Journalists Roundtable

Aug. 15, 2008

Transcript:

Ted Simons:
>>> Hello and welcome to horizon. I'm Ted Simons. Joining me tonight, Mary Jo Pitzl of the Arizona republic, Mike Sunnucks of the business journal and Catherine Reagor of the Arizona Republic. A number of arrests in the sheriff's latest crime sweep. Mike, it looks like over 100 arrests. How many were here illegally.

Mike Sunnucks:
>> I think 80 were here illegally. He went out with less fanfare. So he wanted to surprise in el mirage and picked up folks for various crimes. It sparked criticism from the governor with the allocations resources. Joe continues with the same mo which is his bread and butter. They are monitoring the sheriff's office.

Mike Sunnucks:
>> I think he's looking at civil rights complaints of the folks on the other side of issue and people who criticize him. You haven't seen anything substantive. You haven't seen lawsuits in Ernest.

Ted Simons:
>> Are we seeing anything along the lines of the public saying that's enough. Maybe there's too much?

Mike Sunnucks:
>> No the latest polls his approval rating dipped a little bit. I think he's popular and expect to win re-election. The gist of the issue is enforcing the laws.

Ted Simons:
>> No other politicians in town besides Mayor Gordon stepping up.

Mike Sunnucks:
>> Gordon continues his criticism on occasion and adding task force and building profiles to immigration issues. Most folks avoid the sheriff on that.

Ted Simons:
>> We have a situation in the east valley, Mary Jo, with the attacks on Russell Pearce. Are you surprised he commented on it.

Mary Jo Pitzl:
>> These are campaigns mailers that have gone out and are pointing out extreme flaws in his character. The first piece got a lot of ink and referred to a divorce petition that alleged abuse. That was 28 years ago and took some of the steam out of it. Another one accusing him of ties with neo-Nazi and sending out proneonatzi emails was unintentional. They seem to be backfiring. When you have the democratic governor standing up, it doesn't hit the target.

Mike Sunnucks:
>> The Republican Party stems from Stan Barnes taking on Jeff flake. And Russell Pearce wants to enforce the walls and border walls and denying illegals benefits. You have other folks in the Republican Party that take a business and moderate stand. They are worried about losing Hispanic votes. That's a danger for them. Bush carried 40% of Hispanics in 2004.

Ted Simons:
>> There was fighting in certain part of time as opposed to the legislative. Is this spilling over in other aspects of g.o.p.?

Mary Jo Pitzl:
>> I think so. We're seeing it in legislative district six. Tony buoy is running for the republican nomination much one of the criticism is contributors at a recent fund-raiser are the business types who don't like the employer sanctions law. Really the employee sanctions law is a wedge in the party. This is all about illegal immigration and led the charge against him. No, it's bigger than that. It's about the party. It's really about both. It's how to approach illegal immigration.

Ted Simons:
>> could this backfire? Is Russell Pearce going to get support out there?

Mary Jo Pitzl:
>> I think we'll see sympathy. Editorial pages were sympathetic to him in. And Stan Barnes formed a committee and took a poll. It was taken last weekend. 51% for Russell Pearce and 13% for Kevin givens. Although 51% is not huge, it's enough to win. The opponent is not getting a bounce here.

Ted Simons:
>> I want to get on with one more thing with the ethics complaint against Jack Harper. This party line is voted?

Mary Jo Pitzl:
>> Party line 3-2 vote. The senate ethics committee dismissed it against Harper. It didn't rise to violating the ethics code even though Harper said during a protracted debate over the gay marriage amendment. He first said I inadvertently turned off the mics.

Ted Simons:
>> His quote was I did not violate the rules. Is he right?

Mary Jo Pitzl:
>> According the ethics committee, he is right.

Ted Simons:
>> Can they do, you messed up the rules but it didn't rise to the application of sanctions?

Mary Jo Pitzl:
>> Yes, they can. But that's not what they did. This was dismissed. This is the second ethics complaint against senator Harper has been there. It's been a long time.

Mike Sunnucks:
>> It's a function of who is majority or minority. Committee of chairmans do things and kill bills and move them through. This was a little more overt the flipping of the switch. When you are in the minority, you don't get a lot of rights. This happens in congress with the republicans and democrats with the legislature. They are a minority and once in awhile they get steamrolled.

Ted Simons:
>> Any fallout against Dick Trainee and others?

Mike Sunnucks:
>> I think this helps dick trainee within the caucus. He looked at the leadership post in the past and could have bucked the republicans on this, he could have had problems. They voted with him. Whereas immigration and other issues republicans are disjointed, they stayed together on this.

Mary Jo Pitzl:
>> I don't agree. I think dick may have alienated himself by getting the complaint to the hearing stage and he ultimately voted with the majority--

Mike Sunnucks:
>> It is a long way to January.

Ted Simons:
>> I will be guarding the microphone.

Ted Simons:
>> The valley home prices 15 straight months of falling prices?

Catherine Reagor:
>> At least.

Ted Simons:
>> What's going on? Is there any end in sight?

Catherine Reagor:
>> Unfortunately not. As long as foreclosures are rising, it will fall. No trustee sales fell for the first time and they continued to rise and lagging by three months. We'll see two months of the trend might be near the bottom which is a good thing. Get near the bottom, prices will flatten out. We will rebound by this time this year and now they are saying by this time next year. We are a ways off.

Ted Simons:
>> Are there areas showing a signs of life and areas that have a long way to go?

Catherine Reagor:
>> Most definitely, the fringe areas hurt by the gasoline costs. The homes went up during the boom. A lot of the subprime loans are hurting most. Buckeye has the highest foreclosure rights and other neighborhoods like Tempe is doing better. But there's not one immune to the problem because of subprime or the equity problem and you don't have equity and you're upside down and you need to sell and can't.

Ted Simons:
>> This is affecting the rental market as well, is it not? With all the homes out there, they will try to rent them.

Catherine Reagor:
>> Yes. We have a lot of landlords that never thought they would be landlords. You would think you would see deals in there. We're not seeing as many as we expected. The single family market is competing. We have 26,000 different homes in foreclosure now. Think about what was lost in the last year. A lot of people lost over foreclosure. They have a terrible credit score and can't rent an apartment. You can rent in some cases from a single family landlord who is more agreeable and opened to that. It's a tough market.

Ted Simons:
>> The ill-failed condo conversion market that's playing into it as well?

Catherine Reagor:
>> That's a hot phrase in 2005-2006. Now it's one of the things that developers and a lot of investors shake their heads at. A lot of failed properties and people put money down. It didn't pencil out and prices were high. If we come back in two or three years, they were properties made to be converted. Those will come back in time. Yeah, there are some that really glutton the market.

Ted Simons:
>> I'm glad we have you here. This story I find fascinating. Mortgages limited which apparently was funding or funding most.

Catherine Reagor:
>> It's a small hard money lender. Developers who couldn't get money from a bank or Merrill lynch, you went there and got it quicker and paid higher interest and fees. There's a niche for that market. It grew and lost money. It was taken over by Scott coals and went out and funded projects. We have a chateau central and Tempe. Those completed and did well downtown. The market turned and it turned--I don't know who expected this deep of a downturn. But it definitely turned and a lot of urban projects were on the market. When housing went down and people stopped buying--

Ted Simons:
>> Who is radical--

Catherine Reagor:
>> Isn't that a funny name? Radical bunny is mortgages limited biggest lender. Right now they owe radical bunny $200 million. It's led by valley tom hersh. It's named after one of the partners who is a former school superintendent. We don't know where the bunny came from. When I saw the name in property records and begged who is radical bunny and where is this name coming from? Their investors are concerned the fight in bankruptcy court is they are unsecured or secured lender. If they are unsecured, they are like a credit card company and get paid at the end of line. Only one-third of the limit borrowers are paying on the loan. They are in a hard spot.

Ted Simons:
>> Projects center point and Tempe. Chateau on Central Avenue looks gothic. Are they building those?

Catherine Reagor:
>> It is basically done. That project went into default and mortgages limited got bought out. It's in a stand still because they are using it as an asset to get more money and dragging through bankruptcy court.

Mike Sunnucks:
>> The legal aspects is coal who committed suicide was the sole shareholder and c.e.o. and it was dad's company. He was the main guy and everything in the corporation, he was it. That's going to complicate how they move forward and get money and what kind of legal actions will be taken.

Catherine Reagor:
>> They have named other trustees and other people involved. The investors not the radical bunny.

Mike Sunnucks:
>> They are not the only ones. This is high profile because of coles and what happened to him. There are banks and investment groups that brought people in during the boom. People from California and here and convinced them to invest and some of the things are going sour and they are not getting their money back.
Catherine Reagor:
>> Mortgage lenders is the biggest at 1 billion. By far the biggest. We have some of the most prominent progress. That many investors 3,000 limited most in Arizona and 900 radical bunny investors mostly here. A lot of people put in millions and a lot of retirees put in 200,000 and they are not seeing the money and not getting the dividends. It's a two-prong issue.

Ted Simons:
>> You have folks saying I'm first in line. No, I'm first in line. No, no, I'm first in line.

Catherine Reagor:
>> It's the greatest show in downtown phoenix. They had to open a second courtroom and cast it over there because so many people are concerned. It's their money. There are people who rely on this and are not getting it. Developers and people who thought they were going to get a condo in center point and attorneys.

Ted Simons:
>> Last question the particular story of this era, the housing crisis era?

Catherine Reagor:
>> Unfortunately, yes. And beginning and more to come. The last downturn started with commercial projects and rtc and this time the homeowners and subprime loan and commercial lenders gave subprime loans. Hard money loans and it's seeping out of there.

Mike Sunnucks:
>> You have others involved. You have Las Vegas, and Miami and condos and run and housing runups. Some of the investors were maybe duped. It was a buyer beware thing and a get rich quick thing and now they are unfortunately at the short end.

Mary Jo Pitzl:
>> These things along with the housing sales is the ripple effects they feel at the state capitol and the budget and will they come in for a special session to cut the current 10 budget?

Mary Jo Pitzl:
>> We haven't seen numbers yet that say it's technically out of whack. Everybody expects it to be and will lead to tougher decisions next year.

Mike Sunnucks:
>> Some of the urban projects and infills and condos, during the run up people questioned how much could the market take? We're not from Cisco. You can buy a nice house here and drive to work. It's not such an urban core. I think during the bull market they thought it was viable.

Catherine Reagor:
>> It was the race to get out the projects best in the best location.
Catherine Reagor:
>> Some got caught and walked away and left on the table. Investors continue to put their money in it. The company never lost money for investors. It felt like a sure thing. Radical bunny investors were getting 11.

Mike Sunnucks:
>> You have center point on Mill Avenue and a great spot. If that doesn't move forward, will hurt that area. Downtown phoenix and hotel Monroe are key areas for the cities to try to create tax revenue and businesses. If they are just sitting there, that's not creating anything.

Ted Simons:
>> Sounds like center point wants to move forward. They say they have lenders that will let them move forward and can't get past what's there and road block which is the bankruptcy.

Catherine Reagor:
>> The investors say we have the loans and we don't want to be subordinated into a lower position and it will fight.

Ted Simons:
>> keep an eye on that and keep an eye on you keeping an eye on that as well. Mary jo, what's going on with the ballot?

Mary Jo Pitzl:
>> This morning we have new three ballot measures that people gathered signatures and turned them in. Three were rejected without enough valid signatures. Today's victim was one that would set aside land with state trust. It came in with a 43% failure rate. Most of these are happening in Maricopa County. Elections director Karen Osborne told me its quality control. It's plain and simple with the people gathering the petitions and people that oversee them are not checking to make sure you have everything filled out to the letter. The county recorders' office is looking at it as strict constructivist. They read the law. If you don't put the year and day and date, they will toss it. You may be able to go to court and argue it back on as the medical choice folks did this week. They have a hurdle to clear as well as trust funds and time initiative.

Ted Simons:
>> Time initiative, where does it go from here as far as transportation funding? Does it knock the ball back in the lap?

Mary Jo Pitzl:
>> The fight is not over. They will work before the judging and get signatures. This was a 1% increase in the state sales tax and it will drop in the laps.

Mike Sunnucks:
>> We think the governor's office and business groups back both things the time interest and state trust. The petition gatherers are folks that come in from other states.

Mary Jo Pitzl:
>> They are guest workers.

Mike Sunnucks:
>> They are guest workers. They try to get everybody to sign as many petitions as possible and they give you a huge pile to sign and money. They got a late start and tried to get it through the legislature. They weren't buying on a sales tax hike. They took it late and had a change from consulting firms and went from high ground. They had a rush and probably not a huge surprise some didn't make it here.

Ted Simons:
>> Quickly here, a couple of more things. What do we make with the staff changes and governor's office?

Mary Jo Pitzl:
>> The governor's chief of staff and her legislative lobbyist and budget chief stepped down. George the budget chief is retiring and the other two stepped down. They have been there six years and that's a long time to serve. We looked through the files and he was on third chief of staff by 16th run in office. She effectively kept the same chief of staff. This is characterized as time to move on. It's a midpoint of the governor's last term. She's on the down slope. When people go off and say what am I going to do after she's out of the ninth.

Mike Sunnucks:
>> There's speculation whether she will stay. If Obama wins in November, there's talk of her getting a cabinet position. Maybe there's writing on the wall for folks to get out now and lobby or work on campaigns.

Ted Simons:
>> Let's talk about that. She's speaking at the democratic convention on the 26th, correct?

Mary Jo Pitzl:
>> Are you eliminating things?

Ted Simons:
>> I'm looking at the calendar. Yeah, yeah, yeah. But the idea is she still in the running, as mike mentioned, for a cabinet position? Is this still a possibility?

Mary Jo Pitzl:
>> I suspect it is. I'm not wired into the people with the Obama campaign or the dnc. As we said before there's a strong push to keep governor Napolitano in Arizona. The democrats want to keep a democrat at the helm. I don't know if Obama wins and your president calls on you to serve in some capacity, can you say no?

Ted Simons:
>> Especially a position like ag. Speaking of that john Edwards and his problems. Does that now got to his elimination from probably a cabinet position, I would think. Does that move her up?

Mike Sunnucks:
>> I think she's probably one of the people they will talk about for ag maybe homeland security maybe interior. They like to pick western governors for interior for some reason. She was u.s. attorney and attorney general and qualified to do it. I think she'll be on the list when they start talking about ag if Obama wins. The budget deficit will not be better. It will be worst. They have run out of gimmicks in the fund sweeps to do it. It will be tough. If she is looking at I can be ag and hangout with Jim and Russell Pearce and fight the budget. I think there's an impetuous to jump ship.

Ted Simons:
>> 30 seconds left. What's next with the mortgage limited?

Catherine Reagor:
>> Investors are trying to get the money. The SCC filed today. We know something there is going forward. They are trying to turn the bankruptcy, the developers from a chapter 11 re-organization to a chapter 7 liquidation of mortgages limited.

Ted Simons:
>> keep an eye on those proceedings.