web analytics

Growth Monitor for Economic Development

Tracking the issues, programs, incentives, tax matters, and "lessons learned" affecting local economic development.
California’s Proposition 15 will be a Major Disrupter

SCP’s Economic Growth Monitor


California’s Proposition 15 will be a major disrupter to commercial and industrial real estate owners in California, if approved by the state’s voters on November 3.   Prop. 15 comes as other California and city initiatives for increasing taxes, are also up for voter approval in November.  A couple of these additional initiatives includes San Francisco’s Proposition I and the state’s AB 2088 that would establish 0.4% tax on wealth.


The ballot initiative is a major challenge to California’s historic Prop. 13 property tax measure approved by voters in 1978, which was later upheld on challenge in the U.S. Supreme Court.


The ballot proposition title reads:  “increases funding sources for public schools, community colleges, and local government services by changing tax assessment of commercial and industrial property.”   On the state’s voter guide website, the initiative is summarized in this way:  “Taxes such properties based on current market value, instead of purchase price. Fiscal Impact: Increased property taxes on commercial properties worth more than $3 million providing $6.5 billion to $11.5 billion in new funding to local governments and schools.”


As with other California ballot measures that would increase funding and spending, there is no safeguard that such increased taxes on commercial real estate owners would find its way to local government or local schools.


California’s proposition 15 will be a major disrupter in several ways.  First, commercial (shopping centers, office buildings, etc.) and industrial real estate owners would see a decrease in the cash flow and value of their properties.   This would mean a direct deleterious impact on the resale value of their properties.  Conceivably, some property owners with long-held properties may need to sell if their new property tax assessments prove to be onerous.


Second, for any commercial real estate held on a NNN (so-called triple net) basis, typically retail and restaurant tenants, this property tax increase would be directly passed along to such tenants as their responsibility.   Presumably, these retailers and restaurants would then attempt to increase their prices to consumers, an unintended consequence and example for how California’s proposition 15 will be a major disrupter.



California's Proposition 15 will be a Major Disrupter, if Approved

California’s Prop. 15 could be a major CRE disrupter if approved by voters in November.


ACE Act for conservation
Conservation Act Passes Congress, Now Heads to President’s Desk

SCP’s The Growth Monitor


In a bi-partisan vote, a next conservation act has passed the U.S. Senate.   The unanimous vote in the Senate pertains to America’s Conservation Enhancement Act, S. 3051 (the “ACE Act”), a package of natural resource management and conservation provisions.  The House of Representatives is expected to take up the legislation, and vote, as early as next week.


SCP Growth Monitor update on October 1 – the House of Representatives has approved the ACE Act by voice vote; now the legislation goes to the President’s desk for signing.


Consideration of the Ace Act follows passage in August 2020 of the Great American Outdoors Act, widely considered one of the landmark legislative achievements to protect America’s natural environment.


The legislation authorizes the National Fish Habitat Partnership, an endeavor that brings together local, state and federal partners to coordinate and conduct on-the-ground aquatic habitat restoration projects for the benefit of recreational fishing.   The ACE Act also reauthorizes and boosts funding for programs critical to the health of the Chesapeake Bay, the nation’s largest estuary and a critical nursery for sport fish throughout the Atlantic region.


As the bi-partisan Conservation Act passes Senate consideration, attention now focuses on regional benefit.  The ACE Act is expected to be a strong boost to recreational economic development in the region.  The Chesapeake Bay is the largest estuary in the U.S., and is also a critical sportfish nursery for the greater Atlantic region.

Truck Tonnage Declines in 2020
Truck Tonnage Declines in 2020, Through August

SCP’s The Economic Growth Monitor


Truck tonnage declines in 2020 included the fifth consecutive year-over-year decline in the U.S., through August 2020.   Freight transportation is a barometer of U.S. economic health, making monthly truck tonnage estimates a key indicator for local economic development officials.


Trucking represents an estimated 72.5% of tonnage carried by all modes.  According to American Trucking Associations, in 2019 trucks hauled 11.84 billion tons of freight.  The American Trucking Associations is the largest national trade association for the trucking industry.


Transport Topics reports on truck tonnage throughout the year.  Their most recent recap is available here: Tonnage Declines 8.9% Year-Over-Year in August


The American Trucking Associations’ press release about truck tonnage declines in 2020 is available here: Index 8.9% below August 2019.   According to the ATA, the apparent softness in truck tonnage was due to softness in the industrial and energy industries where truck loads are heavier, than any softness in consumer-related loads.   Fleets hauling for retailers reported strong freight volumes.  ATA calculates  U.S. tonnage volumes and index based on surveys from its membership and has been doing so since the 1970’s.

Edge computing is coming to you
Edge Computing is Coming to You Soon!

SCP’s Economic Growth Monitor


Edge computing is coming to you, an essential part of our world of data centers, Internet cloud and the Internet of things.  Since many local economic development professionals are interested in attracting major data center facilities, it is helpful to understand how these edge processing objectives may impact data centers and the rest of the connected data network.


In essence, edge computing is about distributed computing, delivering processing “horsepower” in low-latency situations as close as possible to where it is required.   Also, enterprise datasets are getting huge and there is also a desire to reduce data transport costs.  As a result, keeping more of collected data closer to its source simply makes economic and performance sense.


According to some industry sources, by 2025, 75% of generated data will be processed outside centralized data centers or the cloud.


Edge computing often involves data storage and processing with “edge devices.”  A simple example of an edge device is a router that connects public networks to the internet.  Or, in a finance setting, a smartphone or tablet becomes the edge device.    Edge devices become increasingly specific to particular edge requirements.  In healthcare, edge devices are increasingly deployed as wearable and/or implantable medical devices to support patient care.


Because this computer processing “at the edge” is implied as connected to data networks in the Cloud and in data centers, each edge device carries an implicit security risk.    While the interest in processing power at the edge increases, getting the overall system security design in place is a large open issue.


There are benefits to edge computing in most every industry today.    Network World joined with CIO, Computerworld, CSO, and InfoWorld, have prepared articles to explore “the edge” from five different perspectives, available here:  Edge computing: The next generation of innovation


real estate expert witness - Global Real Estate Consultants
Sovereign Wealth Funds Get Their Test in 2020, Aiding in Covid-19 Pandemic Relief

To be sure, sovereign wealth funds (“SWF’s”) have gotten their test so far, in 2020.  As the COVID-19 pandemic has decimated the global economy, country economic downturns have created possible calls for draws on SWF reserves.  As well, the economic troubles have also hit the investment returns of many of these SWF’s, reducing the projected (hoped for) enhancement of portfolio asset values.   Such a time.


Norway’s GPFG has reported a negative return (loss) of -3.4% for the first half of 2020, a loss of $21.3 billion.   Bahrain’s will draw $450 million from its FGRF sovereign fund to provide funds for the state’s general budget.   New Zealand’s Superannuation Fund managed to achieve a 1.73% return for the year ending June 30, 2020, although since the fund’s inception it has returned an impressive 9.63% per annum.  Iran is using its SWF funds to stabilize Tehran stock exchange.


Generally speaking, these SWF’s were formed over the years to capture current wealth for use by future generations.   A great many of the funds were literal monetization transfer methods, where a portion of national oil and gas revenue (wealth) has been transferred into a country SWF.  Investment from any particular SWF have first been intended to build these reserves for the benefit of those to come.


For 2020, the existence of these SWF’s has been a helpful resource to provide funds at an unusually critical time, to stabilize national economies.    Tapping into held sovereign funds for “rainy day” purposes was always a possibility, but not a welcomed eventuality.  Norway will withdraw a record $37.72 billion from its SWF to address Pandemic impacts to the nation’s budget, and intends asset sales as part of this withdrawal.  Indeed, sovereign wealth funds have had their test in 2020.


Looking forward to the balance of 2020, we shall see how the 2020 pandemic impacts new SWF formations, in Indonesia, Oman, Israel, Mozambique, and South Africa, among other nations.   Within the U.S. and Canada, our many indigenous sovereign Native / First Nations are also facing particular financial stress this year, with operating asset revenues significantly down and available reserves at risk.  In discussions about SWF’s, these sovereign Native / First Nation tribes and pueblos are often neglected.


SWF formation has seen significant activity over the past decade, with just under 100 new national SWF’s getting their start.

Sovereign Wealth Funds Get Their Test in 2020
Dubai Announces Innovative Retirement Program for those Over 55 Years Old

SCP’s The Growth Monitor


Dubai is known for its innovative economic development programs, and with its announced retirement program it has again matched its reputation.   Retiring in Dubai can be an attractive proposition for many given the city’s open-door policy, tolerance, and quality of life.    This particularly economic development strategy successfully leverages existing regional assets with a new target market (retirees).


“Retire in Dubai,” the first of its kind in the GCC region, is being spearheaded by Dubai Tourism in collaboration with the General Directorate of Residency and Foreigners Affairs (GDRFA-Dubai).  Dubai’s program is focused upon resident expatriates and foreigners over the age of 55 who are seeking to retire.   Eligible applicants will be provided a retirement visa, renewable every five years, provided they can meet one of three financial requirements for eligibility.  The eligibility can be based on either a minimum monthly income, savings, or the value of the Dubai owned property.


More details about the program were detailed in an Arabian Business article of September 3, 2020:  Dubai launches retirement programme for over-55s.

Destination Meetings are Starting to Occur Again; Some Lessons Learned

SCP’s The Growth Monitor


Several large conferences, as well as smaller meetings and events, have taken place around the country in a kind of “test case” scenario, according to the online resource BizBash.   Each of the events described by BizBash were successfully produced and with no follow-on COVID-19 cases reported.   Of course, each of the gatherings took place with intense safety measures in place.


These recent events are extremely helpful to economic development professionals around the U.S. and around the world.   Most metro areas count on the meetings industry and its ancillary hotels and resorts, transportation, F&B, and off-site activities, to provide local employment and tax revenues.


Professional meeting planners are quickly adapting and embracing safe meeting practices, and taking advantage of emerging “lessons learned” from first efforts.    With this backdrop we believe that metro areas accustomed to hosting destination meetings, re-starting this important economic activity is possible.


The BizBash article is a must-read for anyone wanting confidence to get their event scheduling underway.   The September 2, 2020 post at BizBash.com is available here: Meetings Are Still Happening Around the Country. Here’s What They Look Like.

DCT Abu Dhabi has Plans for “Safe Zone” Areas to Host Visitor Events

SCP’s The Growth Monitor 


Encouraged by the success of UFC Fight Island, the Department of Culture and Tourism (DCT Abu Dhabi) is planning a “safe zone” strategy for hosting visitor events.   The Ultimate Fighting Championship (UFC) event at Yas Island was a success for Abu Dhabi, which provided for a “safe zone” that hosted approximately 2,500 people over five weeks on Yas Island.


The safe zone program may be an approach for other visitor destinations looking to revitalize their tourism industries.   Las Vegas may have some suitable properties if not areas of The Strip where this could be workable; at this time Las Vegas is seeking to recover with virtually no convention-related business.  A tall order.


A helpful overview of the tourism strategy was provided by Arabian Business in an August 31, 2020 post.

Contact us for more information, we'll enjoy hearing from you.