Kicking the Legs Out From Key West Tourism

After watching the City of Key West Commisssion Meeting last week I was in a bit of shock.
On the Commission agenda was a proposal aimed at stopping the conversion of Key West hotels to condos/condotels. Previously I wrote that selling off the hotel rooms and converting them into luxury second homes, condos, and condotels is suicide for the tourism business. No sane leader would do it.
Since I warned that the city was allowing tourism, the main engine of the Key West economy and community, to be dismantled, I was amazed and saddened by the position of our Mayor and two of our commissioners.
I wanted to write something about it...I knew I had to. But it took days for it to settle in, and until I rewatched it (on the local public access rebroadcast) I couldn't quite figure out where to begin.
I've decided it would be easier at this point to detail the meeting:
Commissioner Mark Rossi created the proposal to stop the conversions of hotels to condos (transient to non-transient).
Public comments were heard, and nearly every single person spoke in favor of the proposal. Business leaders, Chamber of Commerce President, and workers stepped forward to let the city know that selling off the hotels will be disasterous. Ed Swift, the owner of Conch Train and numerous other tourist dependent businesses, warned that if the city does not act to halt the trend of conversions then we are "disassembling this economy." Swift mentioned that over 2500 RV and hotel units have been lost in the Keys due to the conversions taking place.
One person did speak out against passing the proposal to ban conversions: lawyer Jenny Stone. She said that the legislation was procedurely improper. The newly hired city attorney forcefully argued that the legislation was proper, and sounded ready to head to the Florida Supreme Court.
But mostly everyone spoke in favor of stopping the conversions of hotels to non-transient use.
Next the proposal was brought before the commissioners.
Rossi led off, noting that tourism is "our lifeblood" and that he was worried. Rightly so. Rossi owns bars on Duval Street, and he said business is down. An even more ominous sign, Rossi pointed out, was that there are commercial vacancies on Duval Street and Simonton Street and that businesses are having a hard time surviving.
Commissioner Menendez agreed with Commissioner Rossi - then he launched into a scolding about the affordable housing crisis and the fact that the city leaders have done little to make a dent in the problem.
Next up was Commissioner Verge, who can be difficult to read while his comments wander back and forth over the various opinions aired. Finally he revealed his opinion of tourism, saying that Key West is "...at a crossroads between mass tourism and a different kind of tourism." Verge mentioned Vail, Colorado and said that change "naturally occurs." Someone should tell him that Vail was built to be a tourism town...there was no town there before it. Then Verge went on to espouse the virtues of higher property values, mentioning how the enigmatic developer Pritham Singh turned a $10 million dollar piece of property into a $90 million dollar piece of property (presumably Truman Annex), and that meant higher tax receipts. Verge also didn't believe that all these hotels in the condo-conversion process were truly offline because the Holiday Inn Beachside still has rooms availabe. Actually Commissioner Verge you are incorrect - the Holiday Inn bought the property across the street and is now renting rooms under the Holiday Inn name. The old Holiday Inn, the one in the process of converting to condos/condotels, is not renting rooms. Rumor is that people are unhappy with the investment and are threatening lawsuits. Verge also pointed out that since the occupancy rate on the island is less than sold-out than "maybe we overexpanded." Also, he said about restaurant seats is "maybe 18,000 restaurant seats should be 14,000. In the end, Verge was o.k. with tourism suffering and stated he would vote against the "moratorium".
Commissioner Bethel kept his comments brief and to the point. He didn't say one way or another what he thought about tourism. But what he knew he believed in was property rights. And damn anyone who will interfere with property rights. He was dead against Rossi's propoasal.
Last up was the Mayor who began with a confusing joke about Bush and the French & Indian War, saying why fight a battle that is already over? In his words, "This war is over...the invisible hand took care of it." The Mayor was referencing the crash in the Key West condo market, and that a developer would have to be insane to get involved in a new conversion project. In his words, "We are experiencing market failure today."
So you are in favor of tourism Mr. Mayor? NOT! The Mayor began speaking out of the other side of his mouth arguing that hotels are not full and are charging too much. He mentioned that the Comfort Inn had charged $286 the other night, and that he didn't think guests that paid that much for a room "buying trinkets" in reference to Ed Swift & Company's warnings that business is hurting.
The Mayor might not understand or like tourism. It doesn't sound like he does. By blaming the slow tourist season on the hotels ignores the fact that the northeast and midwest have had the mildest winter in a century. If it is 70 degrees in NYC, people don't feel the need to head to Florida.
In the end, Commissioner Rossi's proposal didn't pass and the Mayor said that now is a "true new day". According to him all we need is a little "onterpuhnerial speerat".
Tell that to the business owners, families, and workers that make up our island.

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Why Is Affordable Housing Right for Key West?

I keep reading in the Citizen's Voice, an anonymous rant column in a local paper, someone(s) calling in saying that affordable housing isn't and shouldn't be a right, as in the Bill of Rights. And for the most part, I agree. One shouldn't expect to buy a property in Beverly Hills for something "affordable". And in reality, Beverly Hills does not need affordable housing. Nearby are plenty of communites for the necessary workers to commute from.

So why should affordable housing be something our Key West government cares about?

To me, there are more than a few good reasons, but I want to point out an often-overlooked one:
It is a right to have our government run wisely.

And this is where the anonymous Citizen's Voice contributor is not understanding the problem.

The City of Key West requires a lot of personel to run properly. I won't go into a full list, but there are police, firefighters, building department, code enforcement, liscensing dept, road crews, electrical crews, technicians, and countless others. Hundreds of people.

These people need places to live in. Homes. And these places need to be affordable.

Without affordable housing built, the city will have to raise taxes to a multiple of what they are now to pay their workers enough to buy a million dollar house. Can you imagine how much the tax bill would be if the police, fire dept., and the rest of the city workers have to pay for a million dollar mortgage. Nearly no one would want to live here. This puts the city at risk of becoming financially unstable.

So, my point is that I don't care if you don't think affordable housing should be a right. But the city must have a finanically sound plan. Being an island too far from the mainland to bus in our city staff, affordable housing is a requirment of smart planning in Key West.

And that is why it is my sincerest hope that the City of Key West gets around to actually building affordable housing. Our city's future depends upon it.

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Condotels Becoming Condo-No-Sells?

It's old news that Key West's real estate market has a glut of properties available for sale. Maybe most notable is the huge number of condominiums that are available while even more are currently being developed. Many of these developments are hotels converting into million dollar "condotels".

The question everyone should be asking is: "Will they sell?"

If Miami is any indication, the Key West condo craze may be in serious trouble.
Miami is Key West's closest South Florida major city. There, the condo craze of the past few years is going from boom to bust.

As condo prices in Miami went through the roof over the past few year with wild speculation and flipping, developers responded by planning thousands of new condominiums. Much of that demand and speculation was driven by record low interest rates. Now, with rates higher, Miami is quickly realizing that many of those units don't have real buyers who actually want to occupy the pricey condos. As a result, many projects are unsold and quite a few are being scrapped.

According to Miami city officials, 15 condominium developments have been scrapped totalling nearly 2000 units. Still in construction is over 75,000 units among roughly 300 different condo projects.

This steep downturn in the condo market in Miami is showing up in their sales numbers. In October, sales of existing condos dropped 31% compared to the same month last year. Prices are also headed south, falling 2% that month.

Developers in Miami are likely to panic if things don't improve soon - which is unlikely. According to Lewis Goodkin, a Miami economist and real estate analyst, it may be 5-10 years before condo prices hit bottom and start to rise.

Should Key West be worried? Certainly if you bought a condo at the top of the market and were hoping to "flip it".

But there is probably a greater threat to Key West. Many of the condos being developed today are Key West hotels which have historically been a major part of our tourist economy. If these new condotels don't sell, will the Key West economy suffer? As a tourist based economy, it is hard enough on local businesses trying to survive with the current 700 rooms offline during their conversions/renovations.

Have the developers put us all at risk?

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Time For Tom Tukey To Go?

According to a letter published on the Bahama Village Blog and allegedly written by Tom Tukey, the President of the Truman Annex Master Owners Association (TAMPOA), the TAMPOA Board of Directors is not backing away from his desire to control Southard Street and the new waterfront property outside of it's gates. The letter is dated December 7, 2006 and is addressed to "Fellow TAMPOA Owners".

In that letter, Tukey lashes out at City Commissioners while imploring Truman Annex residents to continue funding his battle with the city (and the County, Navy, NOAA, and the general public).

The letter details upcoming special assessments that the residents of Truman Annex must pay: "The Board decided to adequately fund the association budget to allow for costs associated with litigation. This means that the quarterly assessment will increase to $1150.00 and the special assessments will be $400.00 each in January, April and July."

Tukey details the many problems that will befall upon the beloved Truman Annex motherland if they don't prevail. For some reason, Tukey thinks that his fellow residents won't be able to fully enjoy "extensive pedestrian, bicycle and roller blade activity" if TAMPOA can't control traffic. Makes one wonder how the rest of the world manages to do these things without gates and controlling traffic. Maybe he didn't learn the childhood "game off" and "game on" method of playing. Maybe he just does not play well with others.

But the most astounding thing in the letter is the admission that Tukey wants to control property outside of his development. I am not talking about putting in a factory, industrial facility, or airport next door. I'm talking about a working marina, waterfront restaurants, bars, shops, and whatever else belongs in Key West and makes this place so fun and special. In the letter, Tukey supposedly wrote: "Gates enhance nighttime security for our residents, prevent late night access from the waterfront and act as a suppressant to the development of restaurants, bars and other retail establishments."

And this Key West, is what TAMPOA may really be up to. TAMPOA wants to control property outside of its gates, the Truman waterfront given to the City of Key West from the Navy. Some residents of Truman Annex will lose the greenspace that exists between them and the water. But you know what, THEY DID NOT BUY THAT PROPERTY! It is the City's and the citizens, and that is who should be deciding what should be done with it.

I want to see the Truman Waterfront, which is a very large open space, have a mixture of green space/park (this must be part of the plan), working marina (the Florida Keys are losing their working marinas due to redevelopment into yacht clubs), and bars, shops, and restaurants (for the enjoyment of everyone).

Citizens of Key West and City Commissioners, make the Truman Waterfront a vibrant addition to Key West. Please don't let TAMPOA control the Truman waterfront. REJECT THE RISING TIDE OF CONFORMITY. Don't be afraid to use eminent domain...this is what it was made for. Let TAMPOA know that if they won't play nice, then they may lose all the gates.

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Local Humor: Captain Conch Battles Cat-Napper Tim Turkey

I came across a funny local cartoon strip called The Adventures of Captain Conch & Stock Island Boy, published in the free local bar guide Key West Bar Tab.

In this issue, Captain Conch and Stock Island Boy are battling the treacherous Tim Turkey in their effort to "get to the bottom of the cat-nappings taking place in Key West".

I'm guessing many will miss this, so I'm reprinting it here, thanks to Key West Bar Tab.

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Rumors of Fidel Castro's Death

The island rumor mill in Key West is buzzing with talk about Fidel Castro.

Some are saying that Fidel Castro may have died and that his death may be announced soon.

Local politicians, the Coast Guard, the Navy, and other departments of the US government have supposedly created complex plans to deal with the possibility of Fidel's death. Will there be a massive flood of Cubans landing on our shore? Or will hundreds of boats head for Cuba hoping to pick up relatives and friends like during the Mariel Boat Lift of 1980?

Either way, it is acknowledged that Key West is on the front line of any change and will likely see a big impact. Key West is only 90 miles from Cuba, directly across the Straits of Florida.

Personally, I can't wait for the day when the people of Cuba are free from oppression and can create whatever future they envision for themselves. They are a beautiful culture and deserve much more than Castro's rhetoric and dictatorship.

Viva Cuba Libre!

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Florida Keys Paying the Price for Selling Off Hotels

Its cold up north and the weather in Key West is balmy and perfect. So where are all the tourists?

Although tourism is normally a bit slow in Key West between Thanksgiving and Christmas, many local businesses are grumbling that things are slower than normal.

Alarming statistics show that bed tax revenues are at a ten year low! (the country charges a 4% "bed tax" for lodging). Why is this happening? Maybe because , as I have pointed out before, the City of Key West and Monroe County are allowing their economic engine to be sold off to the highest bidder.

During the insane go-go-go-go real estate market of the past 5 years in Key West & the Florida Keys, hotels, guesthouses, and RV parks have been bought up by developers and are in the process of converting them into million dollar condominiums. Currently, there are over 1200 "rooms" that are not available due to converting into condos/condotels. As a result, with fewer hotel rooms available to rent, the average price of a hotel room in Key West has risen. Yet that does not explain why occupancy rates have not been full.

Supposedly many of these converted hotel/condos will be rented out once again. I think it is unlikely that they will. Let's look at the rational behind this arguement. For example, suppose someone buys the "condotel" room/unit for $1,000,000 (one million dollars). The mortgage on the property, with 20% down, would be over $6400 per month, plus taxes and insurance and condo fees (and electricity, water, sewer, garbage utilities etc). Let's call it $9000 per month. For the room to just recoup the expenses, it would have to be rented out every night of the year for $300 per night. And that would only get you to break even.

So the question is: Can Key West regularly get $300 per night from a huge number of tourists? Today's Tourist Development Council President, Harold Wheeler, said that he thought that our bed tax numbers are at 10-year lows because the price we are charging for hotel rooms it too high. So why should anyone think that our tourist market will be able to support even more expensive lodging?

But what about the reality that most people who buy a million dollar property are unlikely to rent it out to strangers. For them, it is a second home...maybe an "investment". Then again, I think it is nuts that anyone would buy a hotel room for a million dollars. At that price, it surely can't be a "flip", something that hyper-inflated housing prices recently and is now starting to unwind/deflate.

The City of Key West and Monroe County should be very concerned about what is happening to the main engine of our economy - tourism. The mayor of Key West said he wasn't worried and attributed the bad bed-tax numbers to Florida's ranking number one in the nation for foreclosures. I have a feeling that our Mayor has been too dependent on real estate and is missing the boat about tourism. As the real estate boom goes bust, the financial stability of the Florida Keys will be upended.

And yet, through it all, nearly nothing is being done for affordable housing. Workers are leaving in droves, and I suspect that this year will be make-or-break for many Key West businesses.

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Praise for Conchette & Her Tampon Blog

I just wanted to post some praise about the great job Chonchette is doing at her blog Tampon Blogger (which stands for "Truman Annex Master Property Owners' News").

I don't know her personally, but I applaud her coverage of the Truman Annex versus the City of Key West battle over the control of Southard Street - a.k.a. the gate issue.

Conchette clearly has some deep connections within Truman Annex, and she has brought to light several documents, for example here and here, that show TAMPOA's position on the gate is not unanimous within the Truman Annex community.

Plus, Conchette has had to suffer the slings of anonymous comment posters who have tried their best to discredit and insult her. I praise her ability to remain level headed and keep the attention on the issues. Good work Conchette.

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Is Florida's Housing Bubble Imploding?

Statistics recently published reveal that the Florida housing market is in serious trouble.

After years of wild speculation, enormous home sales and price gains, and record numbers of new homes and condos constructed, it now appears that Florida real estate market may be in serious trouble.

While the nation as a whole saw a year-over-year decline in October housing prices, some of Florida's communities were among the nations biggest decliners. Meanwhile, the foreclosure rate for Florida has significantly spiked upward, foreshadowing continued problems for the real estate market.

Here are some of the details of the statistics recently released:

Three Florida metro areas were hit hard by price drops. In Sarasota, the median home now sells for $320,700, off a whopping 9.4 percent from last year; Palm Bay/Melbourne/Titusville prices sank 9 percent to $193,600; and Cape Coral prices plunged 8 percent to $255,400.

RealtyTrac, an online marketplace for foreclosure properties, reports that 115,568 properties entered into some stage of foreclosure in October, a 42 percent increase over last year and an incidence of one for every 1,001 U.S. households. The comparison with October of 2005 was particularly dramatic because that month in 2005 recorded the highest foreclosure rate last year, according to James Saccacio, chief executive officer of RealtyTrac.

The newest data continued a strong trend from the past three months that shows foreclosures definitely moving upward, according to Saccacio. That puts more pressure on an already strained housing market.

In the month of October 2006, Florida had 11,413 foreclosure filings. That equates to 1 in 640 household - a fifty percent increase over the past 12 months.

Here in Key West, the housing picture looks bleak. The speculation of the past 5 years has driven many local residents off the island, as affordable housing vanished from the Keys. This is the county's number one problem, yet unfortunately they seem to have been unable to find a solution. With a record number of residential properties on the market in Key West (and more continue to be built), and nearly none of them selling, prices will have to fall much further before finding solid footing.

Maybe I was right: everyone in America cannot suddenly afford a second home. The aberration was caused by banks loosening their lending practices (remember interest-only payments?) - eventually building up a pyramid that required new buyers to pay every higher prices. Once prices had reached their peak, a cascade of sellers glutted the market. It was a bit of financial trickery led by aggressive lending practices, and it very well may shake the banks themselves. They have lent too much money for too little equity.

It will be a long time before this housing bubble collapse is over.

Now where are the realtors that were practically promising their customers huge gains? I believe more than one said "You can't lose".

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Reef Relief Holiday Auction

This year's Reef Relief Holiday Auction is underway! This year's auction has great items - plus, by bidding, you'll help out an important cause, saving our coral reefs. You might find that perfect holiday gift too.

Thanks to generous donations by over 100 business including many from Key West, you can bid on art from Key West artists, exciting boat trips, excursions, and other wonderful items. All proceeds will benefit Reef Relief's efforts to save the coral reefs and educating the public about our marine environment.

Check out the desirable items and get in on the bidding action at http://www.reefreliefauction.cmarket.com/

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