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Monday

July 2014

28

Local developers cautious about Obama economy

Developers concerned about high taxes and regulations

Some Lake Country developers have mixed emotions about the re-election of President Barack Obama and what it might mean to the regional and national economy.

For the past several years, local business leaders and entrepreneurs have said one of the reasons for the slow recovery from the recession has been the business community's hesitancy and uncertainty about Obama's economic policies related to taxes, business regulations and potential costs associated with implementing Obamacare. Some of those leaders had hoped for - even anticipated - Democrat Obama would lose to Republican Mitt Romney, the first major party presidential candidate in decades with a business background.

The good news, according to business leaders interviewed by Lake Country Publications, is they now have certainty. They know Obama is going to be president for four more years. The bad news is that some of them they think his is an "anti-business" administration.

Michael J. Mooney, chairman of the board of NAI/MLG of Brookfield and Milwaukee, seemed to be the most optimistic. Mooney, who has numerous commercial and residential developments across Lake Country, said he believes free market competition will begin to take over now that Obama has been re-elected.

"There is no question that large- and small-business owners and entrepreneurs have felt a sense of uncertainty regarding this administration's polices regarding regulations and taxation," Mooney said.

"Those business owners who have been sitting on their hands waiting in hopes of change were undoubtedly disappointed by the election results. But now they must face the reality of what has happened. They have to decide whether to sit still or move forward. You cannot remain competitive if you are going to sit still. You have to move forward." Mooney concluded.

But Mike Judson of Judson and Associates, commercial Realtors with numerous Lake Country listings, suggests there will continue to be uncertainty for business investors until the president and Congress reach long-term revenue and spending agreements to reduce the national debt.

In addition, he said, business and banking regulations need to be relaxed. He said the administration and Congress overreacted to the banking and investment collapse of 2007 and imposed regulations on some banks that are too stiff.

"Because of the regulations on the amount of capital reserves banks must maintain, some of them are afraid to take chances and make loans. The pendulum has swing too far from the right to the left. We need to get it back toward the middle," Judson said.

In addition, Judson anticipates there will be tax increases that will have to be paid by business owners, including possible increases in capital gains tax rates, which he said could hinder future economic development.

"I have had two deals that were called off as a result of the election," he said.

"But, on the other hand, we also have some new listings because people are trying to sell before the capital gains taxes go up," he added.

Jim Siepmann of the Pewaukee-based Siepmann Development Co. is a bit more optimistic. Siepmann said before the election there were signs that some segments of the real estate market were showing slight improvement.

"If you call general contractors, I think they will tell you their phones are beginning to ring. There appears to be some openings in new construction," he said.

He said the improved housing market is the result of a pent-up demand. He said he anticipated improvement would continue, but it would be slow.

However, he said, anticipated tax increases for those who earn $250,000 or more might affect the commercial real estate market.

Many of his tenants operate their small businesses as sole proprietorships, and the business profits are included in their individual income tax returns.

A tax increase on those individuals might mean less money to expand the business, make future investments or hire new employees, according to Siepmann.

It could also mean less money to pay the rent.

"For the last five years we have been in the process of negotiating new lease agreements and not one of them include an increase in the rent," he said.

Greg Kost of Told Development said another factor that contributed to the uncertainty in the business climate was some business leaders were not certain if Obama would be re-elected to a second term and were awaiting the outcome of the 2012 election.

"There is a lot of uncertainty in the year of a presidential election. One thing we have clarity on (now) is that Obama is going to be president, and we have some idea of what we might expect from the Obama administration," he said.

Kost anticipates the administration will continue to "demonize business" with regulations and taxing policies that discourage investment in future growth.

"When you are a business owner and you feel that you are a target of the government rather than having the support of government it makes you hesitant to want to invest," he concluded.

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