This Mammoth Real Q&A appears in the Labor Day Weekend 2018 issue of The Sheet
Q: You are always bringing the local government aspects into your real estate discussions. Do most property owners including the second homeowners, and the real estate buyers, really care about what the local government is doing?
A: Based on the feedback I receive, they do. And the answer is simple; they should, and if they don’t they are truly naive. And they may end up regretting it. The problem is that most people’s lives are so busy that it is difficult to pay attention or do anything beyond being minimally informed. And many simply don’t like politics, especially in this day-and-age.
There has been a one direct intersection between real estate and our local government. There is a long history of real estate brokers occupying Town Council seats and the various commission seats and even County Supervisor seats. But they have always been a minority. And it isn’t for the money. It is a giant time suck that displaces work and recreation time. And more than one has walked away frustrated (or worse).
Besides the real estate industry (and our clients) needing representation in public matters, these people do care about the community. The decisions made at these various levels of local government can affect the whole gamut of property owners, from major developers to small condo owners. And the Town staff doesn’t always (or often) see things the way we see them.
Us real estate brokers are also business owners (as well as property owners). The property owners and business owners are the ones who are truly invested in the community. People who are invested in the community need to pay attention. We can win or lose based on decisions that are made. And over the years not all of the public officials have been truly invested in the community. The same with Town staff. Being truly invested in the community rather than just trying to enhance one’s resume can make a big difference.
On the other hand, second homeowners typically can’t vote or have the time and presence to influence the public officials or staff. But some do pay attention and try to express their opinions or share their wisdom. The fact they can’t vote locally is classic “taxation without representation.” And they rely heavily on news outlets like The Sheet and miscellaneous newsletters for information. I can’t imagine many of them have the time to watch the meetings online unless there is something very specific they are interested in. The real estate industry needs to look out for their interests
So how does this equate to anything with real impact? The classic example of cause and effect in our little corner of the world is what I call the “BK Effect.” The Mammoth Lakes “bankruptcy” circa 2012 occurred while many California real estate markets were rebounding. Yes, there were still plenty of foreclosures/REOs and short sales going on, but the the overall economy was picking up. Those who could purchase were out gathering up real estate bargains and there was synergies showing in the markets; buying, improving, financing, selling, more buying, more improving, and so on.
Today, many California real estate market values meet or exceed the peak values of 2006. But Mammoth hasn’t rebounded to those 2006 peak values. We run roughly 70-80%. This is quietly profound. There are still transactions today here in Mammoth where owners are selling for six-figure losses (I just closed one). Their purchases were at those peak market values and they have held on for a long time hoping not to take the financial and emotional loss. But the real question is; Why haven’t the values rebounded? Some would argue that the drought of 2012-2016 was to blame, that snow is driver of Mammoth’s real estate. But other recovered markets have had their serious challenges too, whether it be fires, earthquakes, crime, water shortages, etc..
In the current age of information overload and Google searching, the Mammoth Lakes bankruptcy still looms large. We were front page news all over the place back then. And even today, legal scholars and city government wonks are still writing papers about it. It was a textbook municipal catastrophe. It was and remains a black eye. I get questions about it to this day. Many outsiders think the Town actually completed the bankruptcy process. Ultimately, it raises big questions about the competency of the Town’s ability to govern, both from the public officials and Town staff. And I have no doubt it has turned away potential buyers and compromised a variety of investments in the community. Just like the media hysteria about earthquakes, volcanoes and hantavirus.
The Mammoth BK Effect is for real. For some it has provided opportunity and it still does today. It has suppressed values and kept Mammoth somewhat “affordable.” Especially in this new Airbnb era. For others it has left them “underwater” or very short on their Mammoth investment. Many feel they can justify being annoyed (and they won’t be back). The more analysis someone does (and they do), the worse it looks. It doesn’t instill confidence. But then again, isn’t Mammoth “Just For Fun.” That’s what the marketing department tells us. But taking big losses, even through a full market cycle and with inflation, is no fun.
Beyond cases like the unfortunate bankruptcy calamity, the local government officials can impact real estate values and usage in many ways. They always have, and they always will. So again, property owners need to pay attention. They continually promote new taxes and bonds that increase the cost of ownership. They affect usage and create more expense in the name of health and safety. They have little concern for “quiet enjoyment.” The over reach can be incredible. None of us who are invested can be “too busy” not to pay attention.
Here in Mammoth, better and good economic times have put our local government agencies on a continual tax and spend trajectory. From Measures R and U to TBID to the recent $100 million school bond (that includes the interest). Now we have a proposal to increase the bed tax to pay for the new Ice Rink/Summer Day Care Center (aka MUF). What other “bold” actions will be necessary to prove Mammoth is committed to becoming a real destination resort. Subsidized airports at Mammoth and Bishop? Meanwhile the local real estate continues generating the precious bed tax (TOT) that keeps the Town afloat. And right now, fat and happy. You would think the owners of local real estate would have some respect.
But good economic times often produce bad decisions. And good economic times cycle with bad economic times. We’ve seen it so many times. And conversely, many good decisions come out of bad times.
I often think back to the early 1990’s when the North Village Specific Plans were being sorted out. We were trying to merge 38 different property owners into one new zoning area and vision. Rusty Gregory was leading the charge back then too.These were some very invested property owners and business owners. And some really dyed-in-the wool Mammoth old-timers. I was often told that it could never happen because of all the personalities, the egos, the friction points of the past, etc. (it made for some very long public hearings).
But the local and state economy was so bad from years of drought and military base closings and recession that all the parties had no choice but to come together. And it ultimately paid-off very well for most those owners. At the time, many in the community doubted whether a unified village could ever rise out of those properties. But it did. And it has proven to be a good decision.
In hindsight though, the bad decisions of the Village came about in the very good times (2000-2005). And the “risk” in the Village development was spread out over hundreds of small investors (the condo hotel owners). And for many it didn’t work out so well, resulting in foreclosures, short sales and six-figure loses.
The fractional real estate projects (80/50 and Tallus) brought forward in the mid-2000’s were more bad decisions made in good times. And if you really want to reel the history clock back, so was the Sierra Centre Mall (1981). Imagine developing a 60,000 square foot mall and opening your own three restaurants and various retail stores all at the same time. All as the local goldilocks economy was about to crash. Nearly 40 years later they are still trying to figure out how to make it work.
Investment in the community should make you pay attention. It is often why we see those that are heavily invested in the community attending meetings and standing at the podium. And the longer you have been invested in Mammoth, the more you make light of those who find the need to be “bold” for the sake of justifying outrageous, never-seen-before public expenditures. Mammoth’s history is littered with bold moves that have failed miserably.
One other notable concern about our local government; increasingly, these public positions are creating conflicts of interest and they can’t be ignored. California law is rather clear on conflicts of interest. Mammoth doesn’t have a good history of self policing these conflicts of interest. It is rather unfortunate. Every public official needs to file with the California Fair Political Practices Commission and attend ethics training. But as someone close to me once said “you can’t teach ethics.”
And I’m seeing plenty of younger local residents purchasing homes and opening businesses.They are “going for it.” Some are making substantial investments and taking significant risk. Hopefully they are calculating the increased costs of owning and operating. Including the continual burdens placed on them by the local government. At some point they will be compelled to active engagement. The sooner the better. Their time will come when they will need to be influential. They won’t want the “old guard” making decisions.
But I don’t see the younger generations excited about going to the standard, stodgy public meetings. The proposition is that they prefer the settings of coffee shops and microbreweries. Maybe the change of venue will get them interested.
Happy Labor Day!