Interesting to see the effects and to some extend, the lack of effects, on this small town. Obviously, there’s no guaranties how it would work elsewhere, but it’s an interesting case study of one that has been there for years.
Jackye Berger’s Passing
Easterday Construction lost another of its third generation last week. Jacquelin (Jackye) Berger passed away Monday evening, February 9th, after the long good-bye of Alzheimer’s disease. You can read her obituary here: https://mountainviewfuneralhomeandcemetery.com/obituary/jacquelin-jackye-berger/
While never an actual employee, Jackye was an integral part of the ECC supporting cast. She would run errands, pick up supplies, help with entertaining clients and hosting company gatherings. While Larry Berger ran the company, Jackye was a stay-at-home mom. Larry was fortunate to be able to walk home for lunch most days, so he was able to spend lunch hour breaks with her. She served as a reassuring break from what was often a stressful job.
As outlined in her obituary, Jackye was also very involved in her community, volunteering and and serving on multiple boards and service entities. Her willingness to give of her time, knowledge and talents had an outsized effect on the Culver community.
Alzheimer’s is a horrible disease and the ECC family was saddened to watch her decline.
There will be a Celebration of Life this Summer when Larry returns to Culver, date yet to be determined. For those so inclined, her family requests in memoriam donations to the Alzheimer’s Association.
Arbitrary and Capricious Fees
I just received the billing for this year’s Fire Protection Sprinkler System fee for Sand Hill Farm Apartments in Culver. I have discussed this fee here and here in the past. Despite protesting the initial basis for this fee, and the proposed increase during budget season, an 83% increase was passed.
The previous cost, $1,203.81 + sales tax was excessive and unjustified. The 83% increase to $2,198.98 + sales tax is nearly twice as onerous! There is no inspection or scheduled inspections, no maintenance, and no record-keeping. The only justification given is the cost of bringing water to the site, which the municipality would do anyway for residential service. Reasonably, water usage for a fire in a building with sprinkler system would be significantly less than that used to fight a fire using traditional methods, since fire sprinklers generally put out the interior source before the building is engulfed. I’ll just skip over the whole idea of why there’s sales tax applied, other than to ask, what is being purchased?!
In the United States we have a generally progressive income tax system where individuals are taxed more when they make more. Conversely, we often have regressive fees that disproportionately hit the lower end of the income level. Culver’s Fire Protection Sprinkler System fee is an example of a regressive fee. There are not that many buildings with fire protection sprinkler systems in Culver, but those that do have it vary widely in size. A one-size-fits-all per building fee doesn’t take this into account. Of the buildings being affected by this fee, five of them are residential and subject to some form of rent control. Since there was a rather large rate increase to the water bill passed at the same time, this puts these lower income residents subject to a double hit.
Culver recently adjusted building permits. They were changed from a because-we-can high rate to a cost-of-service rate, justified by time tracking completed by the Culver Building Commissioner. This is a much more reasonable and defensible way of determining fees. If this were applied to the Fire Protection Service System fee, it would likely be zeroed out.
In the current Town Council’s defense, the water service fees have been left unchanged too long across the board, resulting in a larger than average increase. The blame for that lies on previous councils. That said, it’s not appropriate to hit the most vulnerable in the town’s population with an extra fee just to save a few cents on everyone’s water bills as the new fee structure is rolled out.
All the Talk of Housing Costs
I listen to all the talk on how to reduce housing costs from government officials and am amused and disheartened by the lack of industry involvement and thus understanding of the industry by those proposing cures. Much of the discussion is similar to the other conversations on inflation. (I gave some thoughts on inflation here.) Locally, I have been involved with Jack Davis’s Faith Based Housing Committee, the UWMC Housing Matters group, MACOG’s Marshall County Housing Study, One Marshall County’s Housing & Infrastructure Committee and the newly formed Marshall County Community Development Corporation (MCCDC) of which I’m a board member. Back before this I was on Culver’s Entry Level Housing Committee and the MC Crossroads Housing Committee. In all of these meetings, I can only name one other person from the construction industry, no others from the development industry and only a two or three from the rental industry that have been included. The unfortunate thing is that the industry has been blamed in some of these meetings, making it harder to ask them to consider participation.
The general theory is that the reason for the higher housing costs is all due to scarcity. The study done for the Housing Matters group came up with a deficit of 1,300 dwelling units for Marshall County. There is no doubt that scarcity is a factor, but more housing isn’t the panacea. Assuming costs are totally contingent on demand assumes that housing building contractors are taking advantage and price gouging because they can. In most situations, that is not the case. There are underlying inflation costs that have caused material and labor costs to spiral up. This is a problem that travels up from the bottom of the material supply chain. At a certain point, if demand starts to be satisfied, the incentive to build new housing goes away.
There are couple of other effects that seem to be overlooked. The first of these is the increase in property values. It is often stated in these meetings, that more new housing will make existing housing stock more affordable. Sounds good right? Until you’re the existing homeowner hoping to profit from your home sale. If some of these plans are successful, some who have counted on their home’s value appreciation will see a reduction in their net worth. The second effect is how this will affect property taxes for the county and municipalities. These governmental entities, while understanding the challenge to potential homeowners, have benefited from the increase in property values. While this is tempered by homestead exemptions, it has still been a net benefit as commercial residential property is affected as well.
The bursting of the housing bubble in 2008 has contributed to this problem as well. As so often happens, the pendulum has swung from the easy credit days back then to credit tightening to theoretically prevent another bubble. Homeowners need to show more steady income. Commercial residential developers/builders have to do the same, meeting a higher income to debt service ratio to satisfy lenders.
Add to these things, all of the new energy codes, safety standards and zoning hurdles and you find that building new homes is not always an easy prospect. Locally, there are attempts underway to start a land bank, streamline processes and in some cases provide short-term, low-interest loans. On the national scale, there are ideas bandied about such as 50 year mortgages, releasing government land for home construction and making down payments on a home something you can take from and/or hold in your 401(k) plan. All are interesting ideas, but not necessarily things that will make an immediate difference or be proven to be correct responses quickly.
I don’t see this problem going away quickly. Some of the “solutions” may result in unintended consequences. As is often the case, it may be best to let the market figure it out over time, but to the extent that it can be solved externally, I don’t think it will happen without all the players around the same table.
Exit Interviews for Businesses
Brandy Pohl announced the closing of Max’s Playhouse late last year. We worked with Brandy and her Architect, SRKM Architecture, on the remodeling required to bring the buildings up to early childcare standards in 2019-2020. (See this 2019 post after getting BZA approval.) We completely changed the look of the old duplex to give it a modern, clean, professional feel. We became friends and her business journey has been of interest to me. No one can accuse Brandy of not being passionate about her business and childcare in general. It was sad to see her journey in Culver end the way it did.
Brandy posted an offer to explain what transpired, causing the business model to fail, to anyone interested. This was to tell her story about why she closed, how she got to that point, and how she saw that affecting Culver. Only three people from Culver responded and in the end, only two of us showed up.
I am not going to attempt to tell Brandy’s story. It is hers to tell. But what struck me is that this isn’t a story about just a failed business. She has other similar businesses that are successful in other communities. This is a story of a business that couldn’t make it in Culver… A business that was struggling and, openly and publicly, questioning its ability to continue in Culver, while posts on Culver’s list serve, TGL, were asking for additional childcare facilities.
This was a somewhat unique opportunity. Unless there is a public statement about a retirement, most businesses close quietly. Business failures, even when beyond the owner’s control like this one, are hard to talk about. They usually involve financial costs and sometimes worse, like in this case, shattered dreams. I was disappointed there were no elected officials that took Brandy up on this. (Marty Oosterbaan was there from the CRC.) I’m not privy to whether they have met privately with her, but this seemed like a forum where they should have been represented. This was the chance for a rare, business exit interview.
The town is embarking on a new downtown redevelopment study. As I understand it, this is geared towards several goals, two of the most prominent being; 1) filling vacant commercial buildings and 2) preparing existing and new businesses to serve the growth expected from The Dunes development. Bringing in new businesses is much tougher than supporting existing businesses, and while not directly in the downtown target area, Culver just added another business vacancy with the loss of Max’s Playhouse. There doesn’t seem to be a question that this was a needed service.
I’ve learned from Brandy that childcare is a difficult business in Indiana. Unlike what we are hearing about the Minnesota debacle, there is excessive oversight paperwork, with many standards to meet. On top of that, it would appear that the rules change, at a minimum with every administration, but in general every year or so. That’s a tough model within which to work.
I would suggest that Culver could work on some form of business exit interview strategy. You would hope that there is communication before it comes to the point of a business closing, but if not, there should be an attempt to learn from any turnover happening. This could be something that the new consultant helps develop. Having the consultant do some of these along with a town official could provide valuable insight. A perfect example: How valuable would it be to the NFP group trying to revive the theater to know the personal and financial challenges that caused the theater to close? Others that fulfilled a perceived need that would merit a conversation, would be: 1) The Bennett family, who recently closed a second generation contracting and appliance business, 2) Don Baker, who ran a bicycle shop (Which seems like a natural fit with the push for trails and other outdoor recreation.), 3) Kyle Pugh, who ran the Axe to the Max axe throwing venue (Another entertainment venue that is a perceived missing piece in Culver.), and 4) George & Tammy Pesek, who moved the Evil Czeck Brewery (Another popular request.) and the Corndance to South Bend.
In the past, MCEDC has helped fill this role with their BEAR (Business Expansion And Retention) interviews, but MCEDC’s focus is more industrial. Also, when interviews are conducted, they need to be done in a friendly, open manor, rather than accusatory. Town officials can’t be offended when shortcomings are pointed out. Often, to the town’s credit, some of the shortcomings I heard turned out to be communication issues not actual deficiencies, i.e. there was a program or other service available of which the business was unaware. Culver generally does a good job of communicating, but respectful non-defensive listening is a part of that.
In whatever format, asking what businesses need in order to thrive is never a wasted effort, but it can become wasted if there is no follow up. In most cases, the exit interview is too late, but ongoing conversations could help eliminate the need for them.