Huntsville's Mayor Battle sends out Sequestration message from DC

Just a quick post today.  Last night, Huntsville's Mayor Tommy Battle released this statement from Washington DC where he went to Capitol Hill to discuss the Sequestration.
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One thing is for certain; there is a wealth of diverse opinions in Washington, D.C.
Madison County Commission Chair Dale Strong, Enterprise Mayor Kenneth Boswell (Fort Rucker), Retired General Rod Wolf (former president of AAAA) and I met with seven House and Senate offices today. The topic was sequestration and its effect on our local economy.

For more than five years the Defense Department and the rest of the U.S. government have been limping along on a Continuing Resolution (CR) on spending. When Congress raised the debt ceiling in 2011 and could not come to an agreement on debt reduction, part of the deal included an imposed sequestration; a series of harsh budget cuts totaling $1.2 trillion (through 2021) that would take effect January 2, 2013.

Evenly split between defense and domestic discretionary spending, the proposed cuts were so drastic, no one in Washington thought they would ever be allowed to take effect. Leaders mistakenly believed the threat of a sequester would force Congress to agree on a reduced budget plan. Instead, Congress extended the sequester start date to go into effect March 1. As a result, the Congressional paralysis and the threat of sequestration have been crippling our local businesses.

Top firms in are area holding back on hiring and future planning, including expansions, because they don’t know what the U.S. government is going to do. The first effects of sequestration will be shouldered on our federal employees. Notices went out today warning of furloughs. We are told this means federal employees will work a 32-hour week and receive a 20 percent pay cut. I think most offices will still expect employees to accomplish the same amount of work that they had in a 40-hour week. Temporary employees will lose their jobs and term employees will not be rehired.

The military armed forces (Army) would start feeling the effect in FY 2014. The talk on Capitol Hill is that active duty rosters will be cut from 540,000 to fewer than 400,000.

Sequestration also affects schools. The Huntsville City School system will lose $1.7 million and the Enterprise School system will lose around $1.5 million. These will be difficult cuts to absorb in systems that have already endured systematic cuts throughout the recession.

The overall sentiment in the Congressional offices we visited today is that our country will go into sequestration on March 1. Some of the offices believe it will take about 30 days for the real impact to hit.

A few offices were hopeful that Congress would turn the situation around by the time the CR ran out on March 27. The hopeful ones were those representatives with a heavy military presence in their congressional districts. Those without military bases gave the impression they are “okay” with sequestration staying in place.

There is some talk of a defense appropriation bill by Hal Rodgers that would be combined with a CR for the rest of the budget. Some offices believe this might work if it follows the guidelines of National Defense Acquisition (NDA) that passed the House last December. Most were skeptical of the ability of the House to put that together.

There is a lot of finger pointing and “we vs. they” talk throughout the delegations. The promising part was the fact that two offices made statements about “forgetting party lines,” and “we have to do something.” The House has terrific distrust for both Administration and the Senate. They fear both parties are working to make them look bad.

The common thread we discovered is that these Congressional offices are not getting any public feedback on this issue. There is a lot of noise about gun control and immigration, but no public outcry about sequestration. If anything is going to happen, the public has to get involved and they need to speak up quickly. Several of the offices said it would up to the Senate to start the negotiation process to come up with a budget or even a CR. The two Senate leaders that have the might and clout to do that are Alabama’s Senator Richard Shelby and Maryland Senator Barbara Mikulski.

Our “ask” of the legislative offices today was not to “kick the can down the road.” Good, bad, or indifferent, we need a budget. Our military commands will adapt. Our local businesses will adapt. The uncertainty of a CR is worse than sequestration.

Our other “ask” was that Congress not burden the civilian workforce with all the pain. It is not fair. Less pay and a mandatory shortened workweek is something we would not do in private industry and it should not be done in government. 

We don’t know the full effect of our visit, but we did everything in our power to make certain our message was heard in Washington, D.C. We recognize the country must come to grips with its financial future. Let’s do so in the right way.

Tommy Battle
Mayor

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Huntsville Metro Area Homes

Quick News of Huntsville and Alabama and its Impact on Huntsville Real Estate

It seems like there has been a lot of news of Alabama and Huntsville, so let's do a quick fly by in case you missed it.

Standard & Poor's reaffirms Huntsville's AAA Credit rating with a stable future outlook.  Moody's gave the city a Aaa with a negative outlook due to the city's indirect ties to the federal government.  The high credit rating give the chance for the city to get loans at a much lower interest rate than other cities with a worse credit rating.   City Financial Director Randy Taylor says the city will refinance 21 million dollars that went to the Madison County Jail construction.

Management Training Consulting Firm, Afterburner, will be franchised next in Huntsville according to the Atlanta based company.  This is due to its strong military presence.

Wells Fargo is reporting that if the federal government's sequestration hit, Alabama and Huntsville in particular could be one of the hardest hit due to the exposure of the aerospace industry in the defense cuts that would take place.  Other places to get hit: New Mexico, Virginia, Maryland, South Carolina, and on the same level as Huntsville would be St. Louis Missouri.

Good news out of Federal Reserve Bank of Atlanta in report they're highlighting from Univ. of Alabama's Center of Business and Economic Research.  They're also agreeing with it, although the Reserve Bank branch in Birmingham is more cautious of the latter part of the year.  Dr. Addy positive news from CBER highlights':

• The state's economy will continue to show improvement in both output and employment during 2013. Real gross domestic product growth of 1.7 percent to 1.9 percent is forecast for 2013, about the same pace of expansion as in 2012.
• The pace of job growth is expected to pick up modestly from the 11,300 jobs added in 2012. About 15,000 to 20,000 jobs could be added in 2013. However, the unemployment rate will remain around its current seasonally adjusted level of 7.8 percent as individuals enter or reenter the labor force.
• Large transportation equipment-related manufacturing and service-providing employers will be the major economic drivers in 2013. These include firms in industries such as automotive manufacturing, shipbuilding, steel, tourism, healthcare, and business services. Exports should also continue to boost the Alabama economy.
• Alabama's private contractors and government facilities engaged in aerospace and defense-related projects will remain cautious about hiring or making new capital investments until they get some clarity on federal spending plans.
• The state's economy will continue to show improvement in both output and employment during 2013. Real gross domestic product growth of 1.7 percent to 1.9 percent is forecast for 2013, about the same pace of expansion as in 2012.
• The pace of job growth is expected to pick up modestly from the 11,300 jobs added in 2012. About 15,000 to 20,000 jobs could be added in 2013. However, the unemployment rate will remain around its current seasonally adjusted level of 7.8 percent as individuals enter or reenter the labor force.
• Large transportation equipment-related manufacturing and service-providing employers will be the major economic drivers in 2013. These include firms in industries such as automotive manufacturing, shipbuilding, steel, tourism, healthcare, and business services. Exports should also continue to boost the Alabama economy.
• Alabama's private contractors and government facilities engaged in aerospace and defense-related projects will remain cautious about hiring or making new capital investments until they get some clarity on federal spending plans.

The German Consul General, Christoph Sander will be visiting Alabama this coming week to tour the Mercedes-Benz plant in Tuscaloosa County.  Usually these higher ups come to check on investments and see if they've paid off and made the right decision.  From this point, investment can increase depending on a positive review or be pulled if there are many problems. 

This is vast amount of economic news to come out about Huntsville and the state of Alabama.  In terms of real estate, if sequestration hits (depending on the financial situations) we may see a large or small bump in activity.  Considering that the news has been talking about sequestration for over four months now, its possible that we may only see a small bump.  However, depending on what defense contracting companies do and how deep the cuts to civilian workers hours in the defense department, it is this that will determine what the real estate outlook in short term will look like.

Overall its best to say the crystal ball looks murky and the Magic 8 ball says "ask again later".

Today's Tidbit:  The Land Trust of North Alabama is now nationally accredited through the Land Trust Accreditation Commission, a program of the Land Trust Alliance.  Just over 200 Land Trust groups exist in the United States. 

Huntsville Metro Area Homes

And Now a Message from the Federal Reserve

The Federal Reserve decided to make an appearance today to announce something that they haven't before.  The group put an actual number on when interest rates will begin to rise.  That number which triggers everything is the Unemployment Rate at 6.5%.

Now to get the Unemployment Rate at 6.5% there are two things that need to happen: 1) The current path we're on showing a decline in the unemployment rate is being caused by many people abandoning the workforce.  Meaning less people being counted in that rate.  So just a few more additional millions without jobs will push that number to the target of 6.5.  Or 2) The economic engine starts and actually begins to run and sector growth improves to begin hiring of several hundreds of thousands of people.  This is the least likely option right now due to a) stalemate in Washington D.C., b) economic worries in the private sector about over-regulation from previous government bodies, c) lack of reserve funds by small business to hire, and d) lack of consumer faith in wanting to separate themselves from their money leading to lack of revenue stream to companies.

Officials have said they don't expect to see the Unemployment Rate hit 6.5% until after 2015, so until then interest rates will be low across the board.

Today's Tidbit:

With cities undergoing innovation and rebuilding over the old, we must keep in mind the historical districts which make up a piece of the heart of a city.  Often times the new owners pays tens of thousands just to keep them up to code with the city historical commission.  Remember, pieces of a city's past shouldn't be forgotten.  There's much history hidden within each house and neighborhood.

Huntsville Metro Area Homes