Our local property values at the bayshore peaked in 2006 and took a big dive since then. (The chart produced by Zillow below doesn’t even show the largest declines before 2011). I’ve worked on a few projects for investors over the years and each is shocked to see the data.
Taking all the available long term data as a whole, it is clear that each event we’ve lived through: the financial crisis, changing government procedures, Sandy and buyouts have all had a clearly identifiable impact on property values here. The more recent sale data swings are interesting and not so easily explained.
The scariest part now is that over 40% of homes have negative equity (compared to 8% nationally), and that’s only on bank loan balances, not unrecorded environmental compliance liabilities that are HUGE in many waterfront properties.
Yet the many challenges bring just as many opportunities. I’ve found that some people are eager to tackle it and others just don’t want to talk about it and prefer to just deny what’s going on. But the smarter investors extrapolate the data to forecast other impact.
Baysave is committed to a plan for 2020 that emphasises activating diverse community interests at Money Island NJ.
GOVERNMENT– After an intense year of dealing with government, we anticipate that government will play a decreased role as we move forward. The board of directors adapted rules specifically designed to avoid the need for government integration and we do not anticipate that government support will the largest factor in future sustainability plans.
DOCKS – We will emphasize the use of the Money Island site as a port for large vessels. The demand is growing and our facilities are less expensive than other options. While smaller boats are welcome here, dry dock is more affordable than boat slips. In general, the cost of boat slips (costs imposed by government, not by us) exceeds the amount that small boat owners want to pay and exceeds the price of other docks in the region. For all boat sizes, we will emphasize long term relationships rather than single season arrangements.
CRABS – Commercial operations will remain in Delaware until New Jersey updates its laws to allow transfer of crab license and the use of online cooperative marketing. We hope to expand support of recreational crabbing with boats and rafts if public interest is sufficient.
OYSTERS – There is growing interest in recreational oyster tonging. We have no specific plans at this time
INVESTORS – Private investments are available. A significant goal is to create long term tax-free investment gains.
CHALLENGES – The largest challenge for founder Tony Novak is balancing the desire to make facilities available to as many people as possible with the need to reduce financial losses. In 2018 the losses to to abuse and vandalism were substantially more than public donations. That is obviously unsustainable. We will continue to try different approaches, technologies and operating practices to deal with these challenges.
Another long term challenge is building engagement with the community. The trend toward depopulation has been going on for decades and now we see only a few people each day. A key to sustainability is connecting with the fewer but more interested individuals who have an interest in the bayshore.
In the realm of ‘firsts’, this was one that I could not have predicted. A surprise phone call came in Friday from our government relations liaison, a PhD with a background in economic development in the office of another PhD Director of Coastal Resiliency at Rowan University.
Government relations and coastal resilience: what a team! That’s exactly the combination we need around here.
It’s not appropriate for me to get into a “he said…” situation in a public blog post like this. But is is useful to say that I am learning about new areas of public policy that were previously invisible to me. The entire topic of what government needs to do in terms of long term planning largely escapes public view. I was introduced to the topics of what is a “win” in the eyes of government, its impact on future elections and even the survival of our economy and society. Simple topics like planning for enough food to feed ourselves is really a big deal. Yet it isn’t something that makes the newspapers every day.
At the end of this call I felt more confident of the role that Money Island will play in the future as the region’s seafood landing port. Many shore towns will need to dissolve: “strategic retreat” is the popular phrase in public policy discussions. Yet some seaports will need to remain open for our survival. We will see a deeper channel for even larger oyster boats. Heavy duty commercial docks for the expanding aquaculture industry are already in the works. Loading dock, refrigerators and freezers need to be upgraded. The seawall project will be continued. We are one of the chosen few ports that will be supported; even at the massive costs required to adapt to climate change and rising tides.
In the end, our tiny rural seafood landing port will see more than a tenfold increase in its economic contribution to the region. Of course, in a long term saga like this most of the story is yet to unfold.
A new article published this week in the Journal of Business Finance and Accounting takes a step forward in the path that has been unfolding for those of us working at the intersection of community projects and private investments. The paper abstract says (emphasis added): “We investigate determinants of investment decisions in investment‐based (equity and bond) crowdfunding campaigns, using a novel investment‐, investor‐ and campaign‐level database, where equity refers to investments in entrepreneurial start‐ups and bonds to large real estate projects. We find that investors who have higher social interactions invest more. Social interactions are important in an equity crowdfunding context but do not affect participation in bond investments. This is consistent with the view that investors’ social networks help reduce information asymmetry. Women invest less in the riskiest (equity) investments but more in safer ones (bonds). These findings are better explained by differences in risk aversion than differences in overconfidence between men and women. Overall, the findings contribute to the understanding of how investment‐based crowdfunding can be a viable source of entrepreneurial finance and how entrepreneurs’ campaign decisions affect investor participation in this new form of entrepreneurial finance.”
What this means for us, simply, is that Baysave equity crowdfunding strategy should focus on men who are active is social media platforms or otherwise well-connected in their communities. Other lower risk debt-based projects like private mortgage might be more interesting to female and institutional investors.
This research finding appears to be consistent with earlier research and our own observations. Specifically, it addresses the ongoing conflict where the larger private investors want to discourage us from publicizing news of bayshore redevelopment while, in contrast, I see public media and social medial more frequently as a source of strength. Whenever publicly disclosed information is used against us in a marketing or legal situation, I hear a “told you so” from investors who prefer to remain private.
Since 2015, public media in Australia has covered the gradual transition of funding for scientific and environmental project to social media. ABC and NBC networks produced updates this week. ABC writes:
“The competition for research funding is driving some Australian scientists to crowdfunding. It can take up to a year for academics to find out if they’ve been successful in getting government grants. It’s highly competitive with the success rate for the Australian Research Council usually about 18 percent. But going cap in hand to the public, via the internet, isn’t a sure thing either.”
Crowdfunding has the potential of being faster than the grant process. But it has its own challenges. Baysave is also learning about crowdfunding; we’ve had some success and some learning experiences that were not immediately successful. In the long run, I suspect that both methods must be used in tandem for smooth operation in today’s environment.
Community redevelopment or industry revitalization plans historically rely heavily on tax incentives to attract investment. Our local fisheries and aquaculture industries are likely to require large commitments of investment capital over the coming decades. A government program that abates taxes or exempts gains from taxation can make a project significantly more interesting to investors. Such programs can exist at the local, county, state and federal government level. This blog post focuses on the two most prominent options available at the federal level for the revitalization of the New Jersey bayshore. This blog does not attempt to explain each option, but rather focuses on the differences between them and briefly lists how I see each of them contributing to the bayshore community’s long term revitalization.
The first federal incentive programs are the Qualified Opportunity Zone authorized as part of the Tax Cuts and Jobs Act. This program is geographically restricted to a few blocks in downtown Millville and large parts of Bridgeton. Advisers see this program as most attractive to larger investors. This program could primarily help us with commercial real estate projects in those locations, especially equipment manufacturing and seafood processing, and aquaculture equipment financing for the region. This is the investment format being considered by some institutional investors. More information is available on this new web site.
The second program is Qualified Small Business Stock. This has been around longer as Section 1202 of the Internal Revenue Code but its attractiveness is strengthened by a series of recent tax changes. Investments may provide immediate tax benefits. The long term attraction is that smaller investors can achieve tax-free gains of up to $10 million (or more) by committing to the investment for at least five years. This is the business format that will be used by Nantuxent Corporation for the revitalization of commercial fishing and aquaculture at Money Island.
There are risks with either program. The first risk is that the investment may not achieve the gains expected. The investments could lose money. The second is that the investment might not be liquid at the time the investor wants to cash in. The third risk is that the expected tax result may not be achieved either because tax laws change or because the management of the investment did not meet the legal requirements of the incentive program.
I am happy to discuss how either option might fit into your investment plans.