The Messy City Podcast

Before this episode, I knew nothing about Mineral Wells, TX. Now, i’m interested to visit. Mineral Wells is a small, historic resort town west of Fort Worth. It’s the sister city of Hot Springs, Arkansas. And our guest’s family has been on the forefront to save it from recent decline.For me, this, what Macy Nix Alexander relates to me is how people who truly love their place can be the change that helps turn its fortunes around. This is a remarkable tale that can be relatable to all manner of places, regardless of their historic assets. Mineral Wells has some advantages, to be sure. But what they really seem to have are people willing to put their time and money on the line to make a difference. And as much as anything, Macy’s story speaks to the power of her father’s motto to “live below your means.”I won’t give it all away, but the story of how they’ve gone from owning inexpensive rental properties to starting local businesses and renovating majestic old hotels is nothing short of inspiring. Get full access to The Messy City at kevinklinkenberg.substack.com/subscribe

Eric Kronberg, a principal at Kronberg Urbanists + Architects, specializes in urban infill and missing middle housing. He shares insights on the complex realities of urban development, highlighting that a three-story walk-up is the most cost-effective design for affordability. Kronberg discusses the pitfalls of current zoning practices that favor expensive housing while neglecting cheaper options. He also presents innovative solutions like 'powerplexes' and advocates for revising regulations to enhance community-oriented affordable living.

Travel can inspire unexpected lessons for American cities. The host reflects on discoveries from Ireland, emphasizing walkability and community-focused planning. Insights from educational experiences abroad reveal the strong community ties in smaller schools compared to larger U.S. institutions. Challenges faced in urban management and public safety, highlighted during a Seattle conference, expose gaps between crime stats and local realities. A call for innovative governance urges cities to engage more effectively with their communities.

Monte Anderson of Neighborhood Evolution and Options Real Estate in Duncanville, Texas joins me to talk about extremely practical matters: making money in real estate. That is, as a small developer, how is it actually done? What are the pros and cons of different approaches, such as buying and holding vs selling?We start this by discussing a YouTube video from The Real Estate God. Yes, that’s the real channel. Titled, “The best way to 3x your money in 2024,” the video is a good jumping off point for how to structure deals in an ideal world. And, it goes over the differences between general partners and limited partners.Monte talks about why nothing ever works as quick as he thinks it should, and the realities of development fees. We discuss the challenges, but also the joys, of working in development. Find more content on The Messy City on Kevin’s Substack page.Music notes: all songs by low standards, ca. 2010. Videos here. If you’d like a CD for low standards, message me and you can have one for only $5.Intro: “Why Be Friends”Outro: “Fairweather Friend”Episode Transcript:Kevin K (00:01.733)Welcome back to the Messy City podcast. I'm Kevin Klinkenberg. Got our returning champion, Monte Anderson in the house here today. Monte, it's always great to see you and talk to you. Where are you in Dallas? Are you roaming around the country somewhere?Monte Anderson (00:16.022)Yeah, I am in Dallas today. Glad to be here with you, but I am in Dallas. I'll be in Lafayette, Louisiana tomorrow morning and Elkhart, Indiana next week. So lot of traveling coming up, but I'm home for this afternoon. It is. It is. We've been going down there for, this is our second year. And so yeah, there's a lot of good food down there. Yeah.Kevin K (00:26.257)Cool, Lafayette's a really cool town.Kevin K (00:39.449)Yeah, was going to say amazing food, fun people, it be a great time.Monte Anderson (00:43.647)Yeah, they are fun people. lot of entrepreneurial spirit down there, know, they've had to do a lot with a lot of things against them, know, hurricanes and, you all the things that you've got in that part of the country.Kevin K (00:53.627)Yeah. Yeah.That's right. That's right. Well, guess depending on where you are, you've got something. like we don't have hurricanes, but we've got tornadoes and floods.Monte Anderson (01:06.668)Yeah, yep, that's right. There's something always out there, the unknowns.Kevin K (01:10.245)Yeah, I know. I think I texted you a couple of weeks ago, we were up in Dubuque, Iowa, where I know you're also doing some work and they were dealing with the Mississippi is flooding this year. It's been very, very high. And so they've had some flooding in different portions. So in fact, we were going to take like one of their riverboat cruises and we couldn't do it because the river is too high.Monte Anderson (01:28.705)my.Yeah. my, that's because that town is right in between the river and the bluffs. The downtown is right there in the valley, if you will, between the two hills. Yeah.Kevin K (01:37.67)Yeah.Kevin K (01:42.063)Yeah. It's really cool. had not spent a lot of, I've driven through, I'd driven through before, but I hadn't really spent any time there. And it's really a neat, neat little town with like incredible bones and, just a really pretty setting there on the river.Monte Anderson (01:52.802)Yeah.Yeah, the great thing is it doesn't have any major interstates that go through it.Kevin K (01:59.569)But they had a lot of urban renewal. I'll say that. For a small town, boy, did they have a lot of urban renewal that was done to them. anyway, Monty, I wanted to talk to you today. We were exchanging some emails. I sometimes subscribe to these just kind of random YouTube channels or blogs or whatever that touch on real estate or design or planning or whatever.Monte Anderson (02:03.544)Yes.Monte Anderson (02:07.554)Yeah. Yeah.Kevin K (02:27.953)this is one, that I shared with you that is a YouTube channel, from somebody who calls themselves the real estate God, which, of course kind of made us laugh, but it was a really interesting short video. has some pretty interesting content, especially for, newbies, in this video that, I wanted to talk about today, the email, called it the best way to three X your money in 2024.but really it was like a seven minute video that was about a basic investment strategy for real estate that I think is real, that is similar to what you teach. And I wanted to kind of walk through this and talk about it because I think it is, it's interesting. we've talked about financing before we've talked about different aspects of development. It's interesting to take it kind of step by step.and help people understand how, you know, where you put money in, how you get money out, how you make money doing some of these smaller projects.Monte Anderson (03:30.506)Yeah, that's a really big deal for people getting started, you know, in this business. I mean, how do you get money out? Right? You put it in, but where does it go? And how does it come out fast? And it doesn't come out fast unless you buy and sell. That's basically the bottom line. If you don't buy and sell, it doesn't come out fast. You know, because if you buy a, you know, if you buy a property and you get a loan and you restore that property,Kevin K (03:37.969)Yeah.Monte Anderson (03:59.286)and you run it and you get it leased up over time. It's not going to cashflow really great in the beginning. It's going to take, it's going to take a while where I find myself these days and making money as far as making, pulling money out is, and this is what the big, developers do, buying something, fixing it up, getting it all rented up or, or, or buying something and getting it ready to sell, you know, and then selling it. And that's where.A small developers have to do more like buying and selling. And in my case, you know, I charged myself, you know, brokerage fees and management fees and things like that. So my operating company, you know, gets commissions and gets development fees. And that's how we live. And big, big companies do the same thing. You know, the big developer will buy, you know, build a 200 unit apartment complex, lease it up and sell it to the Ohio state teacher pension fund.You know, and that's where the money's made. That's where the big quicker money is made. But it's, it is really difficult as a small scale developer to buy a property, fix it up, build it and get, and I mean, you're building wealth. Okay. Because usually the property is going up in value, but you don't get a lot of cash flow out of it really quick. It's just, that's just, I think in my opinion, and you know, of course, I don't know everything. It's kind of unrealistic thinking. It looks good on paper.but it's unrealistic thinking.Kevin K (05:29.967)Yeah, it seems like so generally when we talk about making any money in real estate is either you're making money off of the cash flow of the project itself, whether it's a residential project or a commercial project, you know, it's producing more income than your expenses. So you're making a little money year after year on that, or you make money when you sell it to somebody else, assuming you've added value along the way and you're selling it for substantially more than what.you put into it.Monte Anderson (06:01.614)That's correct. And then depending on how much equity you put in in the front and how much leverage or how much debt, how much loan you put on the property, you know, will depend on what your cashflow is going to be. So if you've like in the, I've always been one for putting as, you know, having as little debt as possible because you can go through the times like we just went through in the last year or two when interest rate, like on one of my properties went from four and a half to seven and a half percent.like it renewed and just went up. mean, they could have went up to 8 .5%, but my bank lacked me, so they did 7 .5%. But if you have much debt, if you have a lot of debt, first of all, you're not going to probably cashflow for a while. And then secondly, when the markets change, when the markets change or when interest rates go up or when vacancy goes up, then you're going to be in trouble.And that's when you see foreclosures and that's when you see, like right now we're seeing a lot of properties on the market right now, either not so much in foreclosures, but people just needing cash. So they're selling their properties. So.Kevin K (07:13.233)Yeah. So like, you know, let's just say if you, random project that you're a small developer and you scrape together $50 ,000 and you, you put that into a deal and then you have debt on the back of it for the balance of the project. You're, you're either getting that 50 ,000 back to you when you sell it. Hopefully plus a profit or you're getting it like drip, drip, drip over time, over a number of years.Monte Anderson (07:43.211)Exactly.Kevin K (07:43.429)which like you said, at that small of a scale, that might be maybe make a few thousand bucks a year, but you can't make a living off that.Monte Anderson (07:52.47)Right. Well, you can't make a living off the drip, drip, drip part. You can't really make a living off that, but you can if you have a hundred units then. Okay. Then you have it. And you can, if you're in the real, if you have a real estate operating company, like I do, where we do our own leasing and management and development and construction. So we pay ourselves to do those, do those things. If, if the money is available, you know, if there is enough, you know, to do that, butAnd many times these days, I put myself in better positions. You know, I should have learned after 30, you know, 35 years, I should learn, but I put myself in better positions where I can get those fees mostly. So even if the property is dripping, I'm still getting the fees for operating the property. Now I've got a big one that I'm sitting in right now in Duncanville, Texas. It's called Wheatland Plaza, which is an old strip center, know, with some townhomes I'm going to put on the parking lot.And right now I've got all my fees into it. got, you know, I've got, I sold another property to, you know, make the cash calls to keep this thing going because I didn't want to get more debt right now while interest was high. So I made a conscious decision not to add more debt on. In fact, I may not have even been able to get more debt on because I'm in a leasing upstage and I bought aKevin K (09:06.673)MmMonte Anderson (09:17.87)strip center that was 60 % least and it went down to 28%. Now I'm back up to 80, but I'm still not up to really breaking even, know, nearly up to breaking even. And when I put the 20, the 19 townhomes on the parking lot, you know, I'm to have a mixed use building. And then now I've got something that's operating, but it takes, it takes time. So that'll probably take me, what I just described is probably take me four or five years to get that done. So you got to last that four or five years.Kevin K (09:47.589)Yeah, yeah. Yeah.Monte Anderson (09:47.736)you know, negative cashflow and you've got a cash negative cashflow has got to come from from somewhere. So it's, it's funny to hear like in the, the podcast or the, the YouTube we were talking about, it's funny to hear some of the people talking about this stuff because they, this would be the way I would put it on paper to show you a deal. I would show you that in reality, it's just not that easy. And you're constantly having to,You're constantly having to look for new ways of financing or finding another property to buy and sell to make cash flow or buy and sell something you've already got or raising capital from what we call community impact investors who don't expect huge high returns but are also, they expect a little return but they're as interested in the community impact as they are the return. They're interested in both.Kevin K (10:45.541)Yeah. Well, so let's look at a couple of the basics that he talked about just to clarify. He described the way he looks at it as like being a real estate private equity company. I think, I mean, that's clever, but I think it's just basically kind of the way a lot of real estate deals happen. And that is you have general partners and you have limited partners. And I wonder if you could talk a little bit about like in your experience, how those, what's the difference between the two?What roles do they play?Monte Anderson (11:16.29)Yeah, like I'm the general partner or the managing partner in, in, you know, nearly all the deals I do. And I have partners, limited partners or, or members. These days we call them members of the LLC. Same thing, same, but they're passive, passive investors. And so in any real estate deal, you really need two things. And this is what I talk about in all small scale developers need two things. Really. We need really a good, decent loan from a bank.And I always say a bank, bank servers are still our best partners. They're going to be the probably lowest interest rate. They're also be the toughest to underwrite you, know, looking at your paperwork and, you know, looking at you closely and asking you questions. And then you need, you need affordable equity. You're either providing that equity or the down payment or your investor partners are providing that down payment.Kevin K (12:09.617)Right. Just like if you're buying a house and you have to put 5 % down, 10 % down, 20 % down, whatever it is. For a real estate deal, it's the same way. And a bank is probably going to require 25 % down pretty typically or more. Yeah. Yeah.Monte Anderson (12:14.079)same thing.Monte Anderson (12:23.726)or 35 % today, or you may want to put 35 or 40 % today at seven and a half or eight, eight and a half percent interest. I can remember years ago that used to be not be that bad of a rate, but we got used to this low rates. we kind of, you know, below 5%, I kind of call that free money. It's kind of free, you know, really. So it really makes deals easier to do. when they go up, butKevin K (12:45.265)YouMonte Anderson (12:51.822)Yeah, it's the same thing. You you buy a piece of property, you need a loan, you need equity, whether it's 5 % on an FHA loan to buy a house or whether you got a commercial loan at a bank and you need 25, 35%. We used to say 20 % down on commercial loans, but now these days I would say it's minimum 25 to 35 % down that banks are requiring. Not such a bad thing either, to tell you the truth, but it's kind of going back like a hundred years ago when we didn't have financing.Kevin K (13:21.211)MmMonte Anderson (13:21.678)Cause if you think about most of you're in my friends, not wealthy, you know, we didn't grow up with extreme amounts of wealth. 35 % might as well be, you know, might as well be a hundred percent, know, we got nothing, you know, you got nothing, you know, it's still a, still a lot of money. But once you get your, your, your investors, your limited partners, your, your members of your LLC, your passive investors, the passive investors don't, don't operate.Kevin K (13:33.859)Yeah.Monte Anderson (13:49.806)on a day -to -day basis. They're just like they have stock in your deal. And they need to be accredited investors, which means they have to have a certain amount of knowledge or net worth or wealth. They have to make a certain amount of income. They have to be sophisticated and accredited investors of sophisticated investors. In fact, it's a business person that it's not like a little old lady with their last $50 ,000 in the bank.That's a non -accredited investor or somebody that makes less than a hundred thousand a year. That would be non -accredited investors. So you want accredited investors and these accredited investors, that means they're sophisticated and if they lose their money, they're big boys and big girls. they, buyer beware kind of beware. So they're going to be passive partners. The general partner or the managing partner operates the real estate venture.hires the contractors, hires the leasing agents, hires the property managers, hires the architects, negotiates with the bank. Quite often in my case, the general partner would personally guarantee the real estate notes, which I do just about on everything I do. I hear people talk about not personally guaranteeing these commercial real estate deals. It's not in my world, really. That's just not realistic. I have to personally...Kevin K (15:14.949)Yeah, how does that even exist? Who gets away with not guaranteeing a deal?Monte Anderson (15:21.514)I hear people talk about it on YouTube and things like that. But it's just not realistic. there are different kinds of loans where a lender looks at a bigger real estate deal, big, where the asset is so strictly regulated by the bank or by the lender that you may get.Kevin K (15:25.125)Hahaha.Monte Anderson (15:48.098)you know, a situation that we, know, that you don't have to personally guarantee. So the asset is lots of equity. You know, it's the lender is really looking at everything you do, commissions paid, finish out, you know, construction, you know, things like that. They're approving everything, approved leases. They might as well be the owner. That's the only time I see that where you don't personally guarantee, you know, your real estate in that case. But.Generally speaking, is general partners got to guarantee the loan, got to run the operation. Also it's got to get, can get paid for running the operation. We get paid a leasing fee, a property management fee. We get paid a development fee. We get paid all these fees if there's enough cashflow. And since I'm the one putting the deals together, I always feel responsible when there's not enough cashflow and end up leaving my fees in.because I feel responsible if I didn't make the projection quick enough. it seems we just never make the, nothing ever works as quick as I think it should. It never works as quick. It's the nature of the beast. There's so many different things that can happen, whether it be.building permits or zoning or platting you know, a supplier, subcontractors, or didn't get a tenant, you know, early enough. mean, these days in most cities have hard trouble, have a hard time with building inspectors. So you may not get, you know, inspections as quick. We used to get building permits in two weeks and, you know, we could build a building in six months. That's just no longer the way it is. You know, it just takes a lot longer than that.You know, it just, and I used to go to California and they'd say, well, it only took me two years to get a permit. And I said, well, we're from Texas. We got a permit in like two weeks. You know, well, we're like California now. It takes us forever. It takes us forever to get things. So all of those things compile up and can cause you delays and stuff like that. And delays are going to cost you money, you know, and, andKevin K (17:51.985)Yeah.Monte Anderson (18:07.692)You know, I'm always changing things too. My projects are done incrementally. So we might start in one end and by the time we get through, it's different than what we originally conceptualized. And that's, it's got, it's good and bad. mean, bad is that it's changed and it's different and likely costs more. Good is it might be a better project because we're more curating the type of businesses or people that are there than we are just filling spaces.Kevin K (18:33.615)Yeah. I mean, just like on a personal note, the town, like as an example, the townhouse project that I'm working on with my partners, you know, we, as we have progressed through construction, we have found a lot of things that we decided we wanted to change. And a lot of that was really based on, we know like the price we're going to end up selling these at.And so it kind of changed our minds about who we think like the buyers are. It's a, it's a more expensive, home now than, it was originally. so, you know, we, for example, during the course of construction, we're like, well, you know, maybe we should change that kitchen. maybe that pantry should be different. Maybe we should have a different kind of countertop or finish. And, you would think that all that would be figured out ahead of time. But like you said, during the course of the project,Monte Anderson (19:04.589)Yeah.Monte Anderson (19:14.98)Yeah.Kevin K (19:28.355)you know, especially something I'm at take two or three years, things change.Monte Anderson (19:32.908)Yeah, they do. know, time, time happens so fast these days and with AI and other things, mean, the, the speed of, of everything that's happening is, you know, if you're copying something somebody did yesterday, you're already behind. I mean, you've got to be figuring out, you've got to understand this business and know where it's going rather than copying where somebody's been. can, you can learn from someone, but you really can't copy from place to place. know, you principles are the same, butKevin K (19:48.027)Hehehe.Monte Anderson (20:02.318)Yeah, like in the center I'm working in now, it's a 90 ,000 square foot shopping center built in the 60s. And we, you know, it was, we're converting it to mix of uses from retail and restaurants to coworking, you know, school and, you know, state of Texas lease and things like that. And we start off thinking we're going to get, you know, $16 a square foot or $18 a square foot. And we'll put a little lipstick on it here and a little, you know, fix some roofs here and stuff. What we find is if weIf we cut the spaces up smaller and we really gut them out and really make them nice inside, we can get $24 a foot. So $24 a square foot versus 16's a lot of money, you know, to the bottom line, which makes the property a lot more expensive. It's just what you just described with the townhome. You got a better kitchen in, you know, we're going to, we can get more money. In fact, if we keep the cheap kitchen in, we may not sell it.because we found out that the market was a little bit different. And by being an incremental or a nimble type developer, you can make those decisions on the fly and adjust and hopefully profit, you know, hopefully profit from that. In the meantime, you got to get more money somehow. So where do you get it? You either get it from your equity partners or you get it from your, from your bank. And this is a good reason to have community at your partners you want to have. You don't want to have poor partners.Kevin K (21:17.521)Yeah. Yeah.Kevin K (21:30.907)Yeah.Monte Anderson (21:30.958)You want to have rich partners because poor partners can't help you if you get in a situation.Kevin K (21:34.362)Yeah.Kevin K (21:41.297)Well, and I like your point about the fees part of it, because I think that was something I didn't really know anything about related to development 15 years ago, was that, if I'm the managing partner or the developer of this project, then I essentially pay a percentage fee to myself, and that's part of the construction loan and everything. And I remember in the first workshops that John Anderson did that Ipaid attention to, he was like, you know, it's kind of 5 % of hard construction costs in the ballpark. And so I was like, that sounds good. You start to bookmark that. then, you just like you said, that can evaporate during, you know, if things go a little bit sideways. And like on our project, we had budgeted a development fee for all, for the three of us who are managing partners and the construction costs changes and the inflation that's happened over the last few years have really caught up with us.And we basically having to contribute those fees back to the project to cover other things that we would like to do to it. So we hope to get paid out at a later date, but the reality is we're not going to make that fee during the course of the project.Monte Anderson (22:53.218)Yeah. And that's, I would say that's more normal than not. I would just say that's more normal than not. Cause I don't know something about in the idealistic stage, you remember when you were getting ready. I remember when you were getting ready for the townhomes and stuff. And it's the idealistic stage. It's fun during that stage, you know, it's like, it's like new love, right? It's like falling in love and you're in love, you know, all of sudden and everything is, you know, right. Unicorns and rainbows, you know, and then, and then all of sudden, you know, the reality.Kevin K (23:07.483)Yeah.Yeah.Monte Anderson (23:22.414)the reality kicks in. But I think that's more normal than not. In fact, I'm embarrassed to say this, but in my one, I had a hotel project in Dallas up here and the, was paid my development fee. I did the project in 2004 and 2005 and I sold it in 2015. And that's when I got my development fee in 2015. And it was my own fault.Kevin K (23:46.233)Yeah.Monte Anderson (23:52.586)In fact, my own arrogance, my own thinking I knew everything when I started that project that caused that to happen to me. And I wanted to do the project no matter what. I was just going to do it no matter what. I just wanted to do it. And that, and I was like kicking the can down the road, but that own arrogance.I tell Bernice and I talk about this all the time, Bernice Riedel and I, don't fall in love. She says fall in love with these projects. I say, don't fall in love with them until you own them. Don't fall, because it excuse your, and I fell in love with this project before I did it. And so I just had to do it anyway. Sometimes you just, you and I were talking earlier, sometimes you just, and if you're going to do that, that's fine. Just know that the pain is coming. Just know the pain is coming with it.Kevin K (24:32.145)MmMonte Anderson (24:51.178)I understand it. I understand loving a project more than anything and you want to do it. I understand it. Just be prepared, you know, for the stress and the high level of anxiety that will come with that.Kevin K (25:02.481)So, Monty, that begs the question then. If you didn't get paid your development fee for 10 years, if that's more common than we'd like to admit, how do you live? How do you make a living during the course of doing these projects? Because you have to have some cash flow to pay the bills on.Monte Anderson (25:21.774)Yeah. Yeah. So, you know, I started off as a real estate agent leasing and selling space, you know, and buildings in my commercial real estate agent. And so all in the beginning days back in the early years, 100 % of my business was third party broker. I was doing this for somebody else, you know, and that was easy. You know, I had an easy life back then. And then I decided to be a developer.Kevin K (25:48.667)Yeah.Monte Anderson (25:51.406)So, but what happened now today, I have about 80 % is my own stuff and 20 % is other people's about 80 % today. And so you still need to be working. We call it working in the flywheel or working in the area. You're still working to crank that flywheel to move your company along, to move your own personal life along. You still got to make income. So I always kept brokering space for others.people. And if you're an architect, so you would still keep doing architectural work for other people or doing your podcasting or doing your, you know, if you're an IT guy, you still, you know, you're working on your IT in these buildings, you're doing, you're doing work in other buildings, you know, but you're doing in hopefully in your farm or in your community, or anywhere you're where you're, you know, you're committed to where you're committed. That's a really key to this is, is working in an area that you, you know, that you commit to as a small scale developer, you need toYou need to stay close to home and not try to be working in, you know, Kansas city and St. Louis and Oklahoma city and, you know, Dubuque, you know, you'll be, you'll, that's a good way to go broke. You know, it's being too scattered out, you know, like that. You, and some people may can do it, you know, I'm just not capable of doing that. You know, you have to stay close and that's how I make a living. And I keep my, another thing is, you know, you want to keep.I mean, it's just silly stuff to say this, you know, live on half of what you make, try to get used to that, you know. That's a really hard thing to tell people and that's, you know, try to live on half, you know, try to really live, you know. I've had to sell my houses before. I've had to sell my cars. I mean, I've had to, you know, when the going gets tough, you know, sometimes you got to do what you got to do. Now, on wood and thankfully.And by the grace of God, I've been able to build my net worth continually. But when you sell a property and you make a lot of money on it or you make a profit, you've got capital gains, you know, then. And so the only way not to pay those capital gains is to do, you know, to trade that property or do a 1031 tax deferred exchange and put the money into another property. So I sell a property and I get some money and I either pay a bunch of taxes on it or I have to re -spend it.Monte Anderson (28:17.826)But if I respend it, hopefully I can get a brokerage fee, an architectural fee, construction fee. And so I end up living on these fees. You know, I'll end up in these fees I pay myself. I'm able to pay myself. they're not, you know, they're market fees. They're fair to my partners, fair. You you always want to put these fees and stuff in your partnership agreements.You want to put what you're going to get paid. You always want to put that in your partnership agreement. So your partners know what you're getting paid. You want to have that upfront. You don't want that to be a surprise. You know, as you're putting, I've got partners for like over 20 years, financial partners, and they just, trust me. It's whatever you want to do, do it. You know, and because they're used to me, you know, taking care of them. And that's really important as you take care of, you know, youryour people that invest with you like that. gotta take, I would, if I had to, would sell everything I had to make sure my people are whole and my banks are paid if I had to. And I'd just start over again. I haven't had to, but thankfully, but I've sold things along the way when I really didn't want to sell them, you know, to be able to keep on going.Kevin K (29:31.323)So, I mean, I think it sounds like then, if this is a fair way to say it, that if you're doing this sort of thing, first of all, it's probably, especially for a lot of people, it's better to think of it as like a side hustle, at least initially. But more importantly, it's it's great to be able to have one of those people in the flywheel that you would normally pay a fee to.it would be great to be able to replace yourself with at least one of those. So whether that's brokerage, property management, design, engineering, anybody that you might normally be cutting a check to, if you have an expertise in one of those areas and you can claim that fee, then that is a way to keep getting yourself paid.Monte Anderson (30:13.302)Yes.Monte Anderson (30:18.538)Yeah, yeah, think about this. Think about this in your farm up there and your Kansas City farm up there. You're working on this project right now. You're having to put your fees back in, but you're also working on a project for another guy, John Doe and Jane Doe down the street. You're doing the same things. You're still improving the neighborhood. So it's really, I don't look at it as a side hustle. You're doing architecture for yourself and you're doing it for Jane and John and these other people.Kevin K (30:39.91)Okay.Monte Anderson (30:45.42)And then every third or fourth or fifth deal is your deal. And every third or fourth or fifth deal, it's your deal. And then the more you get going over time, every other deal is your deal. And then every two deals is yours and one is somebody else's. And every three deals is yours and then one is somebody else's. So over time, it becomes, but I think it's good as a small scale developer to have.the term used, side hustle, is true to be able to start right now. Because right now you can adopt a place, start doing your architecture in that place, stop building, know, start working on hospitals all over the country, just work in your own farm, and do small jobs, do storefronts, come and help people do their lettering on their windows if you're an architect. You know, help them just fix things up.You you make enough money to make a living and at the same time, now you're working on your townhomes. You know, you're working on your townhomes and now you find another project and I'm always looking for an opportunity. Because if I can find an and what is an opportunity? An opportunity is where something is below the market. Like the shopping center I bought, 90 ,000 square feet, 60 % occupied, the rates were like six or $7 a foot per year. You know.When I get through, it's 90 ,000 square feet. The rates are 22, $24 a square foot. So I bought it. It was way below the market, but the market site is a $6 building. The market didn't see it as a $24 building because it had the cheap kitchens. Like you say, in the townhouse, had, so we put good kitchen, you know, we did better and we had to do, we had to spend more, but it was, we were able to make a lot more money.And in the long run, it will be. I can tell you this on all of my projects, all of them, just a hundred percent. If I keep it long enough, I will get all my fees and a really good return because what I'm doing is improving a farm. I'm improving a community together. And as they say, it's the tide rises, so to all chefs. So every time I'm improving something in that farm, the one I've got is going up in value.Monte Anderson (33:10.412)And over time that'll go up. If we look at it at three or four years, that's where the problem is on the YouTube video that we talked about is looking at stuff that could get rich quick scheme is, don't know. There's guys who flip houses and do things. Gals that flip houses and do things that probably they get rich. They get somewhat rich, you know, I guess. And some of them get rich, I guess. And you know, you can do that.Kevin K (33:22.523)Yeah.Monte Anderson (33:38.552)That's just never been my goal in doing real estate. My goal has been one of a townmaker, you know, of making our lives better. And I know you have the same goal in mind. So do most of our friends have that goal. We want to make the built environment better. Money's important, but it's not always the only important thing.Kevin K (34:02.363)Yeah, I think it's, kind of took the words right out of my mouth. That's like, you're not, you're not describing a, get rich quick scheme at all. But you're describing something that has a different kind of reward that somebody had. Obviously your, your goal is still to make money and make good money if you, know, if you're smart about it, but you're not going to be rolling up in a brand new Maserati in two years or something like that. It's because your goal is really to improve.Monte Anderson (34:08.93)Yeah.Monte Anderson (34:28.098)Yeah. Yeah.Kevin K (34:31.525)your place and lift your own community up and do really good stuff along the way.Monte Anderson (34:39.084)Yeah. And, and like you said, make making money. always tell people wherever I go these days, making money is the most important thing. Doing good is equal, but I didn't say doing good is the most important thing first. And then make it my, you know, I said, making money, said most of them, because without making money, you can't continue. You're going to be stuck. You know, if you build those townhomes.all your money's gone and all your credit's tied up and you weren't able to sell them or you weren't able to get the rents, then everything you got's tied up. And I can't tell you how many friends I've got all over the country right now that are one time, developer and out. They're one deal and out, you know? And so when I get stuck on a project and I do, I'm on one of those right now, it's just big and it's bulky, you know, and it's hard.So I've got to continue to do these littler projects around that keep me. That's what keeps me making, know, my own salary, you know, making, you know, got to, we, had a meeting with my staff this morning and said, okay, what are we going to sell right now? What's, what's on the board that we can sell? You know, what can we do? That's when we make our fees, you know, brokerage fees and development fees when we sell these properties. And then we can do another one. We'll fix them up. And hopefully we get to.sell them to somebody good, you know, that hadn't been the case always with me. I sold some stuff to some people I didn't, I wished I wouldn't have, but sometimes I have no choice. You know, sometimes I have no choice. have to do, but the difference too, in what you and I are talking about today, you're in the middle of it yourself right now. And I am in it all the time constantly is that we're in the middle of this, you know, ofvery difficult, you know, complex, you know, maybe more complex than somebody doing a big, you know, $100 million building over here. Because a $100 million building, you've got lawyers and lobbyists and architects and planners and engineers and contractors, and you've probably got a big bid and you're going to build it all at once and it's going to be over and it's financed by the Ohio State Teacher Pension Fund.Monte Anderson (36:57.602)know, has financed it and it's probably easier because the developer didn't have to be the developers more of a financial architect, more of a financial wizard, you know, if you will, whereas a small scale developer like us, you know, we're the, you know, we're everything. Yeah, we're quite often we're the contractor, you know, handling leases, we're going to raise the money, we went to the bank to sign the note, you know, if the plumbing's broke, you know,Quite often I might be the one that's called depending on when it is, if it's in the middle of the night or something like that. We're very close and these are personal. We know the names of our tenants or our buyers. kind of, know our people. That's the big difference. And so you gotta be, you gotta really be, I think more knowledgeable sometimes about building, about developing and building. And I would think that this is the way people were a hundred years ago. I would think.100 years ago when there was no financing, or maybe a little longer, but 100 years ago when there was no financing and you're building these projects in towns with all cash or borrowed money from the attorney in town who had a little money, or that's quite often who's building those things back in those days. Quite often it was bankers and attorneys back then, bankers built.We're developers. can't do that these days because of the laws, but quite often bankers and things were developers. And you were raising all cash and you're doing it. That's why all of the buildings are small, a lot smaller back in C. And they were built incrementally. When we talked about incremental development, we didn't invent incremental development. That's the way the beginning of time. Yes.Kevin K (38:48.143)Yeah. Yeah. That's the way all development was until really fairly recently. I'm curious about if you could talk about some of the ways things go wrong. So you mentioned you have some friends who are like one project and out. What's going on? How does something like this really go wrong for somebody where, or are there a couple of key mistakes to just really watch out for?Monte Anderson (38:55.5)Yeah, it was.Monte Anderson (39:16.748)Yeah, the biggest mistake is humility, not enough humility. I mean, really to have that open mind to really look at the reality and the facts, know, really have your ego checked and the reality of facts. You really need to look at those facts. Do not try to, you know, cherry coat it. not try to do that.What happens in these cases is be a guy like you or me was starting out, you you put together a deal and you put all your money in, you put all your money in just to get the plans done and, you know, know, down payment on the property and engineering and, you know, bank fees and attorney's fees. And you put all your money up, you got your money. And then now you got a couple of partners and you've promised these partners. You've promised them certain things, you know, that are probably too good to be true.Kind of like the guy on YouTube. Probably too good to be true. If it sounds too good to be true, it probably is. And we've promised those. And we've promised those things and now it's not the right, we said it was. Or we want to upgrade the kitchens. Or I want to change the spaces. In fact, I have a meeting this afternoon at four o 'clock after this to talk to one of my partners about this exact.Kevin K (40:21.903)Yeah, if it sounds super easy, watch out.Monte Anderson (40:44.318)banking today and saying we need more, we need more money. And then you, then you, can't get much more money. You, you, you spend two or three years getting their project together. You used all your money, you used all your in -laws money to part of your investors. You got your credit tied up. You finally did get, say that in the best cases or in some of the best cases, you got it all built. It's built and you're not, you're for one thing, you're brain dead.your brain dead, you're just deal dead. And secondly, you've got no more money. You got no more credit. You've got to go back to work wherever you are, doing whatever you can to make money. Because you still had your house and your wife and your kids. You still had to, and so that's actually best case in some scenarios, you didn't go broke. But in many cases where the deal maker, the promoter, the developer promises things.They might even lose their interest because they can't, especially if it depends on how they promise the payback to the investors. You could actually lose your interest. call that, you there's a preferred return. A preferred return is when you would maybe guarantee an investor return. You would guarantee them maybe a 6 % preferred return, which means you're going to get 6 % from day one in the deal. And if you can't pay me back, that's 6 % plus a percentage of the profit.then I take your interest. And that happens, that happens a lot. And that's not as bad as a bankruptcy or a foreclosure, but you ended up doing all this work and you end up with nothing. And so I never do preferred returns with anybody. I never do those, just don't do them. There's too many unknown things. There's just too many things that can happen. Preferred returns sometimes it's like having a bad credit card. You can't get the interest, you know, paid.And it just keeps going every day while you're having delays or not getting the project done quick enough.Kevin K (42:51.697)So then for your, do you have a recommendation then for dealing with investors so that you don't have to do the preferred return? How would you structure, recommend structuring?Monte Anderson (42:59.246)Yeah, I do. I do. have a, what I call the whole pie. I'd say it's the promoter. And this is, I'm going to oversimplify this, promoter, the developer, you put up the money to pursue all the money to do the deal, the architecture, the due diligence, the earnest money, the legal money, and you sign the note. And then the investors, which you may be an investor in your own deal. If you put cash in your own deal, your investors get 50 % of the deal.And they put up 100 % of the cash needed, the equity needed. And as the cashflow is there, they get their equity, they get their equity back first. No percentage return. They get their equity back first. And once their equity is all paid back, then you split 50 -50. So you're 50 % going in, you're 50%. But they get all their money back. And here's the thing about investors. Most of time, once they get their money back, they're very...They're very flexible then once they get their principal back. And then in the meantime, you say, well, I got no fees. How am I going to make a living? Well, you make your living off the development fee, the leasing fees, the management fees. So you're making those fees back. then, then if you get the building leased up and this is what I'm doing here at where we speak right now, is I'll get this thing leased up and stabilized with no more construction going on. Then I can go out on the market and get a better loan.So I can get a better loan. know, lenders during construction, you know, you've probably experienced this. You lenders are very nervous during construction.Kevin K (44:35.218)yeah, that's the riskiest time period.Monte Anderson (44:38.252)Yeah. And so they're in, this way, this way people get back, they get back to their percentage when they get it here, when it comes back, you're going to get it when it comes back. Now I got to treat them right. And I got to do my best to get their money back. And that taking me time to build relationships where I can, where I can get this done. And these are also community investors. And I would say, what is a community investor? It's a person that's, it's typically a baby boomer, generally speaking between.It's worth between three million and $20 million net worth. That's gotta have 100, 200, 300 ,000, 1 ,000 they can put in one of your projects. Maybe there's three or four of them if you need a bigger amount. they're gonna be like around, it's somebody you can have coffee with and talk to. No, they're gonna be...more empathetic with you, you know, if you're honest with them, you know, always be honest with them. Always telling the bad news and the truth. Always. Don't hold, don't hold back and surely don't hide it. Don't hide. Don't, don't do that. Don't do that. People are, people are, people are forgiving and better when, the truth, when you're, when you have a true, you know,You have a true relationship that's not full of hidden things and it's just a, it's better. And it always comes out in the end. It always comes out better for you. And they know you're committed.Kevin K (46:21.263)Yeah, was gonna say eventually you might be able to hide something for a little bit, but it's gonna come out.Monte Anderson (46:26.604)Yeah. Yeah. You're not going to be able to be careful with your numbers. And I've done this. mean, I've, you know, I've been too optimistic on my numbers, you know, I mean, cause I wanted to do the project, you know, and, I have people around me that keep me balanced in that place. said my long time CFO here, he's an old banker back when he he's been with me forever, I always give him proformas and stuff. do. said, look,Kevin K (46:46.16)HaMonte Anderson (46:56.27)shoot holes in this, really, just really take my stuff apart. Really look at it, critique it, challenge it. Tell me I can't lease that space for this much, or I can't resell it, or I can't know why I can build a restaurant for $100 a square foot. It's gotta be 150, no matter how you look. Tell me those things. Tell me I can't manage this thing for $5 a square foot. It's gotta be, critique me.Yeah. Keep me balanced.Kevin K (47:27.867)So yeah, I think that's great advice. Always have somebody that you have a relationship enough with that you can ask them to poke holes in what you're doing. So I mean, we've talked about some of the downside, there's also, mean, the reality is we're interested in this and a lot of people are interested in this because there's a ton of enjoyment that comes out of it as well. Some financial, but a lot of it non -financial. I think one of the things justMonte Anderson (47:37.88)Yeah.Kevin K (47:57.243)For me personally, I'll never be able to shake loose the architect inside me and I just love seeing buildings going up. the incredible reward you have to know that you worked on something and you can see it manifested physically is pretty awesome. So there's all those things and it kind of like we were talking a little bit about earlier, I think one of the things that I remind myself of.Monte Anderson (48:16.92)Yeah.Kevin K (48:26.845)frequently is that sometimes you just have to make a decision to just go and to just do it. And you can definitely get paralysis analysis here in this always hoping for the perfect timing and the perfect deal. But there's never really any such thing. at some point, you want to do your homework and everything. there comes a point where you just got to pull the trigger and try it and do something, right?Monte Anderson (48:33.186)Yeah.Monte Anderson (48:54.402)Yeah, yeah, I'm very instinct guided by instinct. I mean, I'm very guided by instinct. Now, mean, you've seen me before work on numbers and stuff, you know, I'm constantly running numbers. When I see projects, I can see it with numbers. I see the numbers and the spaces and the sizes and what the rents should be and.operations that cost and stuff like that. yeah, at some point, there's no way you're going to be able to prove it and you just got to go for it. You just got to. And to your right to see a project go from like you've seen, you know, go out of the ground to see it come up. mean, to watch the framing and, know, from the plumbing, watching the plumbing stick up and the framing. mean, there's, there's something so great about that, especially when you're doing a project that's worthy, you know, worthy project. It's something.I mean, we were meant to be builders, think, as humans, especially. I mean, we were meant to build and to do good things upon the earth. Hopefully we could do better things than we've done upon the earth, than some of the things we've done, but we were meant to be builders. And there's nothing like it to see.project. have photos all around my office of projects and things that and it's just so good to see all of that and to also have made a decent living and built some wealth you know and today I have my daughter and my granddaughter both work with me and to have that that legacy or that start of something isIt's like there's no way any amount of money could make me feel as good as looking at some of these projects and just seeing businesses thrive and people have decent places to live. There's something so special about that. Otherwise, I'd just be a broker today, just brokering deals and wouldn't care. I think there's something in us that wants us to be townmakers.Kevin K (51:00.581)MmMonte Anderson (51:00.704)It wants us to make our towns better. And maybe it's you're not the developer. Maybe you're just one of the champions, the community champions, or you're just an activist in the community that supports this. It's nice to have people like that. Those are very important people to me. People that cheer me on and don't just criticize me. They're very important, you know, to me. They're just as important as anybody, you know, but that, but there's something so good about that. And then, then you will, if you can, if you can.If you can commit, here's why committing to your neighborhood or your farm or your place for the rest of your life is so important. Because once you commit to that place like that, you commit. The universe changes around you. It makes things easier. Well, I don't know about easier. It makes things doable. It gives you resources. It gives you things that you wouldn't have had when you make that.when you don't have that commitment. gives people come to you and they want to sell you a property cheaper or they want to, you know, people will invest with you. People will do things with you when they know that you're a true, you're champion like that. And then you will make money. And I think people and my partners and stuff, they want me to make money. They allow me to make money on these projects. They want me to make money. You know, I have to make them money too, but, and to...see all the small businesses that I deal with and the people that I've seen in housing that may not have had housing and subcontractors and welders and carpenters and know painters and people that around me help them build their businesses and stuff I'm involved in all of that there's I mean I can't imagine doing anything better I don't know what it would be maybe I could be a missionary or something do better work or something but I don't know this is good stuff well this is just goodKevin K (52:49.563)Yeah. Well, you're a missionary of sorts. You're a certain.Monte Anderson (52:57.312)It's good stuff, it's good, you and it helps you help people. You help build a better, you hope you do. Not everything I've done is always the best for sure, because I've made a lot of mistakes, but that would be the hope that you are able to leave something decent. By the way, my other granddaughter just graduated from Stephen F. Austin in Texas to be an architect.Kevin K (53:24.729)wow. All right.Monte Anderson (53:25.644)So that was really cool. she's, you know, I got kids, so there's family trees, you know, starting to be architects and developers and stuff. it's a good.Kevin K (53:36.625)I feel like we're starting to brainwash our kids in that regard too. We've got them, you know, all those like HGTV type shows. We got them watching those and they're really enjoying them. And it's fun to watch with them. The latest one that we found, which I guess is not a new show, I guess it's like seven years old, but there was a show called You Can't Turn That Into a House. And it was actually three guys from Kansas City whoMonte Anderson (53:40.994)Alright.Monte Anderson (53:46.396)yeah.Monte Anderson (54:01.6)Yes.Kevin K (54:05.821)made the show and they take these things like, you know, they'll take a couple of school buses or a grain silo or a horse trailer or whatever, and turn it into like a little house. and it's just like the coolest thing. And they do it on these ridiculous schedules and ridiculous budgets, but that act of creativity is so just, you know, incredible. And I remember actually, I think the first one we saw that it was like this, this stuff kind of reminds me of Monty because.Monte Anderson (54:20.78)Yeah.Kevin K (54:34.489)you have done some really cool, creative, unique stuff with your projects that are way outside the box on what people would normally look at, especially for your retail stuff.Monte Anderson (54:44.15)Yeah. Yeah. Yeah. Yeah. We use a lot of trailers and stuff like that. love buses and trailers and things. Yeah. Kind of cool. Yeah.Kevin K (54:49.435)Yeah.Kevin K (54:52.977)So it's fun work and I agree it's fun to share it with others and everything else.Monte Anderson (55:00.111)Yeah. We do need to make more money as small middle class developers and stuff. We do need to make more money. So we need to continue to teach each other and help each other. That's another thing about the friends that you and I have. I think we all pay it forward. We're all always trying to help each other, I think. And that's a good thing.Kevin K (55:21.477)Yeah. Well, Monty, where can people find you next? Or you mentioned earlier some places you're going to be roaming around to. Where else are you working these days?Monte Anderson (55:34.934)Let's see, South Bend, Indiana, Elkhart, Indiana, Denton, Texas, Regina, Canada, Dubuque, let's see, Lafayette, Louisiana, getting ready to start in Orlando, Florida. Of course, Bernice Riedel is working in Buffalo and Jim Cooman in Minneapolis, Minnesota. And then we've done a little bit of work or still doing work in Kansas City or in Grandview.Missouri with an abandoned golf course down there that you remember. We're still working on that. They got their financing and bought that, the people that were helping. And then you can always reach us at neighborhoodevolution .com and optionsre .com. And we're always here. We do, we only do development, you know, in my farm, in my local area of Southern Dallas County. Southern Dallas County is where I work. And then we...Kevin K (56:11.867)Good. Good.Monte Anderson (56:32.022)Then we coach and teach and train, help cities create ecosystems all over the country through neighborhood evolution.Kevin K (56:44.571)Well, we just ran into Bernice recently. was here in Kansas City giving a keynote speech for a Missouri Main Streets Conference. So that was kind of cool to see. terrific. All right. We'll say hello.Monte Anderson (56:51.916)Yeah, and she's right outside my door right now here in Texas. She's riding with me to Lafayette tomorrow. yeah, we're meeting Marcus. Marcus King in Detroit will meet us in Lafayette. So Marcus is coming.Kevin K (56:59.451)Good, good. All right, Monty.cool, good, good. All right, well I'm jealous. Sounds like a fun crew. So. All right, Monty, thanks so much. This was great, very informative and I'm sure we will do it again.Monte Anderson (57:09.218)Yeah.Monte Anderson (57:17.762)Yeah, thank you, Kevin. See you soon. Bye.Kevin K (57:19.205)All right, take care. Get full access to The Messy City at kevinklinkenberg.substack.com/subscribe

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In this engaging discussion, Jim Heid, a landscape architect and founder of the Small Scale Developer Forum, shares his journey transitioning to development. He emphasizes small-scale projects as powerful tools for community revitalization. The conversation delves into the collaborative nature of urban design, the challenges of regulatory processes, and the need for creative, context-sensitive solutions. Jim also highlights the importance of learning through experience and how real estate can address societal issues, all while keeping it entertaining and insightful.

Abby Newsham and Jason Carter-Solomon, both lifelong St. Louisans, dive deep into the long-standing rivalry between Kansas City and St. Louis. They discuss the cultural differences, with Kansas City thriving while St. Louis faces stagnation despite its rich assets. The pair humorously tackle the infamous St. Louis-style pizza, explore urban leadership challenges, and share personal reflections on their neighborhoods. Their engaging conversation sheds light on how historical dynamics have shaped the identities of these two vibrant cities.

John Anderson is a witty commentator on real estate development, known for his humorous takes on complex issues. In this discussion, he demystifies a slew of building code acronyms that may boggle the mind. He argues why sprinklers may not be necessary in smaller buildings, shedding light on how these regulations inflate housing costs. John also navigates the critical differences between the Fair Housing Act and the Americans with Disabilities Act, and shares his unique perspective on the intricacies of zoning reform and small-scale development.

There’s a lot of takeaways from any conversation with Joe Minicozzi, or one of his many public presentations. Here’s mine today: omnipotent forces didn’t create our current systems, whether we are talking about zoning, traffic engineering or tax assessment. Or, in fact, just about anything in life.These were all created by fallible humans. We can, and should, change them. It’s our duty, our responsibility. Your local tax system, and your local zoning code were not handed down to you by Moses from the mountain.Joe Minicozzi of Urban 3 is one of those rare people that just has a knack for communicating complex ideas. If you haven’t seen one of his presentations, run out and do so. Here’s a sample from Not Just Bikes, and one from Strong Towns. Today, we talk in audio form instead of video, but I suspect you’ll enjoy it just the same. Since this is a blog, too, here’s a few visual references for fun:Find more content on The Messy City on Kevin’s Substack page.Music notes: all songs by low standards, ca. 2010. Videos here. If you’d like a CD for low standards, message me and you can have one for only $5.Intro: “Why Be Friends”Outro: “Fairweather Friend”Text Transcript:Kevin K (00:01.231) Welcome back to the Messy City podcast. You know, one of the joys that I've had in being involved with the New Urbanism Movement and the Congress for New Urbanism for many, many years is you get to meet and know people who take a lot of issues that we talk about and care about and completely reframe them and make them much more interesting and accessible and understandable, I think, to a larger audience. And there's been a number of people who who've done that or I've seen that happen in the course of my career. And one of those is joining me here today, live from Asheville, North Carolina, Joe Minicozzi. Joe, how's it going, Joe Minicozzi (00:42.018) Great, thanks for having Kevin K (00:43.771) Well, it's fun. I've been wanting to do this one for a little while and it's you're a busy guy and I'm really glad you made some time. Joe, you may know he's often had his work featured in Strong Towns. He's a regular on the speaking circuit with his firm, Urban 3, and he's really developed a unique approach to kind of explaining our built environment in graphic and financial terms I think has changed a lot of people's thinking about things. And we're going to get to some of that. Joe has, one of the cool things, Joe, is you're working all over the country. So there's always something new to talk about. But before we get there, I do think it's interesting for people to understand your background because like somebody coming upon you today and one of your presentations, they might think, he's like this kind of urban guru guy. What does that mean? Or he's like a financial guru guy, but you're actually, you're an architect. Correct? Not licensed, but educated. Yes. Where did... I don't think... One thing I never knew, Joe, like, where did you grow Joe Minicozzi (01:44.476) Well, not licensed. Can say that. Educated, yeah. Yeah. Yeah, so... Go Joe Minicozzi (01:56.116) upstate New York, Rust Belt, little town called Rome, New York. Kevin K (01:57.445) Ruffio. cool, that's a cool town. Joe Minicozzi (02:05.282) Why do you say that? That it's not cool. When I was Kevin K (02:07.983) Well, I mean, there's some cool built fabric there. No? Joe Minicozzi (02:11.256) No. When I was a kid, they tore down most of downtown. It was literally one of the largest urban renewal projects per capita in the entire United States. And they blew up, I don't know, like eight to 10 blocks of downtown and built a wooden fort. There's a revolutionary wooden fort in what used to be our downtown. Google Rome, New York and go into the downtown, you'll see it. Kevin K (02:39.715) OK, I must be thinking of pictures I've seen of a different upstate New York downtown then or something. Joe Minicozzi (02:43.288) Oh no, no, it's, didn't, but I didn't realize that was abnormal because you you grew up in a town of 30 ,000 people, this is it, right? That's all you know. You just, so when you go to college, you're just like, yeah, surely like you've got a fort in your downtown, right? You know, everybody's got one. Actually Savannah has one. So, but it's not in the downtown. They didn't eliminate Savannah to rebuild a wooden fort. Yeah, but this is a magnet that I have that I in my bookcase over here. This is my grandfather. Kevin K (03:03.193) Right. That would have been rather odd. Joe Minicozzi (03:13.34) used to tie a rope to this thing. And he's an Italian carpenter, first generation American. And he's tied a rope to this and that rope was tied to my waist. And I used to just walk around job sites all day with him as a kid. I was like, you know, six years old walking around a job site with this huge magnet tied to my waist. And I was picking up nails and I would just sit there with this little anvil, like making the nails go straight so he could reuse them because you know, he's depression era. And I thought I was building buildings since I'd go home and talk to my dad and I was like, I'm building buildings with Papa. And he goes, sounds like you want to be an architect. And I was like, Bing, I want to be an architect. so that's, I wanted to be an architect since I was nine years old and I went to architecture school. Kevin K (03:53.903) You know, that's funny. That's like a weird thing we share in common. It's like, I don't know how that happened with me, because I actually didn't know anybody, you know, in architecture. And I knew a few people who built things, but for whatever reason, I just like always knew I wanted to go into architecture and city planning. it's it's just where I was. So, but anyway, so go ahead. Yeah. Yeah. I had no idea. Like why showed up to like freshman year? Joe Minicozzi (04:12.386) Yeah, like, they really cool pencils, right? I mean, it's like little clicker pencils, awesome, great tools. Kevin K (04:22.199) And here's the list of all the s**t you have to buy. And I was like, what is, what does even all this stuff do? Joe Minicozzi (04:25.162) Yeah, here's, out and buy a thousand dollars worth of stuff. Yeah, little, remember that, God, I hate saying this, it sounds old. I was explaining to somebody on staff, remember those little letter writing tools, that little plastic thing that you'd have to put on your parallel bar to make those three lines to do your lettering properly? That was insane. Anyway, sorry, sorry kids. That doesn't exist anymore because we actually type in computers now. Kevin K (04:39.745) my god, yeah. Kevin K (04:44.805) Totally, Yeah. Kevin K (04:53.349) Yeah, I know. Everyone wants to share. mean, actually learning how to do architectural lettering was a pretty cool thing. I mean, I always liked the benefit of Joe Minicozzi (04:59.628) Well, the frustrating thing for me is you go all the way through architecture school and the University of Miami is a five -year program and you never built a building. So how can you be a designer of a building and not understand how it's constructed? So in my fifth year, we petitioned the school to build a homeless shelter and we just went ahead and built it, designed it, built it, worked with homeless folks to figure out what are their needs? How do we help solve the problem architecturally? And think that's one of the beauties of Miami is that, you know, the whole time I was, know, Miami is known for its new urbanism, but I was always talking with Liz Plater -Zyberg about what was going on in my hometown, because here you have a town that was designed for walkability, designed for the things that new urbanists would proclaim, yet it was dead as a doornail and we were eliminating our downtown. And Liz would always say to me, she's like, well, that's economics. That's something different. and we're trying to deal with this flood of what's happening in South Florida. That's a different reality. So this whole being seen as an economist is mostly about chasing a question of what are the policies that shape our environment and how do I visualize those for folks, which is very in line with new urbanism. We just look at the money Kevin K (06:15.397) So talk a little bit about how you got to this point then professionally of working on your own and doing a lot of the economic analysis work that you do Joe Minicozzi (06:24.984) Well, mean, if first is working in architecture, and I think this is probably true for most people that are urban designers, is that you want to look at the context of things that's more exciting for you, or why would somebody say, I'm hiring you, the architect, to do an office building here? If you have an urban design mind, you're like, an office building? Why not a mixed use building or why not a residential building? Why is that developer choosing? That's really the design is when the developer makes a choice, right? And so why is the developer choosing office over residential or over retail? In having an urban design mindset, you're going to be more empowered to be looking for those things, those other forces. What are the financial streams? So after architecture, I went to grad school and then started doing like internships in real estate development, real estate finance. I worked at John Hancock Real Estate Investment Group in Boston. kind top of the food chain, where they had $4 billion worth of real estate across the country. And you're seeing how they're making decisions financially about what's going on in your town, right? Because they're going to be doing an asset in your town, a strip mall or a mall or whatever, right? Totally different design series. It was fascinating to watch, but it felt, if you saw the movie, The Big Short, it felt a lot like that. It was like, wow, these people are like on a different way of thinking. Like there's questions they're just not even asking. We were spending $100 million a year fixing the buildings that we owned. Now when you're making 15 bucks an hour, like that's a lot of money, right? And so you'd sit there, trained as an architect, you'd sit there with these asset managers and I would literally show them pictures of buildings that we owned, a building that we owned in Topeka and a building that we owned in Tacoma. And there are two office buildings that we owned. And I would ask the finance officers, I'm like, what's the difference between these two buildings? And they would start going through all of this gibberish of numbers and cash flows, cap rates, NOI, all of that stuff. And I'm like, no, no, no, look at the pictures. And like, what are you talking about? I'm like, it's the same damn building. We own the same building, the same office park building in Topeka and Tacoma. And you know, they fall apart differently based on the ecosystem. And this was like mind blowing to Joe Minicozzi (08:43.104) And it's just like, wow, they don't even understand what this... It's just a cashflow model for them. It's not a building, right? As an architect, you're going to... Like the windows fall apart differently. It's going to be based on the heat load of the air conditioner, all that stuff. But it's kind of mind blowing that this is the cashflow, the invisible sine curve that's moving by low cell high, that's moving through the system. And we're not even talking about it. So it's always... Yeah, go ahead. Well, it's always made me curious and got into real estate development. And then during the recession is when I started Urban 3, trying to help cities understand that they're prey to these sign curves. Kevin K (09:20.539) Yeah. I remember you used to tell a story about working at John Hancock and I think this is just instructive for people to understand the world of like big development, big finance was I think you had a story about we had they had X million dollars that they had to place within like 48 hours or something like that. What was Joe Minicozzi (09:37.56) Yeah. It was called a capital call where the CEO of the real estate arm came in and said, need to get, I think it was like $120 million into the ground in the next quarter. So that was an issuance that he was given from Topress. think of anybody that's on this podcast, if you have a 401k plan, if you're like CalPERS is the biggest one, the California teachers. pension. They have to make money on their money, right? So they take your retirement investment and they go out and make money so that you can have growth in your dollars as an investor. So if you want to see your 401k plan grow, well, somebody's got to make that money grow. So they're going around, in case of John Hancock, that's an insurance company. So somebody buys John Hancock life insurance. They want to return when they die on their money. what they do at the top level of John Hancock, they're putting some money into bonds, money into stocks, some money into real estate. So ours was the real estate arm. And whatever decision was made at the top, money came into the real estate world and was like, okay, that needs to get into the ground as fast as possible. So they were issued this $120 million in the next quarter. So the people that are finance managers call up all of their developer friends and were like, can I buy a building somewhere? That was basically how it happened. And the more expensive the building, the better because the more we can get that $120 million down to zero, the faster with less transactions. So imagine if you were the guy on the office that found a hundred million dollar building, like that's actually good, right? Now in architecture world, when we go to school, we're learning the direct opposite, like smaller, like little investments. We're not thinking about the big fish that are out there. anyway. Kevin K (11:25.583) Yeah. Sometimes it feels like you're like a language translator, Joe. It's like you have these two different worlds that you have grown to understand really well. One is like architecture and development, and the other is finance. And do you feel like you're kind of like straddling those worlds and trying to explain one to the Joe Minicozzi (11:44.652) Yeah, it's a simple sense, the tagline of our company is a data -driven storytelling, you know, that we have to communicate this stuff. And so lot of what we do is just unnerve things. I just came back from a meeting with our county assessor and their consultant, and, you know, he's going through this report that's got how many pages? I don't know, but it's all this. And it's like, how can you show me all of this text? and start talking to me about it. And I'm just like, I'm like, dude, you got to show me a picture somewhere. It's like, this is crazy. And so what we do is if you watch any of our work, we spent a ton of time breaking a city down to reveal its essence. So I don't need to get into like whether or not your spark plugs are firing at 20 beats per second or whatever. I need to just show you your car works, right? What does the audience want? They don't need to know the details. And far too many of us technically, trained folks, even architects, get down into the details and the audience doesn't necessarily understand does the car work, yes or no. So that's basically the method of our work is try to make it simple for folks. I use lot of analogies when I talk to people because that's how we relate. that's kind of, think of it having a curious mind, you want to go in and break something down, but to be able to speak it to a regular audience. It's not that the audience is stupid, it's just people just don't care about those kinds of details, they just want to know the bigger picture. Kevin K (13:19.545) Yeah, yeah. And so before we get into a couple of those stories, I am also curious, when you started your business in the recession, how did you, like who were your first clients and how did you get going in that world? Because it's definitely a different thing for an architect or urban designer to get into. Joe Minicozzi (13:39.448) You know, the funny thing was, I remember in the recession, I think I did a local lecture here in Asheville to the AIA, to the Architects Association. You know, it's a recession. Yeah, you're not building buildings. So as an architect, you're out of work, you know? But what's crazy about the architectural education, it's really an amazing education in creative thinking, but also critical thinking, right? So we're all given, you remember studio, there's like 15 of us in a studio, we're all given one problem to solve, but you're get 15 different answers, right? So that's the creative side. But the analytic side happens in all of that, that we're trying to break it down and figure it out before we can get to a design process. So that's the critical thinking side. Those skills can be applied anywhere. And then also in architecture, what do you do at the end of the semester? You have to pin up your work and you have to defend but it has to communicate to an audience visually, right? They need to understand what's going on in the design intent by what they see on the wall and how you present it. If you just look at that as a basic educational format, that can be applied anywhere. So we just applied architectural thinking to quantitative economic data for cities, right? So we get all of your data. We figure out what's its floor plan. Like why is this road here? Why is your city grown a certain way? That's all a floor plan, right? But there are decisions that are made along the way that fuel that growth. So if I add three bedrooms to my house, was it because I had four kids? know, it's like, that's the decision point for growing the house. Well, the same is true for cities. So we see when you get white flight, you're going to see that like in Kansas City. We saw that in Kansas City, Missouri, like this massive growth, southward, northward and westward or eastward, That's the whole, and that all happened really fast from 1950 forward. I think you, it's something like you doubled your population from 250 to 500, but you've 10 times your land area, which is crazy. Kevin K (15:52.475) Yeah, yeah, it's somewhere. We had a massive geographic expansion from the like 1947 city until today. I think the original 1947 city or so was probably in the ballpark of about 40 square miles. And now it's like 315 or so. Joe Minicozzi (16:15.242) I'm just drawing off the top of my head. There's an actual presentation out there somewhere, but I think it was like three times the road per person growth. So you're taking down three times the cost. So yeah, during the recession, was basically, I was showing up at conferences trying to help folks that were trying to have conversations about walkability, urban design, equity, and trying Kevin K (16:19.865) Yeah. yeah, absolutely. Joe Minicozzi (16:44.472) trying to share that the things that actually are all things that we advocate for also produce more wealth for communities. Does that make sense? So it was just like, look, we should just talk about that. Rather than say that it's good to have walkability, that can seem like a threat to an individual that you're trying to get me out of my car. That's very judgy. So rather than get involved in that emotionally, let's just talk about the fact that a Walmart actually destroys your wealth. Don't hate the player, hate the game, but you better understand the game. So when we did the models early on, it was just comparing Walmarts to Main Street, and Main Street was winning every single time. But why don't we build more Main Streets? Because the reverse is true, that we make it easier to do the Walmart, we tax it less, we charge it less, so that of course, Walmart's going to... You're going to see more Walmart -type buildings. I don't mean to be picking on Walmart so much. It's That's like a prototype, like the boxes. Those are throwaway architecture. So if you have property tax system that's based on your value of property, then there's an incentive for me to build junk in your community, right? The crappier the building I build, the lower the taxes I pay. Has nothing to do with the costs of the property. So the typical Walmart consumes two police officers per Walmart. So it actually costs you more in police services than a Walmart pays in property taxes. So if you were the owner of a Walmart, that's a good deal for you, right? So don't hate them. I hate us for not doing the math on that. It's that's shame on us. It's not hard. You just go call the police chief and say how many police officers are at Walmart every day and they'll tell you. That's data, Kevin K (18:28.015) Yeah. So let's talk about some of the recent data then. Not far from Walmart country, you've been working in Springfield, Missouri, which obviously is southwest Missouri, not far from Bentonville, Arkansas, which is the home base for Walmart. So we were talking, yeah, and Bentonville's actually an amazing, really cool town. And so you've been down in Springfield doing a bunch of work, and we were chatting about it. Joe Minicozzi (18:44.69) We've done Bentonville too, yeah. Kevin K (18:57.6) So this kind of took you in a little different direction. You started looking at trees and stormwater and everything else. I wonder if you could kind of talk through that scenario. Joe Minicozzi (19:05.888) Yeah. Springfield is really cool. it's one, it's nice about it. It's just straight smack dab in the middle of the country. It's Midwestern. There's not a lot of dynamic change to it because you don't have the coastal pressures of being next to an ocean or something like that. You don't have the rapid change of Silicon Valley where there's crazy changes in employment. It's very stable that And so in that stability, it's sort of a nice control subject of what's going on here. It's also not, it's not at the edge of some blast zone of some other city, you know? So think of like Rancho Cucamonga, California, which is outside the blast zone of Los Angeles. So whatever happens on Los Angeles is going to spread into the suburbs, suburb cities that are around it. So anyway, putting that aside. There's also this business person there, his name is Jack Stack, who wrote this game called The Great Game of Business, awesome book about business transparency. So the quote that I like of his is, I'm reading it right here, it says, a business should be run like an aquarium where everybody can see what's going on, what's going in, what's moving around, and what's coming out. So his theory of business is that everybody inside the company should know the balance sheet, they should know the P &L. that it's not him as the business owner, that he has a gold mine of money in the basement. You know, that everybody on staff should understand they've got to pay rent, they've got to pay insurance, all this stuff has costs. Well, our attitude is the same with cities. We should make the city economics so transparent that everybody understands the land use, the economic consequences of land use decisions. Don't tell me that people just want to live out in suburbia. Of course, if you're subsidizing them, why wouldn't you want to live in suburbia? So they hired us to do that modeling. Their city has run mostly off sales tax. think it's 86 % of their revenue comes from sales tax, 14 % comes from property tax, as far as geospatial, things we can put on a map. So that's kind of like the majority of their cashflow. When I did the presentation there, Joe Minicozzi (21:27.2) One of the things that we're doing the first side, showing the revenue and we're getting feedback from the staff and you're an urban designer, I'm an urban designer. One of the things that we tend to pay attention to how a city is shaped and what it looks like when we drive around. There weren't a lot of street trees in the city. And Graham Smith from Multi Studio based in Kansas City. He's the urban designer on the project. Graham said to me, goes, Kevin K (21:49.935) Yep. Joe Minicozzi (21:54.988) Do notice there's not a lot of street trees? And I was like, yeah, that's kind of crazy. It's like, it's like somehow like trees don't happen in the city. So I made a comment about it during the staff meeting and somebody in the engineering department said to me, well, I said, why don't you have trees? And he just said to me, goes, well, it's because trees attack the streets and sidewalks and use that word attack. I like my, my designer kicked in and I immediately responded. Do you not know how to design a tree pit? And then I stopped and I was like, well, that's not fair because I'm going to put them in the defensive. so, you know, this is somebody that's coming in with a mindset of maybe he came from, life safety or something, or the risk department inside city government. So he's only looking at it as a balance sheet item of one line item. Yes. A tree could screw up a sidewalk if you don't plant the proper tree species and don't build a tree pit. I got it. But it doesn't mean you should just lay waste to all trees. So just for fun. I came back to the office, I talked with Lea Hanringer, who was on the project. was like, and Lea's interested in understanding climate effects. So let's just look at the trees and what they could do financially for the city. So the whole stormwater system is, well, currently they're at a $9 million a year deficit in their stormwater system. They should be spending 15 million a year. They're only spending 6 million a year. So let that wash over you. They're not investing enough in their system that they've built. So that's only going to cause an economic collapse at some point in the future. If I don't brush my teeth every day, that's going to be a problem. One of them is going to fall out, right? So brushing my teeth every day is a maintenance issue. Same is true with any kind of infrastructure system. But to just go out and just totally replace the whole infrastructure system, if we just went out and built their stormwater system today, it'd be $600 million, $661 million worth of investment. So we considered the tree as a pipe and just said, what do trees do? And we actually made a cartoon of two sponges on a stick because there's a sponge in the air called leaves that suck water when the water hits it, keeps it from hitting the ground. And there's a root system that absorbs water from the ground. All of that keeps it out of the stormwater system. So a tree is essentially a pipe replacement, just to be crude about it, right? The average tree in Springfield, Missouri. And again, you don't have to be exact. Joe Minicozzi (24:23.192) Let's just get in the ballpark. It's like 770 gallons of water per tree gets sucked out of the air and 1500 gallons a year gets sucked out of the ground by the root system. So we can do the math on that and we kind of did an estimate based on the trees that they currently have in their city. Scaling that up, you're talking $600 ,000 of savings in the air and $1 .6 million savings in the ground. So that's $2 .2 million a year that you're not paying. in your stormwater system because of these trees. Here's an idea. Buy more trees. That sounds like a real rocket science idea. But I know, hey Joe, trees cost money, then we're gonna have to maintain them, we're have to make sure that we've got to get out and fix a sidewalk every once in while because we did something wrong. Okay, well we can do numbers on that. So we ran the math on it. The average benefit from the tree is a pipe, if you will. is about $115 a tree. The cost is 75 bucks. 'all take out your calculators at home, subtract $75 from 115. That means it's net positive 40 bucks a tree. we just, you know, just as a rough estimate, if you just go out and plant 10 ,000 trees, you're going to be net positive $400 ,000 a year. You can essentially use the tree to manufacture money to buy for police officers. That's cool. So don't just take it and look at that one side and just like, yeah, it's complicated to fix a sidewalk. What are the downstream effects of this? Now to kind of scale this up, remember I said $600 million system. Eugene, Oregon, we just happen to have the data. So Springfield's 170 ,000 people, Eugene, Oregon's 175, so it's got 5 ,000 more people in it. The stormwater system in Eugene, which actually has more rain in Eugene than in Missouri. Their stormwater system cost 400 million dollars versus Springfield is six hundred and and and 20 million dollars so so basically another way putting this Eugene, Oregon saved a hundred and eighty million dollars in their stormwater system and It comes down to the fact that they're a lot smaller. They the city shape is more compact So by doing compact design, you can actually save a hundred and eighty million Joe Minicozzi (26:46.903) Does that make sense? It's 35 square miles for Eugene. It's 83 square miles for Springfield. Kevin K (26:52.327) And to put it in context, I would imagine Eugene is still largely a city of like single -family homes. It's just maybe exactly, it's just a different layout for the city itself and how everything is configured on the ground. Joe Minicozzi (26:59.862) Yeah, yeah, it's not European. Joe Minicozzi (27:09.592) Well, our attitude is like, look, these are your choices. I live here in Asheville. So if you want to stretch out, fine. If you're a Midwestern city and you're like, hey Joe, this is the Midwest, you don't understand, we got lots of land here, we're gonna stretch out. It's like, oh cool, yeah, do it. But just make sure that you understand the cost of that stretching out and make sure that you let your decision makers know that people want to have a one acre yard, awesome, but it's gonna cost us $180 million more in a stormwater Is that the best choice for that public investment, that $180 million? Or could you have, I don't know, sent every child on a walkabout sabbatical around the world with that investment? There's lots of choices you could do with $180 million. Let's just be honest about Kevin K (27:58.117) Yeah, no doubt. Not to mention like one of the least of which could just be like lower taxes if that's your thing, you know. Joe Minicozzi (28:06.232) Well, or you could have invested that $180 million in more trees and you would have had $50 million of new revenue in your system on an annual basis, which is more than the ARPA funding that you got. ARPA was just a one year deal. Like you could actually manufacture more money than the federal government gave you. I mean, come on now, let's just talk about Kevin K (28:18.307) Right. Kevin K (28:24.123) Yeah. And I think the interesting thing is you're not even really getting into what some people might think of as like the frou frou design benefits of trees versus not trees in this. And so makes it a more pleasant place to walk or Joe Minicozzi (28:37.174) yeah. Aesthetic quality that reduces the heat island effect, reduces your air conditioning bills because you're not dealing with the outward effect of radiation. mean, there's lots of things. CO2, I mean, we didn't get an A that. We're just like a tree as a pipe replacement. Just start there. But yeah, if you did do those numbers, if you read, I don't know if you see on the bookcase up here, Happy City. and they get in the quantitative sociological effects that are actually financial as well because Canadians measure that stuff. We don't in America because we don't pay for health systems at the government level. So when the government actually does pay for the health system, they kind of want to know what the costs are. know, Charles Montgomery used all of that math in there to explain the financial consequences. I think the book is sort of a mislabeled. I think it's more of an economic than with the name Canotes. Kevin K (29:35.739) So at the stage you are now with Springfield, have you presented all this information to them and had that out in the world? Joe Minicozzi (29:45.356) Yeah. Well, one of the biases was that they wanted to continue to annex more land. And the first question I asked, which was why? And they said, well, people live out there and there's some higher wealth houses that are out there. Therefore, we're going to get higher taxes. And the reality of it is, and this is back to the original analysis that we did, which is the value per acre analysis. One of the biases people have with math is when they see like the Walmart's worth $20 million, they get really excited about it, especially compared to a building that we rehabbed on Main Street here in Asheville that's $11 million. So Walmart's twice the value, right? But that Walmart took 34 acres of our city versus our building on 0 .5 acres. And it's just a habit that humans have where they just immediately go to the big number without understanding the efficiency. Well, the same is true with suburbia. It's like, okay, yeah, they're experiencing wealth flight out of Springfield where people are just outside the city limits out in the county in their high -end neighborhoods. But when we do our tax model, you can see that they're actually not that productive. That's the first thing. Back to how I said, Springfield gets its money. They get their money off sales taxes. So why would you want to chase residential? Makes no sense. So we're gonna go and bring them into the city limits and then we're have to provide more services for them and not get any taxes out of them because we get all of our taxes out of sales. I actually told the audience when that question came up, I said, look, right now they're living outside, driving into your city and shopping, you're collecting their sales tax dollars and they're going home. You don't have to pay for their schools, you don't have to police them, you don't have to put the fire services for them, that's their problem. Why would you wanna take them in? and have more costs in your community when you're already getting the money that you need, which is the sales taxes. And as a planner, I hate saying that because it's like, everybody should be part of the community if you're involved at an economic level, but from a brass tax of how their financial system operates, there's no incentive for them to annex that land. But again, when you have the politics of everybody just there, and this is something just true to the new, as long as you've been in new urbanism and I've been involved, it's like this kind of habit. Joe Minicozzi (32:10.06) that we are America, so we must suburbanize. It's just this, it's ingrained in us. And it's really, it's a myth more than anything else. Kevin K (32:17.014) Right. So it also kind of strikes me, one of the interesting things about your work or that you get to see is the very different ways that local governments are funded all over the country. So you've talked about this example in Missouri, and it's probably really similar to how my city is. If I broke down our property tax bill, I think about 70 % of it goes to the school district. And then it's kind of apportioned up between the county and the city and some other, like the library board and a mental health. Board etc, but the lion's share is a school district and most of our city revenue is sales tax and then income tax because we Yeah, which is rare, but we have an income tax But I'm curious like what you've seen like around the country. Are there approaches that seem better worse more sustainable less sustainable or they just like they're Joe Minicozzi (32:54.4) Yeah, which is very rare. Yeah, that's Joe Minicozzi (33:08.916) They're all different. One of the jokes that I used to make is when we did this, I want to reference my former boss, Pat Whalen, in public interest projects. Pat's amazing. He's a genius. Pat had this incredible PowerPoint called the Economic and Environmental Case for Urbanism. And so he's the director of a real estate company trying to explain the value of downtown revitalization to people. That's where the value per acre analysis comes from. It was part of his show. what was interesting is it made sense in Asheville, and I just started poking around other cities in North Carolina because I was on the Downtown Association Board, and we're trying to figure out the value of our downtown versus other downtowns. you have a day job working for a district, the real Kevin Klinkenberg, you have this day job for this boundary. Well, don't you want to know how you operate versus the downtown improvement district or the Westport improvement district? Yeah, of course you do. So I was doing that for 10 cities bigger than Asheville and 10 cities smaller than Asheville. What's our taxable, non -taxable ratio? Who's got too much non -taxable? I don't know. Like until you get the data. So I made this shared website that's a Google document. And I shared it with the downtown directors for all the 10 cities and we populated it so we could all get metrics to understand how we stack up. What was your original question? Kevin K (34:43.963) It's just about the different mechanisms for a big local Joe Minicozzi (34:46.75) yeah. So, in that, we started to see that the downtowns were crushing it versus every other part of the city. Right? So, as an urban designer, we advocate for walkability, downtowns, everybody likes them, why don't we do more? And we start to find all the zoning rules that don't allow it, all the policies that don't allow it, and all the biases. And a whole Congress for urbanism is essentially discussing these things, going, who the hell put these things in place? You know, it's just, that's what we do. And we try to undo. these kind of rules that kind of get in the way. So I was doing, I think I was talking to Peter Katz and he's like, does it work this way in Florida? And I was like, I don't know. And so he hired us to do the analysis in Sarasota and sure enough, it was the same damn thing. So here's the way I see it. Florida has totally different rules than North Carolina. North Carolina has different policies than South Carolina, which is way different from Missouri. Everybody's got different state tax policy rules. But you know, and I know, when you drive around suburban Phoenix or suburban Los Angeles or suburban Boston, you see the same crap. To the radio audience, that's an architectural terminology, but it's like you see the same junk everywhere, right? And I told Peter, said, you know, it's hilarious to me. We all have different math, but it yields the same results. So in North Carolina, it's two plus two equals In South Carolina, it's three plus one equals four. In Florida, it's one plus three equals four. In California, it's 22 times 16 divided by the square root of 47 equals four. You know, it's like, we can make it complex, but at end of the day, that's all we have to do is use our eyes and go around suburbia and say, why is this happening? And you're going to see the same exact economic results in the landscape that's baked into the policy to reward it happening. So sort of shame on us for, you know, I don't have a math degree. I'm trained as an artist like you. I draw pictures, but I'm gonna go look at those policies and read them. Sometimes it gives you an aneurysm when you read some of these policies. But I think that's the beauty of the world that you and I operate in, is we're not afraid of that stuff. We'll get involved in transportation policies. Let's go read the ITE manual. It's like, of nerd does that, but we do it. Kevin K (37:07.611) I mean, if you talk to me when I was 19 years old in architecture school and said, well, hey, you're going to learn all about the intricacies of zoning codes and traffic engineering and also like, what? What are you talking about? But if you really want to understand your world and make a difference in it, you've got to dive into those things. So yeah, exactly. And actually, it is kind of fun and interesting to learn that it was fascinating to me when I first learned. Joe Minicozzi (37:25.826) and not fear Kevin K (37:35.003) much more about traffic engineering, like how engineers actually thought and what they were looking at and how they were evaluating streets and intersections and everything else to come up with their solutions. Joe Minicozzi (37:47.544) Well, you can be a better practicing professional too if you're respecting their profession and saying, I want to learn how you operate. Now I'm going to call BS on things when I see it, but at the same time, I'm going to respect that you have knowledge that I don't and I want to learn. But the thing that makes, I think that makes you and I different is that we also know that Moses didn't deliver their rules. That these are not infallible people that have designed this stuff. Kevin K (38:12.184) Right. Joe Minicozzi (38:16.056) that these are humans that are operating with their best intention, but often they make mistakes. Kevin K (38:22.331) No doubt, no doubt. I think we don't emphasize that enough that really so much of what we struggle against is just people trying to create systems and rules and then working with it and all of that can be changed. Joe Minicozzi (38:37.112) Yeah. Well, I just, this morning I sat with my county assessor and this is trouble that we started back in 2021. And here we are three years later and we're going through a reassessment in January of this year. And he's telling me that like a lot of the things that we recommended back in 2022, they're going to do, but they're not going to do it until 2029. I just about lost my mind. I was like, you know how many human beings my wife and I could produce in four years and you can't change policy? Come on now. That's bias in the system where it's like, there's nothing to stop them. It's just they've never done things this fast before. it was kind of frustrating and I told them, said, look, you just need to see me as a taxpayer now and not a consultant. I live here. My staff suffers. Kevin K (39:12.377) Yeah. Joe Minicozzi (39:32.438) with housing, everybody I know suffers with housing in this community because we're a hot market right now. And it's not fair that because you're going to be uncomfortable changing the way that you behave, there's no law that says you can't do this. This is just about your practice. And we see this, you've seen this with your career with city planners. It's like, well, we just haven't done it that way before. It's like, well, change. Kevin K (39:55.749) Yeah, yeah, it's not hard. It's not the end of the world, you know. Joe Minicozzi (39:57.622) The world's not going to stop. And guess what? Guess what? You're going to make a mistake again. Yeah, it's going to happen. It's like we're humans. Kevin K (40:05.423) I know. There's a real struggle a lot of times to just get people to take a risk to try something and try and fail and if you fail, it's not the end of the world. So what has Joe Minicozzi (40:16.376) They won't assess Airbnb's as commercial product. I'm like, dude, we've got 4 ,000 of them in my city. I've got people from Florida, cash flowing houses up here, and they're paying them off in four years. And my staff can't do that. I can't do that. Like, what the hell? And so why are you choosing to value them as houses and not commercial product? And the state, the state charges an occupancy tax on top of them, right? So the state knows that they're hotel rooms. Kevin K (40:19.532) yeah. Joe Minicozzi (40:45.368) because they're paying an occupancy tax, much like a hotel room would. So why are you choosing to value it differently and not value it on its cap rate? And I'm serious. Like I know that I'm kind of like beating this drum about here in Asheville. Nationwide, this is a problem. And the assessors are like, well, you know, it takes a while to kind of work this out. I'm like, no, Airbnb has been around since 2015. For f**k's sake. Sorry. It's like, this is, it shouldn't take 10 years. Kevin K (40:59.547) Yeah, no Joe Minicozzi (41:14.626) to realize how it affected the marketplace. You just sound stupid at that point. we don't understand. Kevin K (41:19.289) Yeah, it was crazy. It was such a big issue, as you might imagine, in Savannah, which I think for a time, Savannah was like the number one city in the world for Airbnb. Joe Minicozzi (41:29.516) Well, at least in Georgia, you have a separation between an occupant and a non -occupant. We don't have that in North Carolina. We're all treated the same, which is insane. So in Georgia, if you own a house in Savannah, but you live in Kansas City, you're taxed at a higher rate than somebody that lives in a Savannah house. Owner -occupied is totally different than non -owner -occupied. In North Carolina, we don't even have that protection. So it's even worse for us. So it's maddening. So anyway, anybody that's on this podcast that lives in a tourist town, like this is one of the things that should be the top of your agenda to talk about. It's like, I'm not saying don't do it. You we're a tourist town. Our baseball team is called the Asheville Tourists. Got it. Been the Asheville Tourists since the 1920s. This is our economy. But don't tax them less. That's crazy. Yeah. Kevin K (42:00.068) Interesting. Kevin K (42:24.443) Understand what they are, tax them, or have some policy that makes sense. Yeah. Yeah, no doubt. So one of the other things that you've been able to do with your work then is kind of related to all this. You get the chance to like dive deep into the history of especially like property taxation and other things. And I know you've read a lot of stuff in this world. How has Joe Minicozzi (42:28.746) It's a commodity, right? What does that do to housing prices? Kevin K (42:51.269) kind of impacted the work that you're doing or you're thinking, or what are some notable things that you've seen and just looking back a long time ago when a lot of these rules were being formulated. Joe Minicozzi (43:01.75) Yeah, there's some. One of the things about new urbanists, it's kind of weird. I hate that term because we're sort of just urban thinkers. We're complex thinkers. Joe Minicozzi (43:19.68) It's not new. This is just, we're operating in an urban environment, we're going to be interrogating things, but we tend to lean toward, if it's broke, fix it. That's our attitude. And it shouldn't take forever. But we also swim upstream to try to figure out who put this fence in. So who put the fence out in that field? And why is that fence there? And if the fence serves a purpose, keep the fence. If the fence was there for just because some random situation, get rid of it. It's like unnecessary policy. So you'll hear within our cluster of crazy friends, a lot of us are just like, rid of parking standards. Why do you need them? Why do we have trip counts for highways? Because when you look at the base data of trip counts, it doesn't make sense. Plus, since pandemic, we've changed the way that our commute patterns operate. So we should be changing our math. And like we operate faster with a level of, with trying to stop the bleeding, if you will. We're triage people, you know, we're like the emergency room medics. But we're also going to go upstream to figure out how did this start? So just for, you know, I started to see a lot of patterns in the assessment maps of how neighborhoods were construed or different market areas that lined up with redlining. And so redlining started in 1934 and went to 1968 and was deemed unconstitutional. But if you go to Mapping Inequality website, you actually find that there's maps that predate redlining that the bankers were using that was essentially racist. That if you were an immigrant or in a black neighborhood, they deemed you high risk and they changed your ability to get cashflow. Redlining was adopted at a federal level. So it's federal policy that said this is the rule of the land now, which makes it pernicious. It was already pernicious before, but for the federal government to come in and say, we're going to be unconstitutional here is pretty bad. But to everybody's credit, everybody's hands got slapped in 1968, that changed. Well, here we are today and we're still seeing the same effects in the valuation that models very similarly to redlining. So I was just like, well, maybe there's got to be a book somewhere that this is all talked about in the Joe Minicozzi (45:41.816) I found this book from 1922. It's the ninth edition. So was actually the first edition was 1895. So think about this, a book was reprinted nine times because it was so popular. It's called The Essays and Taxation by Edwin Seligman. And I love this quote. So just for the radio audience, just turn on your mind to 1895. This is what he wrote. Practically, the general property tax is actually administered as beyond all doubt, one of the worst tax systems known to the civilized world. Because of its attempt to tax intangible as well as tangible things, it sins against the cardinal rules of uniformity, of equality, and of universality and taxation. It puts a premium on dishonesty and debauches the public's conscience. It reduces deception to a system and makes a science of navery. It presses hardest on those least able to pay and imposes double taxation on one man and grants entire immunity on the next. In short, the general property tax system is so flagrantly inequitable that its retention can only be explained through ignorance and inertia. It is the cause of such crying injustice that its alteration or its abolishment must become the battle cry of every statesman and reformer." So this is somebody who works in taxation and goes, this is a crock of junk. Let's get rid of this. And that was over a hundred years ago, right? And so now I sat in a two hour meeting. with my assessors and their consultant going through is excruciating detail, all of this crazy mathematics. I'm like, why are we doing it this way? I understand what you're doing, but let's take a big step up. Why do we finance cities this way? Why is it based on value? know, Kevin, you and I are trained as architects, right? We want to do beautiful buildings. We want to do, if I could afford it, I would build a stone house, you know, because I like stone and it lasts forever. So I create an asset that will be in the community for hundreds and hundreds of years paying taxes. Why would you penalize me for that? You should be charging me on how often I drive on that road and how many times I use a fire call. Charge me for the services you provide rather than some arbitrary, hey, you built a stone house, therefore you pay more taxes. You could be right next door to me in a tin shack and have actually more income than me. Joe Minicozzi (48:09.944) and be taxed less because you have a tin shack and I've got a stone house. I could be making $50 ,000 a year and you're making $200 How is that fair? This is where I said that the income tax is a little bit more fair, but the thing is if you're really rich, you're not making income. You've got assets, right? Those are all hidden somewhere, not being taxed. So there's no perfect systems. That's why we advocate, and you see in our models, those red -black models where you have Black is producing wealth, net positive, red is net subsidy. And we did that for Springfield. 80 % of the city is subsidized. So just show that to the citizens and just be like, this is how we're subsidizing it. Is this the best choice? But you should charge me for it. If there's, yeah, go ahead. No, Kevin K (48:52.091) So when you do this, go ahead. I was going say when you do that kind of historic research, it, I mean have to ask the Georgist question, does that, how do you think about that relative to the Henry George critique, the land value tax approach versus the standard property tax that we do in most places? Joe Minicozzi (49:11.16) I mean, I think that aligns with Henry George, the statement. It aligns with how I feel as a taxpayer and also as somebody that practices in this world. The more we get into this with the Cessars, I have all the respect in the world for what they do because we do all of our work on their data. So I'm very thankful for them as a profession. But I also see that they're trapped. in a construction of their own making, the same way that traffic engineers are. And for anybody that's on this podcast that's read Confessions of a Recovering Engineer by Chuck Marrone, I mean, he nails it. That same ethos in that book is the same ethos I see with the zoning people that are all just about zoning. This is the way the zoning is, as if some omnipotent force gave them the zoning, you know? And then there's the same as I see this with the assessors, where I always ask them, I'm like, why is that the standard? Where did this come Like today when this one assessor was telling me that legally they can't assess Airbnbs as commercial. So I immediately asked her, I'm like, can you show me the law that says that? And she just went blank. And I was like, you just told me that there was a law that this, so tell me the law. And they don't, this is their bias. This is their practice. This is their fear. They're afraid to stir up the people that are out there with Airbnbs. I'm like, that's not what the law says. So you're making a choice not to do that. There's so much... Joe Minicozzi (50:43.129) discretion that people don't talk about. You see this when you talk to old school planners that are just like, the trip counts and the parking requirement, their bias kind of comes in. They won't call it a bias. Kevin K (50:56.197) Yeah, yeah. And I think we've often talked about that. And I think Jeff Speck famously wrote about that. You can manipulate a traffic study to say whatever you want it to say. And it's really just about the choices that you're making of what you want to do or what you want the outcome to be. Joe Minicozzi (51:14.12) We did a land analysis. Back to Henry George, we did a land value analysis where we just turn off all the buildings and just look at the land value per acre. This was in Cheyenne, Wyoming. The larger parcels in the commercial strip area were half the value of the out parcels across the street. I asked, I'm like, does land magically lose half its value when you cross the street? Same zoning category. And the tax assessor told me with all confidence, she goes, well, the cheaper one is bigger. The more land you have, the lower the value. And it's like, what economic rule is that true? And she goes, there's less people that can afford large tracts of land. So therefore we have to give a discount because there's less people in the marketplace. And I was like, well, that's kind of true. But does that work this way with other limited commodities like diamonds? If I get a bigger diamond, is it cheaper? Surely there's less people that can afford a bigger And everybody in the room was laughing, but she was just totally confused by that. And the weird thing is that I don't have an economics degree. I've actually never taken an economics course. So I just asked a question because I'm curious about this stuff. Kevin K (52:23.323) Yeah. So Joe, you've also been working a little bit in Annapolis, Maryland, which is obviously a really, really different context than Springfield, Missouri, one of the oldest cities in the country. wonder if you want to talk a little bit about what you've been doing there and what you're seeing. Joe Minicozzi (52:40.376) Yeah, Annapolis is cool. We did one of those red -black models for them. And one of the things that we noticed was their annexation pattern was an interesting tell. It's kind of funny. like, I've got a picture for that, but it's kind of hard to talk about a picture in this space. I'll Kevin K (53:03.387) Well, eventually, eventually this will be a YouTube thing too at some point. So we could do Joe Minicozzi (53:08.696) Yeah. from one of the things you could see in the, again, we talked about at the start of this about Kansas City, there's tells in the annexation pattern that tell you the problems that you're having today. So it's kind of like, you and I are the same age. I'm 56. There's things that I'm dealing with today in my body that didn't happen because of what I did last week. It happened because of stuff I did when I was in high school, right? The older you get, like all of a sudden it's like, my ACL gave out. Why is that? It was because I played football in high school. So it's like, just took a while for that ligament to just finally give. I can remember the concussion that I had when that happened. You know, it's like things like that. So we look at cities the same way as what did you do in your past that you're now seeing the problems today? So. One of the rules that we all know is roads only last about 50 years. so every 50 years is when you have your heart attack based on what you did when you first built those roads. Annapolis did 71 % of its land acquisition. So if you look at it today and just say, if we make a pie chart of this, when did these areas break down? Their first hundred years is 4 % of their land. for their first 100 years. From 1920 to 1800, that's 80 years, they did 5 % growth, okay? So that was 120 years. In just the year of 1951, they annexed 71 % of their land. So let that wash over you. Just imagine the pie in your mind of 4%, 5%, and then 71 % in one year. So those developments didn't all happen in 1971. would take a while from the late 50s, early 60s when you start to fill in all of those subdivisions, you're filling in a lot of lane miles in 71 % of your city. So those roads are now being replaced now in the 2020s, 2030s. And they're looking at, let's see, kind of try to do the quick math here. They're looking Joe Minicozzi (55:34.264) close to. two thirds of their roads are coming due because of that original sin of that annexation. But the habit in the 1950s, I think about that. People come back from the war, we're like, we're going to be modern. There's all these policies in place to reward this, the federal highway system, the FHA loans. And it's not that people had ill intent, they just were naive. They're just like, well, let's try something different. Let's kind of remake cities. And this is what we're dealing with. It's like we have to kind of think back to when that happened. So we show them the And you can see their jaws drop when I was showing this to them. And it's kind of like walking in and I'm the doctor, we just got a bunch of CAT scans and I show you your broken shoulder. I'm like, is the reason why you can't pick things up. You've got your shoulders broken. And everybody can see it because you can see it on the map. 71 % is a lot of area in one year. Kevin K (56:27.023) Yeah. What is some of the examples of how some of your clients have reacted to information when you're finally at the end? I would imagine it runs the gamut from complete denial to people excited to make some change. mean, what do you see on the back end of doing these analysis? Joe Minicozzi (56:49.196) You know, the mayor actually called me yesterday. I was bicycling into work and I get this telephone call from Annapolis and it's him and he's so excited. And he goes, it's it's hard. It's indescribable. We're all singing from the same sheet of music now. And so, you know, in respect for politicians, and I don't, I don't mean this in a, in a, as, negative as this is going to sound, but think about, let's, let's just kind of make it blunt. You win a popularity contest and you become mayor. That's it. That's the American system of government right there. They don't have the master's degree in urban design. They don't have the research of 30 years of public policy analysis and parking requirements. They don't have that junk shoved in their heads the way that you and I do. So they just win this popularity contest and they're trying to figure things out. their commerce is what they hear from people, the emotions, the conversations, how people react to their day -to -day living. It's sort of on us as professionals to help demystify that. So that's basically, that's the MO of our company is we're going to try to find a way to give you a lot of quantitative data, but we're going to do it in a way that's easy to understand and give you a pie chart. You know, it's like, we're not going to make that hard. You know, it's just, it is. This is what's going on. Here's that pie chart showing you 71%. is in that one year, they've had that data since 1951. It's like, it shouldn't be magic to pull this stuff out. So it really is on the professional to do that. So usually what we get is we see a game. He's right. We do see a game change from people because we've created a graphic that people can see and they can see what's going on. You can't argue against the pie chart. There it is. 71%. It's like there's data. There's a pie chart so everybody can see how big that is. Just make it simple. We don't hand you an 85 page document explaining it all in text. Why? 65 % of the audience are visual learners. Show them a picture. So once we did that and kind of walk them through and help them understand, they could see their city with new eyes. That's actually another quote that a mayor gave me in Davis, California. He goes, it's as if I've never been to this city called Davis and I could see it with new eyes Joe Minicozzi (59:16.886) So it's respecting them and honoring that their life is hard. Their role is near impossible. They've got to learn how a multi -billion dollar corporation operates the night after the election. And there's all of these habits baked into it. how do we short circuit that and make it easy for people to move? So we've seen changes. We've seen Rancho Cucamonga, California. They adopted a one to six rule for their downtown as an area to value ratio. So now they have like a two drink minimum, if you will. And there was a steel manufacturing company that came in for a tax break. And the assistant city manager told me, goes, you know, it's fun is after we did this math with you all, he goes, they came in and asked for a tax break and they're a big employer. But then I compared them on a per acre basis to other manufacturing plants in our city, these smaller ones, and they were actually way more beneficial than this big one. So I told the big one to take a hike. And it was like, that made my month. It's like, I couldn't believe he did that. But it was like, we gave them a new language to understand themselves. And as a consultant, it's like, yeah, I wasn't there for the win, but I feel proud of that. It's not sexy to talk about, but it's like, that's cool. So there's not as much satisfaction as being an architect when somebody lives in a house that you produce, but it's a different kind of satisfaction. Kevin K (01:00:52.003) Yeah, I really like the analogy of, it's almost like you're providing an MRI or a CAT scan. You're the doctor giving them critical information about the health of their community. And then really it's up to them to decide, do they want to correct that health or not? Joe Minicozzi (01:01:11.606) Well, it's value statement of our company too, that the doctor doesn't blame the patient. And so if you're going in and you're a smoker, chronic smoker your entire life, the doctor knows you're an addict. But what can the doctor provide you to help you get past your addiction? So the doctor is going to show you an MRI of your lungs and you're going to see the black spots all over the lungs. The doctor is going to be like, guess where that's coming from? Kevin K (01:01:14.083) Okay. Joe Minicozzi (01:01:40.128) and you'll say, it's my smoking. It'll be like, yeah, you want to keep doing it? It's up on you. I'm not going to be able to pull a cigarette out of your hand, but I have to do what I can to give you information to be an educated consumer. So that's kind of our MO. Kevin K (01:01:54.821) Joe, I think that's a great place to wrap. And if people are looking to find you and your company, what's the best place to go? Joe Minicozzi (01:02:06.552) Urban3 .com, three is all spelled out. You can also, there's plenty of videos online that you can Google through YouTube. My favorite one is the one that Not Just Bikes did on our work. Not Just Bikes is just a great resource for lots of information on city planning. And also Strong Towns covers a lot of our work. And also the Congress for New Urbanism. If anybody wants to come to a conference, the Congress for New Urbanism or the Strong Towns Gatherings are great. Or if you want to go deep nerd, we're like at the Government Finance Officers Association conferences every year. That's a whole lot of fun. So yeah, we'll see you around in public and thank you for doing all of Kevin K (01:02:54.405) Yeah, so really appreciate it, Joe. I'm sure we'll do some more in the future, but this is a great introduction for anybody who doesn't know your work. And also for those who do, I really appreciate the deeper dive. So hang in there. Keep doing what you're doing. And we'll talk again. All right. Joe Minicozzi (01:03:13.25) Thanks. Get full access to The Messy City at kevinklinkenberg.substack.com/subscribe