Al Klemm's dream has already vanished | Eastern North Carolina Now

    Publisher's Note: This article originally appeared in the Beaufort Observer.

It took only days before his hot prospects for buying QSII disappeared

    Most of our regular local readers will well recall the March 12, 2012 County Commissioners meeting in which Hood Richardson offered a motion to put the county's so-called "QuickStart II" on the market by listing it with a real estate agent who would then market it and have it listed so that any agent could sell it. Previously the building has sat empty for four years while it was marketed by Economic Development Director Tommy Thompson. Each time the sale the building has been discussed, Mr. Thompson has declared that there were imminent prospects interested in the building.

    But since the building has sat empty, the maintenance expense for the county has skyrocketed. Thus, Mr. Richardson suggested that by selling the building it would eliminate future maintenance expense, having to pay the debt service on the loans and put the building on the tax roles. The motion to list the building was seconded by Stan Deatherage but was defeated 4-3 with Richardson, Deatherage and Ed Booth voting to list the building while Al Klemm, Jay McRoy, Jerry Langley and Robert Cayton voted "no."

    This week we learned that the hot prospects Mr. Klemm described in his argument against listing the building have now disappeared. That, of course, has been the history of this debacle. "We've got good prospects interested..." has been the mantra. Yet prospect after prospect has disappeared.

    Listen to the discussion and watch the vote here:



    Now the rest of the story.

    Within a matter of days of Mr. Klemm saying that there were several prospects for buying the building, one of them reportedly has decided to locate in neighboring Martin County. Another, which has been housed in a county-owned building called the "Skills Center" down the road from the Quick Start II building, has now vanished from that location. Reports are that it moved to Pender County. In addition, Brooks Brothers Boat Company is reported to have left the Industrial Park or is trying to sell its building and there are rumors that yet another building will soon be vacated.

    Commentary

    This situation would be laughable, a la an old Keystone Cops movie, were it not so serious. Al Klemm must either be the most ignorant commissioner of the decade or he is joking or something we don't know about is going on here.

    There are reported to be several hundred empty "industry-ready" buildings across the state for sale. In fact, one commercial real estate expert described the market as glutted with an excessive supply and "very few prospects, relative to the supply." He also told us that the standard of "prospects are looking at a particular site" is, in his words, "foolishness." We were told that there are many people "looking" at buildings and "if you knew the truth, there would be a tiny fraction of those who look at a building who end up buying anything, much less a particular building. "I know several speculators who look at dozens of buildings but never make an offer on any of them. You don't sell a commercial building like that (QSII) these days because a company wants a building and they research the market and then make a reasonable offer. I'll bet there has not been a single building sold in recent years that way. I could place clients in a dozen buildings this week that would not cost them anything. In fact I know of several buildings that the owners (local governments) would pay somebody to take the building off their hands," he told us.

    This observation seems to have played out last week right under Mr. Klemm's nose. The "prospects" he touts in the video above are gone, just as "hundreds" of other prospects have never materialized over the last four years. But as usual, he is secretive about who these prospects are so no one can substantiate what he claims. We have recently been told that the criteria Mr. Thompson has used to declare prospects is to get a page view count on the website that lists the QSII building. Those of us in the internet business know how fickle that kind of data is.

    So why would Commissioners Cayton, Langley, McRoy and Klemm vote to not list the building on the commercial real estate market?

    A very reliable source on the inside of the Committee of 100 explains it this way:

    The real issue here is not "jobs." What is going on and what has gone on for years in "Economic Development" is that a small group in the Committee of 100 and EDC use economic development to play favorites with special interests. Who knows what they get out of it. But here's the clue. Watch who is involved in the back room when the deals are made and look at who the deals are made with. We're not talking about jobs, we're talking about power. A self-selected oligarchy wants to control the action. That is why they don't want transparency. That is why they fight against a "market approach" to both buildings and grants. It is not who makes the best offer. It is who the insiders want to make the deal with. If it were about "jobs" these people would not be spending more taxpayer money for "jobs" than the jobs pay. Think about that. They'll pay $100,000 in incentives to create a $30,000 job. Why? Follow the money, the favoritism and the power and you find that none of them would have ever made a deal like that with their own money. Until the recession hit, economic development in this state was primarily a money laundering operation. Political types would get deals for businesses who would then make political contributions to the politicians/political party who gave them the incentives. Marc Basnight and Jim Black honed the game to the edge. Now it's the Republican's turn.

    Another source from outside Beaufort County agreed to watch the video (above). While our source was not talking about Beaufort County per se, his reaction to the video was interesting. He is a former Jim Hunt appointee in the Department of Commerce. He is now a principal in one of the top three commercial real estate firms in the state. He laughed at Al Klemm's comments. His first comment was: "it is crazy to think that a company would buy a $2 mil building and not bring jobs to it." But he also said:

   "The idea that you can unload this building by listing it with a commercial real estate firm is also 'wishful thinking' just as much as Mr. Klemm's thinking that because somebody looks at a building that they are a potential buyer is more in the realm of fantasy than reality. You are not likely to sell the building because you listed it. The problem is that the supply far and away exceeds the demand. It is a buyer's market. Most of these government owned buildings that are not empty were not sold. They are leased and many of those leases don't cover the interest on the debt, much less pay off the loan. Bottom line? You will not sell this building for what you've got in it, unless you find a sucker. The "jobs thing" is nothing but political cover. I don't know about Beaufort County or this commissioner. But I have seen this play out over and over again. These politicians propose a project and get the money for it. Then when the building or land does not sell they have so much ego invested in it that they often will not liquidate the project and take a loss because it is a personal thing with them. That's what happened in Halifax County with the Randy Parton thing. They don't want to admit they made a mistake. But it's like the Kenny Rogers song: "you got to know when to hold...you got to know when to fold. You ne'er count your money while you're sitting at the table (own the stuff). It's like buying an expensive sports car and finding out it rides terrible. You don't want your wife to know you messed up."

   So Warren Smith was correct all along and Tommy Thompson was ten years behind the curve. When the economy was booming, shell buildings and industrial park land were viable ideas, if handled correctly. But in recent years it is, as Hood Richardson characterized it, an albatross around the taxpayers' neck.

    As our source, who obviously would not allow his identity to be revealed, said: "Remember Soul City. The "build it and they will come" mentality has turned out to be a bottomless money pit. Beaufort County is no different than most other places. It thought it could control the market and it will pay a dear price for that miscalculation."

    Remember, this is a man who has become a multi-millionaire selling commercial real estate. But listen to his answer to our last question: "What do you think Beaufort County should have done about economic development over the last ten years?" His answer was as quick and as simple as it was surprising: "Improved your work force." He went on to explain that his first 'getting down to business' question he asks any serious client looking to expand or relocate is: "What do you need that will help you be successful?" He went on to explain that the answer he gets is consistent: "It more often than not is related to the quality and quantity of the potential employees and secondly, to technology. I don't remember the last time one of them said: 'a building.' I could sell a dozen buildings this week if I could guarantee them that for every position, they would have 3 applicants who knew how to program sophisticated production equipment that I could get them a deal on."

    Now we have to wonder about Mr. Klemm's next "hot prospect" and how long they will delay his coming to grips with reality.

    As a postscript, this highly successful private economic developer offered another idea. "One of the most successful strategies I have seen used is with utilities. A county runs sewer and water to a site with a developer paying the largest share of the initial cost. (The county borrows the money and the developer pays the interest and a part of the principle.) As other developers tap onto the line the Financing Developer gets the largest part of the tap fees. That is a much better model than the government taking all the risk and hoping the "jobs" or increase in the tax base will pay off the project. The more privatization the better, usually."

    The problem is, of course, that Mr. Klemm, Tompson and the oligarchy with the Committee of 100 cannot as easily maintain control over such deals.

    Now, maybe, we know what they voted not to list the building on the open market.