The year 2008 was one for the record books.
Record property depreciation. Record home foreclosures. Record unemployment.
Southwest Florida's economy suffered major declines with Cape Coral at the epicenter of the financial implosion of the real estate boom's house of cards.
Few among us have been untouched as the year revealed a harsh economic reality to which we thought we were exempt: Booms are followed by busts.
Historians probably weren't too surprised.
For the rest of us, that intrinsic truth came as a shock as not even the most financially savvy among us foresaw the literal loss of all the boom-year economic gains - and more.
Agree? Disagree? Comment on this editorial opinion.
As 2009 gets under way, it's a good time to ask, what path led us to the plummet of 2008? And more importantly, what reparations do we need to make to get on the road toward long-term economic stability?
For make no mistake, recovery will be neither easy nor cheap and, if 2008 was the year we paid for past mistakes, 2009 needs to be the year we begin investing in our future.
Sunshine and waterfront aren't enough
For years, Cape Coral pushed the growth curve in Lee County by riding the wave created by its natural amenities: great weather and miles upon miles of canal-front waterfront second to none in Southwest Florida. The kicker? The American Dream was cheap. Cheap to buy. Cheap to keep as taxes were based on those bargain prices.
The demographic mocked as the "newly wed and the nearly dead" - first-time home buyers and, especially, retirees - moved here in droves, fueling the city's primary economic driver, real estate and construction, at a steady pace.
The real estate boom, a veritable speculative tsunami, blew these prospective buyers out of the water.
With basic three-bedroom, two-bath "starter homes" reaching a quarter-million dollars, first-time buyers couldn't afford them.
And, as pricing and the "cost to keep" became noncompetitive, retirees didn't want them.
Due to spiraling taxes, Florida was already sliding from its position as a top move-to state even before the building collapse as retirees discovered more fee-friendly states that let them keep a little more of their hard-earned green.
Lesson learned: Don't kill the golden goose or, in this case, the silver snow bird.
Florida, by implementing the new tax cap for non-homestead properties last year, recognized too late the importance of keeping taxes down to keep part-time residents investing in second homes. Now local governments need to do their share of reparation to lure these buyers back. Wiggling around the tax cap by shifting the cost of services now paid for with property taxes into special districts and "assessment" levies will not foster recovery. Tax shuffling will only serve to keep government salaries and benefits fat.
We urge the Cape Coral City Council to resist this quick revenue fix in '09 and focus on the long-term. That means making our tax structure attractive and our homes "cheap to keep" for those who can - as we have learned - invest their money elsewhere.
It's the recurring costs
that will come back to haunt you
City tax rates went down in the boom years.
Unfortunately, taxes did not.
Property taxes doubled or tripled for anyone not protected by the Save Our Homes cap - lot owners, landlords, investors and, most importantly, new home and second home owners - because local taxing authorities across the board raked in the tax windfall wrought by hyper-inflated prices.
Some of this money went to pay for growth and was allocated to things like additional police officers and firefighters, and fire stations in newly developing neighborhoods.
This was a proper use of the additional revenues.
Unfortunately, far too much, though, went to raising salaries and adding benefits - including new union contracts even as the bottom was falling out of the city's revenue structure.
Consider: Cape Coral's General Fund, the fund out of which government pays for most of its operations, including salaries and services, grew from $87,554,697 in fiscal year 2004 to $170,994,585 as amended for 2007.
Much of the revenue came from property taxes, property taxes based on speculator-driven valuations that no longer exist - and aren't coming back any time soon.
The city has cut some costs through attrition and buyouts but double-digit raises, much higher starting wages for core positions and better benefits linger like the ghosts of Christmas past.
Lesson learned: Don't mortgage the future based on paper profits and the expectation of more of the same.
In the private sector, that's called a Ponzi scheme. In the public sector it's called a "revenue shortfall" and you get to go back to the investors - read taxpayers - for more.
Those of us paying the freight are not fooled.
Reparations for 2009? On the personnel side, it's consideration of some of the same things the public sector has been doing for the last year or more - wage freezes, salary cuts for the top brass, elimination of uncontracted perks and contract renegotiations. Then add in a sharp look at any program or department that does not directly contribute to core services or provide a quantifiable bang for the buck spent.
It's a tough approach but paybacks are seldom painless. Make cost contraction a priority for 2009.
A community's primary industry is not called its economic driver for nothing
Like a well-monied hubby with a wandering eye, Cape Coral lost its passion for its long-time economic partner, the housing industry, during the boom years.
"Diversification" became the sexy new buzz phrase, and the courting of new industries got the bulk of the economic development dollars.
Meanwhile, even the city's most vigilant anti-tax watchdogs bought into the "growth-must-pay-for-growth" rhetoric. The result? Higher fees as a cost of doing business in Cape Coral with yet another impact fee increase proposal in 2008 although construction had come to a virtual standstill.
Lesson learned: Realtors, developers and builders are not the evil axis. Collectively, these industries are our economic driver and the bedrock of our employment base.
When the final numbers are in this month, it is likely that unemployment will have topped 10 percent in 2008. This unprecedented number still will not reflect the real picture as many workers, especially in the construction sector, have fallen off the unemployment rolls, have moved to areas where work can be found, or never qualified in the first place due to previous self-employed status.
The domino effect has been devastating, affecting virtually every business in Cape Coral, from shops to restaurants, to chains to small independents.
Few families have not been touched by job loss. Unemployment is the No. 1 fear of many as we enter 2009.
The No. 1 wish is economic recovery and that's going to take some doing.
We urge council, as neighboring communities have already done, to take a strong look at the city's impact fee structure with an eye toward lowering or temporarily eliminating the charges. The fees have long outstripped their initial intent and have become a burdensome tax that can no longer be passed on to homebuyers. The market, quite simply, can no longer bear the add-on cost.
Greed trickles down -
and doing right ain't easy
With big business taking bailouts and big government looking for ways to maintain the status quo, those of us taking it on the chin are not exempt from reparations in 2009.
While many of the home foreclosures in the Cape are a result of job loss and business collapse, many more are the result of speculative excesses and a lack of moral fortitude.
Property owners who took out cash in second mortgages or signed for first mortgages hoping to "flip" the home for profit before they had to pay are as much to blame for the foreclosure morass as the greedy lenders who forgot their fiscal responsibility to their shareholders.
So are business owners and individuals playing bankruptcy loopholes to wash away debt and credit card balances they still could afford to repay by adjusting lifestyle expectations.
So are government employees who "retire," take large pension settlements, and then return to full salary paid by the taxpayers.
This smash-and-grab mentality from the top down is a primary contributor to the depth of the economic mire into which we have fallen.
The financial question for 2009? It's a tough one, a once-in-generation test of ethical standards: Walk away and add to the foreclosure mess or hang tight and pay for a home worth less than is owed - i.e. get yours while you can or fulfill a legal obligation to a company that likely grabbed theirs along the way?
We'd like to think financial ethics will come back in fashion in 2009, that the majority of us will hang tight, do what's right and not add to the property panic that defined 2008.
Historians can share another truism: Down cycles always turn upward. How quickly that happens depends on us.
To 2009. May the new year be better than the last.
- Breeze editorial