The Future of Alternative Energy

Solyndra (the solar energy company–website here) and the federal government’s loan guarantees have been in the news recently.  Some are taking this as a debunking of alternative energy as a source of electricity.  We at Achievable Solutions, Inc. remain positive on alternative energy, especially biofuels, as a part of West Central Florida’s economic development future.  We are not able to calculate a way to make wind or solar economically efficient out 5 to 20 years, but we can most assuredly put together a package of fiber-to-biofuel that competes favorably with clean coal for electrical generation.

The Solyndra case had three problems that are not shared by biofuels:

1.  Solyndra was facing cut-throat competition for their product.  Competitors were able to successfully undercut their prices.  The advantage of biofuels for the time being is that they are unique products that have to have custom designed biodiesel engines for that particular product.  You can’t just substitute one product for another in the generator, you have to completely redesign it to accept a different product.

2.  Solyndra was relying on government loan guarantees.  This is one of the worst government economic development products there are:  it socializes the risk, but leaves the profit in the hands of the entrepreneur.  Where was the up-side for the federal government, here?  And where was the down-side for the investors?  Who can make a rational economic decision if they get all the benefits, but someone else pays all the cost?  Not that I can blame Solyndra for taking the guarantees, I must say.  However, if a government wants to become a Venture Capital firm, then it needs to follow the model of successful VC firms and take a significant portion of the profits.  The companies we work with on biofuels do not rely on similar incentive products:  yes, it often takes relief from property, tangible property, and corporate taxes to make the final product profitable, but that’s what’s offered to any firm moving or expanding operations in a community.

3.  From a power capacity perspective, biofuel-generated electricity is a more reliable product.  Solar (and wind) is limited to certain times of the day, week, and year that it can generated electricity;  a biofuel operation can operate 24 hours per day all year long at a constant output leading to more efficient capitalization of the investment and more reliable capacity.

By the way, if someone can demonstrate a viable solar or wind plant that does not require heavy subsidies (ones I’ve seen need some multiple of the negotiated power purchase agreement price), we are ready to find a location for you.  Contact us at 352-527-9003 or by email at tellmemore@achievablesolutionsinc.com.

At the end of the day, no matter what happens with Solyndra and solar energy, in general, municipal waste to energy and wood waste to energy appear to us to be very good products with a bright future in Florida.

Tax Breaks for Restaurants?

From the Orlando Sentinel:

Towns offer tax breaks to lure Darden restaurants

How much is it worth to bring an Olive Garden to your town?

In Decatur, Ala., the answer is almost half a million dollars. In Bristol, Va., it’s $350,000.

Expanding in a shaky economy, Orlando-based Darden Restaurants is pursuing tax incentives from cities and counties to build new Olive Gardens, Red Lobsters and LongHorn Steakhouses.

This is an interesting trend.  I’m unaware of any such incentives in West Central Florida, but there could be some municipalities interested.  From a global perspective, this quote is correct:

“More people aren’t going to eat out if Darden gets this tax credit,” said Randall Holcombe, a Florida State University economics professor. “The result will be giving the Darden restaurants a competitive advantage over other restaurants.”

There’s no real economic development associated with a restaurant–it’s a nonbasic good at the community or regional level.  But, and here’s the crux of the matter, it may actually be a basic good at the level of the municipality!  And if that’s the case, it might make good fiscal sense to give the incentives.

Let’s take a step back and define the terms:  a basic good is one which is exported from the region, or one which brings dollars into the region; a nonbasic good is one which is paid for by locals.  So, typically, a manufacturing plant is basic:  it exports its output, bringing cash into the community.  The bar outside the plant is nonbasic:  once the employees get paid from the exports, they go across the street and waste their earnings on booze and loose women.

What is “basic” and what is an “export” varies with the scale of the community:  what is “nonbasic” to the State of Florida might be “basic” to a community–the University of Florida, for instance, is nonbasic to Florida, but basic to Gainesville.  The same is true at the county level and the municipality level.

So, a new LongHorn Steakhouse might be a nonbasic good to Lake County, and I would think the Lake County Economic Development staff would think you daft if you asked for a subsidy for one.  However, the specific site location of the new LongHorn could be anywhere along US 441 and it is a basic good for whichever municipality it winds up in.  Whether Leesburg or Tavares or wherever gets that tax revenue and those dollars being spent is relevant to those city councils.  I think it could be rational for Tavares to offer a tax refund for a restaurant in such a case.

Still, it sort of sticks in my craw as a concept.  This just cannibalizes neighboring communities, leading to no new economic activity in the end, really.  Good economic development needs to be a regional effort and shouldn’t lead to disagreements within your Chamber of Commerce.  Economic Development is different than business boosterism, but it should also be complementary.

State Surplus Land

From the Citrus County Chronicle:

Farmers discuss state land sales

Representatives of Citrus County’s farming community are cautiously welcoming talks by the water management district to consider selling government-owned property — so long as it doesn’t mean the lands will be cleared for development.
Members of the Agricultural Alliance of Citrus County on Monday discussed an announcement that the Southwest Florida Water Management District will review about 30,000 acres of district property in the county to see if portions should be sold.
Gov. Rick Scott has mandated the five water management districts review their holdings to trim off lands not needed for conservation.
Agricultural Alliance members said they support returning government-owned lands to private ownership in some cases, but stressed land once set aside for agricultural or conservation purposes should stay that way.

On invitation by the Chairman, Dale McLellan, I attended an Ag Alliance meeting for the first time yesterday.  My interest is in finding ways that industry and agriculture can work together, especially by finding industrial uses for agricultural waste products.

I was impressed by the breadth of knowledge represented in this group.  Cooperation between the Ag Alliance and the EDC will be useful in the long run.  This group clearly understands the importance of regional cooperation and not only should we be able to leverage our membership in the Tampa Bay Partnership in their favor, but we should also be able to leverage their personal connections with farmers, ranchers, and landowners elsewhere in the Partnership as well as in Sumter and Lake Counties for the benefit of all businesses.

On to the topic of the post:  The Governor continues to retrench the Water Management Districts, this time by trying to return some public lands to private ownership.  Most of these lands were purchased over the years for water conservation purposes; however, some include areas that serve no water conservation purpose, but were part of an acquired parcel or were a gift during some DRI negotiations or something like that.

I remain ambivalent about the Governor’s plan:  on the positive side, getting some economic return out of some of these lands is a plus.  Citrus has somewhere on the order of half its land area under federal, state, or local government ownership.  That’s a pretty big chunk of the county just taken out of the economy, for the most part.  It’s also the case that SWFWMD is not a land management agency and owning so much land really takes them outside of their core mission:  water resource management.

One more–I hate to even broach this since I’ll be called the D-word (as in, Developer, probably with some epithet attached that is inappropriate for this family-friendly blog), still–as important as they are ecologically and environmentally, the amount and the distribution of these lands really inhibits retail trade and accessiblity in the county.  I know there aren’t many SWFWMD properties that will make much difference here, but there are considerable Withlacoochee State Forest properties along SR 44, CR 491, and CR 581 that serve little ecological purpose, are difficult to manage by the Division, and could be appropriate for commercial and/or residential use.  And what about another east-west connector connecting Homosassa to the east side of the county, maybe along Trail 10?  That would shave 5 to 10 minutes off my journey to the Freezer!

On the negative side, these lands were purchased for a purpose and we need to make sure that making them surplus does not undermine that purpose.  Also, this might not be the best time to dump a bunch of land on the market.  I’m no fan of the government buying or holding property to “stabilize” (read:  inflate) prices, but I also fear the disruption that a new several thousand acres might have on the real estate market in the short-run.  Oh, yeah, I forgot to mention that all these lands have had their development rights basically removed on the Future Land Use maps, so any future buyer will have to deal with an unsuitable land use category.  That’s not a problem for most agriculture or if you want one house on a quarter section, but any more intense use will require a land use change.  That’s good for Achievable Solutions, Inc–we’ll be happy to help you make that application, just call us at 352-527-9003–but maybe less so to any prospective purchaser.

Finally, I know the politicians would like to see some of these lands back on the tax rolls, but that’s of less interest to me:  the fiscal effect will be minor since as conservation lands, they demand few to no services; so, you don’t get any tax revenue for them, but you really don’t pay anything out for them either.  And this could be a real disaster for the county fiscally if they aren’t careful.  I’ve been talking quite a bit to the Property Appraiser, Geoff Greene, and to Avis Craig in his office about the fiscal effects of different land uses, we’ll eventually need to do a real study of this, but right now we’re estimating that residential uses cost $1.11 in services provided for every $1 collected in taxes.  It’d be a downright shame if, in order to increase tax revenue, we built a bunch of houses that end up costing more than they pay.  As the old joke goes:  “Oh, that’s okay, we may lose money on each one, but we make it up in volume.”

And this brings me back full circle to the Ag Alliance.  Agriculture has the best opportunity to provide a reasonable transition for these lands.  Farmers, ranchers, and foresters are excellent land managers.  Agriculture demands very little in the way of public services (a Colorado study I’ve seen estimates it at $0.35 for every $1 paid in taxes).   And agriculture has significant linkages and spillovers into other industries, so it makes for good economic development.

Now if we can only convince the state to do this right . . .

Slot machines in the Nature Coast?

In this morning’s Orlando Business Journal:

Florida could approve slot machines

A 1st District Court of Appeal ruling allowing slot machines at a race track in Hialeah could allow lawmakers to OK slots anywhere in the state, reports Florida Today.

It appears that a county referendum would be required, but this ruling opens the door to the potential for slots in West Central Florida.  Full casino gaming is still somewhere down the road, so there will be no Hard Rock Casino in Brooksville.  However, there’s room for some type of gaming in Ocala, Wildwood, or Wesley Chapel, I would think.  A resort-type hotel with slots at a high-level golf course along the Suncoast Expressway might also be a possibility.

Manufacturing and West Central Florida

I was pointed to the following article:

Does Florida want manufacturing in its future job mix? It better

Some excerpts:”This economy cannot come back based on home construction,” Peck says. “It’s got to include manufacturing.”

“Manufacturing is a significant provider of high-wage and high value-added jobs in the state; however, Florida is lagging behind in manufacturing investment due to significant, identifiable barriers.”

The report warns that Florida has the lowest per-capita capital expenditures on manufacturing among the 12 Southern states. It is losing to competing states in capital investment in manufacturing.

With double digit unemployment and no real economic base to speak of, West Central Florida needs to focus on manufacturing as a replacement for lost construction jobs.  This isn’t the whole answer, but it is definitely a part of the solution.

The I-75 corridor through Hernando, Sumter, and Marion counties makes perfect sense for some industry clusters.  While Hernando has done a good job of leveraging its airport for industry, a lot more potential is there.  Outside of mines, nobody has yet taken advantage of the Crystal River power plants in Citrus–I’m thinking electricity-intensive industries for whom the state offers significant tax breaks.  And Sumter is perfect for industries needing extensive land.

Done right, this could all leverage the coming Ocala Inland Port and the potential new barge port in Inglis for some serious economic development potential.

Now, how do we get there?  This requires significant regional cooperation.  It also requires flexible investment in infrastructure–roads, water, sewer, stormwater.  Don’t pick the location, sink the costs, and wait for them to come; instead, find the industry and offer to extend infrastructure to the site that works for them.

We all need to remember that we’re not competing against each other; the success of one part of this region means success for the whole.  Manufacturing facilities in Wildwood will employ people in Inverness and Leesburg.

HT:  Teddi Rusnak

Whither the NASA employees?

A little far from West Central Florida, but of interest to the region.

From the Orlando Sentinel:

Former shuttle workers face uncertain future

NASA officials predict the KSC work force will number roughly 8,200 next year — about half the 15,000 employed there in 2008. A few hundred contractors now are giving the shuttles last rites before they, too, join their former colleagues in a brutal job market.

This is an opportune time for someone interested in aeronautics to find some high quality, highly educated, highly skilled employees at a bargain price.  Ocala or Brooksville might be close enough to allow the least mobile of these employees to stay in their homes, but help someone build a business west of Orlando.   I have no real knowledge of this industry–maybe there are thousands of qualified people in the field without a job–but I’d think there’s an opportunity here for someone with a product to build.

Welcome to the Achievable Solutions, Inc. blog

We created this blog to provide information about our company, our clients, what we’re doing and thinking, and what’s happening in the development community in Citrus County and the rest of West Central Florida.

A little bit about Achievable Solutions:  We’re a planning and economic development company based in Beverly Hills, FL.  We assist companies looking to relocate, expand, or redevelop property.  Our goal is to bring your project to completion.  If you’ve had problems with finding the right location or with getting your project permitted, we can help.  We’ll work with your existing engineer, architect, broker, or general contractor to get your project approved, permitted, and under construction.

We provide a free consultation to evaluate your situation and offer solutions.  Just call us at 352-527-9003 or email to tellmemore@achievablesolutionsinc.com.