallowed by Chase. Now I could stay, and turn into a Chase customer, except that I don't like Chase and don't trust it any farther than I can drop kick an anvil. So I'm shopping.

The obvious choice around here is Zions Bank. But I'm not going to go with the obvious choice. Some people out there are saying, "Oh, it's because you're not LDS." That has nothing to do with it. Zions doesn't care about my religious affiliation, and I don't care about its. My concerns are strictly what any business person's should be when making such a decision: business.

Zions has made a lot of loans. If SunCrest is any indication, a lot of those loans are garbage. I know there is a substantial amount of collateral tied up by the ANB receivership because ANB and Zions have the same collateral. That isn't good.

Zions also seems to have become the FDIC's local go-to guy for buying up problem banks, Silver States being the latest example. The FDIC's demands for those services are about to go up, and the value of the takeovers is about to go down. I'm wondering if Zions will find a way to just say "No."

Finally, Zions has engaged in some creative accounting, as evidenced recently by its having to pull off-books investments back onto the books. How can I tell what its liabilities actually look like?

If you aren't going through an analysis like this, you're asking for it. It simply isn't simple any more.