Lowell's

To-Do List for Lexington: 4. Embrace Openness

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

In January 2008, we were in early discussions to buy Lowell's.  Since Lowell's focused only on Toyota brands, I had a simple question: How many Toyotas, Lexuses, and Scions are in Lexington?

It seemed like a fairly straightforward question, and since the county and state kept vehicle registration records, it seemed like the answer should be easy to find - especially since Indiana freely published precisely the kind of data I needed, but not for Kentucky counties.

After trying internet searches and coming up empty, I contacted the Fayette County Clerk's office, who referred me to the state Department of Transportation.  After a few more phone calls, I learned that I'd need to file a request under the Open Records Act, specifying the exact data that I would need.  I later found that I'd also have to pay $225 to get the data.

It all seemed so needlessly bureaucratic: It was public information, after all - so why wasn't it more public?

What followed was 13 months of a couple dozen intermittent phone calls, a similar number of emails, maddening unresponsiveness, and inane forms (including a mandatory contract which required that I wouldn't use anyone's personal data, even though the data I requested contained no personal information - it was just counts of vehicles by county).

Finally, this past February, I got the report I needed.  Well, sort of.  It was in a file and format which was nearly useless.  And, we got it a full 7 months after we bought the business, so much of the urgency to get the data had dissipated.  Still, we eventually wrangled it into something we thought was interesting and informative, and published the results in early April as the Bluegrass Vehicle Report 2009.

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Bureaucracies often have a maddening, self-perpetuating logic wherein the only purpose of the bureaucracy appears to be to maintain the bureaucracy.  Laden with rules and restrictions, such organizations often turn their focus inward and forget their true purpose.  And rather than engaging with and serving their constituencies, they tend to serve the bureaucracy's interests.

In the process, bureaucracies become tangled, closed, unmovable beasts which are hostile to the very people they are bound to serve.

Our vehicle data experience is, unfortunately, all-too-typical.  But it doesn't have to be...

Lexington suffers from a bureaucratically-driven lack of openness (as does Kentucky at large).  And that lack of openness hinders our city's economic, social, and political progress.

Lexington needs to embrace openness.

There are (at least) two ways in which we can create a more open city: 

1. By creating more open information and information systems
2. By adopting more open approaches to how our city serves its citizens

Open Information
Portland, Oregon recently approved an economic development strategy which directed the city to open its information to the public in a structured, standardized format.  Portland is just one of the latest in a fast-growing list of progressive communities who are opening their data to their citizens.

Portland followed in the footsteps of San Francisco which - through DataSF.org - has created a clearinghouse of over 100 sets of up-to-date government data.  That data includes geographic information, crime statistics, transportation data, and measures of performance for key city departments. 

By standardizing this data and making it easy to download, San Francisco has enabled software developers to create rich new applications.  In just a few months, this move toward openness has spawned several mobile applications dedicated to anything from getting around the city to spotting neighborhood crime trends to finding places to take the kids.  It has even created a showcase of these applications, encouraging both users and developers to make use of the open data.

Indiana - for many years - has offered incredibly rich datasets on a wide variety of the state's data on Indiana University's StatsIndiana site.

By sharing this data - even when it is uncomfortable (like the crime data) - these places are enabling citizens to understand their communities better.  If the crime data highlights problems, so much the better - at least citizens know what they are dealing with, and the community can begin to address problems with knowledge and insight.

In short, these places are making their communities more livable, while simultaneously encouraging local entrepreneurs to leverage the data to create new applications and new businesses.

These places follow a few simple rules to create useful clearinghouses of data:

• Data should be standardized into a structured, machine-readable format so that it may be easily imported into databases and spreadsheets for use with other applications.
• Data should be updated regularly.  If possible, it should tap into data sources in real time.
  
• It should cover the widest possible array of government information - statistics, contracts, spending, performance, etc.  (Don't try to predict or direct what information will be needed - let citizens decide on their own.)

In addition, most of the places adopting open data standards are also standardizing on lower-cost open source software.  By adopting open source platforms like Linux (operating systems), Apache (web servers), MySQL (databases), and Ruby (software development), the cities are able to move away from expensive proprietary systems from Microsoft, Oracle, and PeopleSoft, while simultaneously tapping into a rich community of developers, applications, and support.

Lexington can and should learn from these cities.  

From an economic development standpoint, this kind of open information is crucial to business growth.  In Lowell's case, vehicle registration information would have been valuable for developing better, more informed business plans and strategies.  Such information is crucial to local businesses as they evaluate market opportunities in our city.  It would be equally critical for businesses who wish to locate in Lexington from the outside. 

And, most important, having more complete, more open information would help Lexington make better, more informed decisions and have smarter conversations about our future.  For example, we could have better evaluated the closure of South Limestone:

• How much traffic would be diverted to other streets?
• How much congestion would that cause?
• What are the environmental impacts of the increased congestion?
  
• How much commuter time would be lost?
• What are the costs to downtown businesses in lost customers, lost productivity, and lost services?
• What are the tax implications of those business and commuter losses?
• How did the bid process actually work?
• What did the bid documents say regarding daily work schedule, incentives, and overall timeframe?

Some of these questions may have been answered inside the Lexington-Fayette County Urban Government (LFUCG), but those answers didn't enter into the public discussions in a meaningful way.  If this data and these processes had been more open and transparent, the decisions made around the South Limestone project may have been very different.

Open Approaches
One of our most frequent critiques of LFUCG is the way in which it serves (or fails to serve) the interests of Lexington's citizens and economy.

Nowhere is this more apparent than in the structure, timing, and conduct of LFUCG's Urban County Council meetings, which seem designed to suppress thoughtful public discourse.

The council holds a bewildering array of meetings with a variety of purposes, but two of the most important meetings are held on Tuesdays at 3 PM or on alternate Thursdays at 7 PM. Depending on the agenda, citizen input comes either at the very beginning or very end of the meeting.  Each citizen is limited to three minutes to speak to council.  In fact, both citizens and council members are placed on a visible countdown clock to limit their discussion times.

This format poses a number of problems:

• Participation.  Because of the timing of meetings, our ability to participate is restrained.  Most citizens have work or family obligations at 3 PM on a Tuesday.
• Beat the Clock.  Generally, the three-minute limit and the countdown clock stifle thoughtful civic discussion on complex and nuanced issues like CentrePointe, underground utilities, or South Limestone.  This is especially the case under the iron hand of Mayor Newberry, who - whatever his other qualities as an executive - is a ruthlessly efficient timekeeper.
• Timing.  Putting citizen commentary at the beginning or end of meetings divorces it from the council's discussion of those topics, which comes in the middle of the meeting.  Thus, citizen input is placed at the margins of the discussion instead of in the midst of it.
• Abuse.  The time limits, when coupled with parliamentary maneuvers, allow some council members to squelch the discussion when it goes in directions they don't like.  One council member is so adept at using this technique - on citizens and on fellow council members alike - that it should be named "the Myers" in his honor.

Such scheduling and time-allotment rules are relics of the last century: They seem more at home in the 1950's or 1850's than in 2009.  And they are leftovers of a bureaucracy which has lost its way - squelching civic discussion rather than contributing to it.  Worse, it shows disrespect and disdain for the very citizens those rules are supposed to serve.

LFUCG should adopt more open - and more modern - approaches to debating issues and to gathering citizen input.

[Note: What follows is excerpted from an old post which we feel framed the issue best.  Sorry to self-plagiarize.]

In an age of websites, blogs, Twitter, and Facebook, every business has had to engage in conversations with customers on the customers' terms.  The ubiquity of the internet means that these tools are available to nearly everyone, nearly everywhere.  The latency of the internet means that the conversations don't have to happen at the same time - they can build over time.  The internet's ubiquity and latency forms the foundation of a new and better town hall.

Why should we all have to cram into a room at the same time?  Why should we have to play 'beat the clock' when talking about issues which are complex and nuanced?  Why should we have to forgo pressing business or personal matters to attend a meeting which is designed to be convenient for our representatives?

The internet provides the perfect public forum for every citizen to express his or her public policy views, ideas, and thinking.  Even better, our ideas can build on one another as we tinker with and improve the ideas of our neighbors.  Plus, conducting civic conversations on the internet can happen around the clock.  Citizens can participate in the public discussion when and where it is convenient for them, not for the elected representatives who serve them.  Isn't that the way it should be?

Further, every single representative should publish their conversations, thinking, dilemmas, trade-offs, beliefs and positions (and the transactions between them and other interested parties - like developers or investors or campaign contributors).  These records should be posted online for all citizens to see, comment on, debate, and improve.

The council members' emails are listed on the city's website, as are the mayor's newsletters.  But these are old, closed, one-way forms of communication.  They aren't vibrant community discussions.

So, do I want to see tweets that the mayor's advisor is picking up eggs?  Or a Facebook entry featuring the halloween costumes of the councilwoman's children?  Not particularly.  But we deserve to see real-time updates of their thinking on critical community issues.  We should know why they have changed their minds at the last minute.  They should tell us who they talked with and what they said.  After all, they are public officials.  We should see into a transparent civic machine which serves all of us.

What is clear is that a 19th-century civic apparatus has hamstrung our 21st-century community. The ancient contraption allows far too many secrets to hide within.  Whether our representatives and our governments use blogs, Twitter, Facebook, or some other platform matters far less than whether they start participating in open conversations with the people they serve.

The technology already exists.  Millions of people already use it.  Thousands of your constituents use it every day.  It's easy.  It's free.  And it will make Lexington better.  What are you waiting for?

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Lexington needs to adopt open, transparent, and up-to-date approaches to serving its citizens.  Lexington should also provide open information about the city so that we all can make smarter, more informed decisions.

Our lack of openness impedes our commerce.  It impedes our democracy.  It impedes our path to a better Lexington.

Let's change that.

Next: 5. Leverage Intellectual Capital

To-Do List for Lexington: 3. Local First

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

When we spend a dollar in Lexington, what, exactly, happens to it?

It sounds like a silly kind of question, but it is actually quite essential to our city's economic vitality.

When we spend money in Lexington, some of that money is extracted out of the local economy (going to other parts of the country or of the world), and some continues to circulate inside the local economy.  Whatever amount stays in Lexington is available to help fund other purchases, other jobs, other investments, and other businesses. 

This is known as a "local multiplier effect".  As each dollar reverberates through the local economy, as it is re-used over and over for other purchases or investments, its effect becomes larger than just a dollar.

So understanding where money goes and how much remains in the local economy is important as we craft a sound economic development strategy for Lexington.

And, to a great extent, how much remains in Lexington depends on where we spend it.

A study by Civic Economics looked at Austin bookstores and found that out of every dollar spent in a national chain's bookstore, about 85 cents leaked out of the Austin economy.  That 85 cents "leaves" to pay national and international suppliers for the books, to distribute profits to owners (shareholders) around the world, to pay federal taxes, and to pay for support staff -- marketing, finance, administration, etc. -- located elsewhere.  The remaining 15 cents stayed in Austin (mainly in the form of local employee wages, local utilities, and local taxes).

When the study shifted its focus to a local bookstore, some interesting effects kicked in.  Because the owners were local, more profits stayed in Austin.  Because they used more local suppliers, more of that money stayed in Austin, as well.  The support staff was also local.  The net effect?  Out of every dollar spent at the local bookstores, 45 cents remained in Austin - 3 times as much.

If we apply the same rates to Lexington, that means that $100 spent at, say, locally-owned Morris Bookshop (no relation to this author, by the way) turns into $145 as the initial $100 sale ripples through the local economy, and other businesses realize an additional $45 in sales.  The same $100 spent at, say, the Hamburg Barnes and Noble yields only $115 for the local economy.  Are these numbers absolute?  No - but they do provide a relative measure of the value of a local purchase.

How representative is a bookstore to the rest of the economy?  It depends.

Books are manufactured things, and they tend to be manufactured 'somewhere else'.  That means that much of the money used to buy a book leaves the local economy pretty quickly.

If we look at businesses which produce goods or services with even more local content, then the money spent on those products tends to circulate through the local economy for much longer.   

Here at Lowell's, we did some back-of-the-envelope multiplier calculations.  Roughly half of our sales are goods (mainly car parts) and half are services (the expert labor of our technicians). 

The parts side of our business works a lot like the local bookstore - most of our suppliers are local parts distributors, but most of their suppliers are national distributors who get parts from Japan or China.  So the money spent on parts at Lowell's bounces around the local economy for a couple of rounds, but much of it eventually leaves Lexington because our parts are made overseas.

The services side of Lowell's, however, is very different.  Because our 'suppliers' (employees) are all local, the majority of each dollar spent on services at Lowell's circulates through the local economy for 3 rounds or more, with a little more leaking out of Lexington in each round. 

Our rough estimate is that each dollar spent at spent at Lowell's turns into at least 2 dollars for the local economy. 

And we aren't - by any means - the best example of a local multiplier.  

As the local content of goods or service ramps up, the multiplier compounds.  In some cases, the local multiplier could reach 5 or more: each dollar spent results in $5 recirculating through the local economy. 

A great example of this compounding is Good Foods Market, a local co-op which sells a lot of locally-produced items.  That local produce often uses local labor and local inputs, and the multiplier compounds quickly.

We often hear the phrase "Buy Local".  And it often sounds defensive or protectionist or even a bit naïve.  And sometimes it is.

But purchasing goods and services from local providers also pays hefty benefits for Lexington's economic health.  And finding those local providers is relatively easy, with sites like Kentucky Proud and Local First Lexington providing useful directories of local products and services.

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Lexington needs to think 'local' first.

Because of the way local purchases supercharge our economy (through the multiplier effect), prioritizing local business investment and development should be a cornerstone of Lexington's economic development strategy.

But it doesn't appear to be.

Commerce Lexington - our local chamber of commerce - is also commissioned by the Lexington-Fayette Urban County Government (LFUCG) to marshal economic development efforts in our city.  More than any other organization, Commerce Lexington should understand the economic benefits of prioritizing local investments over external ones.  

Looking through Commerce Lexington's policy statements on economic development, they are filled with booster-speak - pushing incentives aimed at attracting new businesses (see our last post on why this strategy is deeply flawed).  And, we see nothing in those statements regarding prioritizing local business investment.

Other Lexington leadership seems to have overlooked the local multiplier as well.  LFUCG paid Vision Internet (based in California) $24,000 to redesign the lexingtonky.gov website.  Rather than injecting $48,000 into the Lexington economy (assuming a 2x multiplier) and helping sustain a local business, the city created a multiplier of 0 and drained $24,000 from the local economy.

And the Lexington Convention and Visitors Bureau contracted with New York's Pentagram to design the CVB's 'Big Lex' logo.  Regardless of your feelings about the logo itself (we didn't find it relevant), the CVB missed a big opportunity to contribute to Lexington's own thriving branding-and-design community.  They could have created a compelling story by working with a bigger, award-winning local firm like Elevation Creative.  Or, they could have partnered with a smaller, growing local firm like Martin Design Studios (who crafted the crisp, clean new logo for Lowell's).  Instead, CVB missed out on a chance to leverage local relationships to create a new logo and contribute to the community's economy.

Some observers might (rightly) be concerned about the effects of nepotism or cronyism if the government (or their agents) were to award such contracts to local firms.  The "good ole boy" network is alive and well throughout the city, but there are ways to ensure local preference while simultaneously ensuring that taxpayers are not being fleeced.  Several progressive communities throughout the country have identified and adopted rules for local government purchasing which do just that if a local bidder is within, say, 5% of the best non-local bid. 

Lexington should explore our options for implementing similar local-preference purchasing rules, so that our community may benefit from the local multiplier.

In any case, Lexington should make local business development and investment a cornerstone of its economic development strategy. 

Next: 4. Embrace Openness

To-Do List for Lexington: 2. Stop seeking saviors. Start making them.

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Last July, Florida Tile announced that it was relocating its headquarters to Lexington from Lakeland, Florida.  Kentucky's state government made a $3.7 million capital investment to bring 25 new Florida Tile jobs to Lexington.  Florida Tile estimates that the number of jobs may grow to as many as 51 in 10 years.  In October, Lexington's Urban County Council dropped the occupational license tax for Florida Tile to 1.25% from the normal 2.25% - a benefit of up to $1.3 million over the next 10 years.

How will 25 (or 51) new jobs pay back the millions of public dollars invested in bringing Florida Tile to Lexington?  It is doubtful that they will.  And that points out significant problems with Lexington's economic development strategy.

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In our last post (Get Real), we talked about the destructive effects of Lexington's booster mentality, which couples a self-deceiving optimism with a compulsive need to look good to others.  Boosters often pursue expensive, highly-visible, ego-driven civic projects with the promise of vague future rewards.

The economic development strategy which springs from such boosterism is one in which a great deal of effort and capital is expended to attract outside commerce to Lexington.  So boosters promote big civic investments (events, buildings, infrastructure projects, or incentives) with the hopes that those projects will entice new companies to invest or locate here.  And the underlying assumption is that the firms we attract to Lexington will - eventually - pay back the investments of effort and capital.

But this kind of economic development strategy has a number of irredeemable flaws:

• Waste.  Projects like the 2010 World Equestrian Games and CentrePointe are wildly speculative and profoundly inefficient ways to draw new commerce into our city.  And, when one looks at the numbers, it is doubtful that Florida Tile's incentive package will pay back taxpayers over the next 20 years - if they stick around that long.
• Loss of Power.  When we try to attract companies from outside Lexington, we cede significant negotiating power to the company we are courting.  That company can stay where they are, or go to a city other than Lexington.  We are prone to enter bidding wars with other desperate cities in the pursuit of desirable 'saviors', and the process becomes a race to the bottom: Who can offer the most lucrative incentives and conditions?
  
• Misguided.  These strategies pursue the wrong kinds of firms.  When we resort to incentives to, in essence, bribe companies to come to Lexington, what kinds of companies are we attracting?  Ones which are much more mercenary and which - by definition - have less investment in our community and its future than firms who are already here.  To be clear, every business should be concerned with improving  its bottom line.   But when public dollars are at stake, we must decide how to allocate those dollars based upon public benefit.  And underwriting mercenaries is not the best use of public funds.
• Hidden Penalties.  The incentives granted to companies like Florida Tile disadvantage already-local firms.  Those local firms not only help pay for the new firms' incentives through taxes, but they also don't get the financial subsidies, new facilities, or extended tax advantages that are often granted to newcomers.

This economic development approach - attract outside saviors to drive growth - also ignores a vital question: Where are these firms coming from?

Or, put differently: How is it that such firms even have the capability to expand to a city like Lexington?  How did they grow?  What did their home cities do to foster that growth?  And, most importantly, why isn't Lexington doing that to grow great businesses at home?

Lexington's leaders frequently look to similar American cities in the attempt to understand how those cities have grown and how they have built a great quality of life.  If we look at 'model' cities like Austin, Madison, Portland, and Pittsburgh, we see a very different economic development model at work. 

In fact, these cities suggest that the old booster model has it exactly backwards: Those cities invest in growth at home first, then outsider attraction follows.

Lexington should be asking a lot of questions about those cities:

• How did they foster key industries at home?  (For instance, how did Austin nurture the development of vibrant economies around semiconductors, computers, and music?)
• How did those cities redevelop key districts into vibrant contributors to their economic engines? (Think Sixth Street in Austin or The Pearl District in Portland.)
• What specific approaches did these cities use to leverage their relationships with local universities to drive economic growth?  (Think Carnegie Mellon or University of Wisconsin.)
• What infrastructural moves did they make to enhance the local economy? (Example: How did Austin Energy help the city save enough energy - even as Austin grew - to avoid building a new power plant?)
• What did they do to nurture and promote the careers of key locals?  (Think Michael Dell in Austin or Rebecca Ryan in Madison.)

And then Lexington needs to take a hard look inward and think about how those lessons apply here.  For instance:

• Who are Lexington's Michael Dells or Rebecca Ryans?  How would we know?
• What are the best ways to allocate economic development funds to cultivate growth in their businesses?
• Which districts in Lexington hold the most promise for redevelopment?  What specific lessons can we draw from, say, the Pearl District redevelopment process?
•  How can we leverage the University of Kentucky and Transylvania University as key resources for economic growth (and not think of them only as educational institutions)?

These cities suggest that Lexington should stop seeking external 'saviors', and instead focus on building up our city's internal competencies and infrastructure.  Then, outsiders might find our city desirable without requiring huge ransoms. 

Focusing on internal growth is, in fact, how cities like Austin, Madison, Portland, and Pittsburgh have fueled sustained growth over the past 20 years.  Lexington should follow their example.

Lexington should stop seeking saviors, and start making them instead.

How does that look?  Here are some initial ideas:

1. Make targeted investments. Instead of, for example, throwing $80 million at the World Equestrian Games in the speculative hope that the investment will draw future commerce from outside the city, make smaller, more targeted investments in growing specific businesses with specific growth measurements and targets (jobs, tax revenues, etc.).
2. Select target industries, and invest there.  Choosing particular industries will allow Lexington to develop self-reinforcing ecosystems around key technologies or competencies.  Lexington's mayor has frequently touted the "3 H's" strategy for Lexington's economic development: Horses, health care, and high-tech.  These might be valid industries to target, but we've allocated precious little development resources toward those goals and seen precious little progress in those areas. 
3. Oversee development with sharp business intellects.  Typically, Lexington's economic development has been overseen either by developer-driven boosters (Commerce Lexington) or by academics and architects (Downtown Development Authority).  Lexington needs to shift the balance to more entrepreneurial businesspeople who have experience in business growth and who understand which business models work and which don't.  
4. Prioritize business investment over infrastructure investment.  Projects like streetscapes and buried utility lines, while pretty, will contribute relatively little to Lexington in the way of tangible jobs or revenues.  And attempts to financially justify these projects frequently cross into sheer booster speculation about making better impressions.  Instead, we should focus on cultivating growing businesses and directly creating jobs and revenues with our development funds.
5. Think "local" first.  Supercharge our investments by prioritizing local businesses before external ones.  More on this in our next post in this series.

Rather than spend hundreds of millions of dollars on hope and speculation, we need to make smarter, more targeted investments with our public development dollars.  We need to run the business of growing our city like a business.  Anything less is a waste of our time and money.

Next: 3. Local First

We love you, too!

One of the great things about working at a service-oriented company like Lowell's is how much our customers appreciate what we do.  Our hope is that treating customers with generosity will pay future dividends - we want to build the most loyal band of customers in the city.

And, occasionally, we're able to do something which touches peoples' lives for the better.  We did that a couple of times last week.

J.I. sent us this note in response to our Community Service program (a FREE full-service oil change, with no strings, no catches, and no charge), our way of saying "thank you" to our community in celebration of our 30th anniversary:

Sent: Wednesday, October 14, 2009 3:45 PM
Subject: I LOVE LOWELL'S

I just wanted to share something with you.  I have been experiencing a bit of financial difficulty these past few months.  I guess I too am a victim of the bad economy.  Anyway, my service light came on yesterday and I quickly realized I needed an oil change.  I decided to check out your web site to see if I could get a good deal on an oil change and to my amazement I saw the ad for a free oil change.  I will be contacting you to make my appointment! :-)  I wanted to say thanks for the years of GREAT service you provide Lexington and your decision to offer a free oil change. It is a BLESSING to me!  May you get all that you deserve in return for being so honest and giving!

J.I.

That same week, we got a bowl full of candy and this wonderful note from C.H., who used one of our 20-year-old loaner Camrys over the weekend:

Thank you so much for the use of the loaner car while mine was being fixed.  I must admit that I panicked not quite knowing how to work out the details of not having a car.  Your loaner looked better than any luxury car could ever look to me this weekend!!

You all truly deserve the reputation you have as giving excellent customer service!!

With gratitude,
C.H.

Both of these notes make us proud to be in the business of helping people.  We're always looking for ways to be an even better mechanic.  It is really nice when you tell us that we're on the right track. 

We love you, too!

The True Cost of South Limestone

The South Limestone streetscape project began with the closure of South Lime two months ago today, and the project is slated to continue for another 10 months.  Meant to better connect downtown with the University of Kentucky campus, the project includes the widening of sidewalks, the installation of bike lanes, and the underground placement of utilities.

When the project started, we wrote about the chaotic process of closing the street and about the need for practical planning and design on South Lime and other urban development projects.  How has the project evolved since then?

Not well.

Severed Artery
The closure dramatically impacted traffic patterns between downtown Lexington and the south side of our city, resulting in gnarled traffic on a number of alternative routes to downtown.  At various points in the project, intersections with cross-streets (High, Maxwell, and Euclid) have also closed with little notice, adding to confusion and gridlock for downtown commuters and shoppers.  In effect, the closure of South Limestone has walled off downtown from Lexington's south side.

Several businesses along South Lime have struggled to cope with the substantial loss of customers and the physical disruption of their businesses.  Last week, Joe Graviss, the owner of the McDonald's on South Lime, pleaded with Lexington's Mayor and Urban County Council to add extra shifts or more workers to speed the project.  

City officials responded that extra shifts will not accelerate the project.  The project's manager noted that the city's concrete supplier closed in the evenings and that local utilities were already providing personnel to assist with the location and relocation of utility lines.  At one point, he admitted that he had no ideas for speeding the South Lime project along.

Vice Mayor Jim Gray - the CEO of Gray Construction and the only councilmember to oppose the project - countered the project manager's claims.  "It would be wise of us not to be extravagant in describing the difficulties of this project...  With 2000 projects under my belt, I've never seen a project that couldn't be improved or accelerated."

At this point, most elected leaders and city bureaucrats seem unprepared to take significant action to accelerate the South Limestone streetscape project.

That's because they have been thinking about the impacts of South Lime on the wrong scale.

Estimates on the price of the South Lime project vary, but the early $5.2 million estimate has ballooned to somewhere between $13.1 and $17 million.  The newer, higher price was partly meant to help expedite the project. 

But, as we'll see in a moment, that price far underestimates the true cost of the project to our city, our economy, and to our future. 

South Limestone's closure is not a mere inconvenience - it is a severed artery that is bleeding the life from downtown.  It demands an urgent response from our leaders.  The cost to the city is too dear to delay action, especially in this difficult economy.

Disruption: Anecdotes and Hard Data
A number of weeks ago, on the first day that the High Street intersection with South Lime was closed, I worked in my office and overheard two different customers from the south side of Lexington talk about the enormous problem of getting to our downtown shop - the confusion from suddenly closing the High Street intersection had made traffic especially difficult to decipher.

Then, we had an elderly customer from Nicholasville make an appointment for the next day, asking for directions on how to get to the shop with all of the construction.  Concerned about getting lost, she decided to do a dry run the day before.  After experiencing the jams, diversions, and delays, she called back and canceled her appointment.

Last month, I talked with another downtown business who is in our same industry.  They were scratching their heads about why their August business "fell off a cliff".  I talked with them again last week, and their business was still much slower than usual.

Yesterday, a regular customer who owns a shop in Festival Market came into Lowell's and opened the discussion with a flat "Business sucks".

When I started hearing these anecdotes, I began to think that the impacts of the South Limestone closure extended far beyond South Lime.  I wondered about the effects of South Lime as a customer deterrent for our business:

• How many of our customers come from the south side of Lexington?
• How many of those south-siders might have chosen to stay away from "the mess" downtown?
• What could that data tell us about the impacts to all of downtown Lexington?

And what I saw in the data was astounding and troubling:

• About 30% of our customers come from ZIP codes which would use Nicholasville Road (which turns into South Limestone) as the primary corridor to downtown
• Since July 22nd - the date of the closure - we have lost one third of the business we'd normally expect from those ZIP codes.  By comparison, the rest of Lexington is relatively flat or growing.
• The net of this was a loss of 10% of our sales (and a much bigger hit to our profitability) directly attributable to the South Lime closure.

I disclose these facts not as a woe-are-we pity party, but as a fact-based assessment of how "the mess downtown" affects one downtown business.  Our business is a relatively healthy, well-respected business with incredibly loyal customers (Last week, we won "Best Honest Mechanic" from Ace Weekly readers).  And, still, the closure of South Limestone accounted for a loss of a full third of south-side customers.

Ripple Effects
Can we extrapolate from just one business to the whole of downtown?  Not with any degree of certainty.  But my conversations with other business owners make me believe that my business' experience with the South Lime closure is not exceptional.  Admittedly, not every downtown business is as impacted by traffic disruptions, but most are impacted in some fashion: lost customers, lost productivity, supply chain delays, etc.

Hard data for downtown Lexington is difficult to come by.

• Just how much of Lexington's $11 billion economy takes place downtown?
• Which businesses depend upon the smooth flow of traffic?  To what degree?
• How many of their customers / employees / suppliers come from the south side?

Depending on the assumptions used, the estimate of impacts to downtown can vary wildly.  Our best "conservative" estimate?  Downtown Lexington loses about $360,000 each business day that South Limestone is closed.  (Depending on our assumptions, the estimates ranged between $275,000 and $600,000 each day.)

That translates to between $7.0 to $7.7 million in lost business every month, or between $84 and $92 million for the year-long duration of the South Limestone project.  That's around 700 to 1000 jobs which could evaporate from downtown Lexington, especially as the closure drags on.

Are these numbers absolute?  Not by any means.  But they do provide a ballpark idea of the true cost of the South Limestone project. 

Much of the focus on the costs of South Lime have focused on either a) the direct taxpayer costs ($17 million) or b) the costs to businesses on South Lime.  And while those South Limestone businesses deserve special attention for the degree this project impacts them, our estimates suggest that our leaders and our community have been thinking about 'cost' on the wrong scale.  There is a much bigger, much more urgent cost which must be addressed.

The irony of South Limestone - as the cycle of lost customers, declining businesses, lower employment, and more lost customers continues - is that the project may well end up strangling the very downtown that the streetscape is meant to connect with.

Our leaders frequently assert the necessity of a vibrant, livable downtown.  It is time for them to live up to their words. 

With the South Limestone closure, they must now choose: Will they continue to choke off downtown from a significant portion of the city, or will they act with urgency and extraordinary effort to accelerate and improve the project?

Their actions now will determine whether the prediction from our Chaos post will come true:

"And the results of the chaos are easy to predict.  Confused commuters and shoppers stay away from 'the mess' downtown.  Downtown businesses die.  And, after fits and starts, Lexington ends up with a beautiful street.  To nowhere."

Time to choose.

Health care reform: A small business perspective

This week, we're finalizing our shop's health insurance requirements for the next year.  Our policy will be 25% more this year for the same coverage.  Last year, it grew by 16%.  Compounded, that's 45% in two short years.  No other cost increases on that scale for us.

As a small business, the spiraling costs of health care hit us particularly hard each year.  And the need for a new approach to health care is particularly acute, for us and for our employees.

I've been puzzling over health care for a long while - and I won't claim to have the answers here.  But I thought it could be helpful to step away from the town hall and cable channel histrionics and fear-mongering to share some observations on health care from a small business perspective.

Insurance companies are like casinos: The house always wins.
Insurance companies have received a lot of criticism during the health care reform debate.  But they are doing precisely what they are designed to do.  They make money for investors by taking bets on the health requirements of their customers. 

Insurance companies operate like casinos or racetracks: the table is always tilted in favor of the house.  They may lose big on a single 'jackpot', but across the full array of customers they nearly always win.  And when they don't win 'enough', they'll raise the cost of making bets with them. 

When we enter into agreements with insurance companies, we're always taking a sucker's bet that we're very likely to lose.  The only reason an insurance company takes our money is because they 'bet' that we won't need that amount of medical care.

Ultimately, as with the casino, the house wins.

The oddity of employer-provided health insurance.
We don't really question it much today, but it is just plain strange that something as personal and as private as health care is mediated by employers at all.  We don't usually involve our employers in house payments or banking or appliance purchases or car insurance.  But, somehow, we've come to expect them to provide health care insurance.

Employer-provided insurance is an historical artifact from negotiations between General Motors and labor unions in the late 1940's and early 1950's.  Charles Wilson, GM's CEO, saw it as a last-ditch concession to help prevent the 'nationalized healthcare' system that Harry Truman was championing - which Wilson saw as a threat to the integrity of the free enterprise system.  (Funny how many things just don't change.)  Soon, other employers adopted health care coverage as a standard part of their benefits packages, and employer-provided insurance became the norm.

But, really, why are we employers involved at all?

Leverage
One reason that employers remain involved is that they often have more buying power than individuals.  Over the past 60 years, we've been able to provide leverage which lets us negotiate somewhat better plans with insurers and medical providers. 

But small businesses have scant more negotiating leverage than an individual.  Often, our employees choose to get independent coverage rather than participate in our group plan. 

When Lowell's bid out to three other health insurance companies, the results were disheartening.  The other three companies offered rates that were 200% to 300% higher than our current rates with Anthem.  So we're 'trapped' with Anthem.

Expanding waistlines, increasing costs.
As a nation, we're getting a lot unhealthier.  We eat more.  We exercise less.  We sleep less.  We're in worse health.  We're living longer.  And we need more care.

We don't spend much time, effort, or money on the preventative health care and self-care which would help eliminate the much more expensive catastrophic care.  We're too busy to exercise.  We don't want to pay for the mammogram.  We don't like waiting in the doctor's office. 

And we require more medical care as a result.  Often, we get that care after a catastrophe built upon years of self-abuse: We have a heart attack.  Our knees fail.  The cancer spreads.  (We see the same phenomenon with routine maintenance in the car business - put it off, put it off, put it off, then replace an engine.)

Health care is getting more expensive, in part, because we are getting unhealthier.

Rising expectations, increasing costs.
We've come to expect more from our medical system.  We expect our doctors, staff, drugs, equipment, and facilities all to improve.  And we should expect improvement as medical science advances.

But those advances are costly.  The astronomical research and development costs for the medical 'miracles' of MRIs and cholesterol-fighting drugs and 'little blue pills' have to be paid for in some fashion.

And doctors, hospitals, and insurance companies won't simply absorb those costs.  They will pass them on to patients.

Health care is getting more expensive, in part, because health care is getting better.

There are no painless solutions.
We've seen politicians, lobbyists, pundits, and fellow citizens all offer various versions of 'painless' solutions to the healthcare problem.

They promise that government should bear more of the burden. Or that government shouldn't bear any of the burden.  Or that we just need full, universal insurance.  Or that insurance companies should pay.  Or drug companies.  Or hospitals.  Or doctors.  Or that we shouldn't have to pay for the chronically uninsured.  Or that we should just collar all the lawyers and their malpractice suits.  Or we should just have more competition.

Nobody says that we must bear the responsibility.  But we must.

If we refuse to provide insurance or government coverage for the roughly 45 million uninsured Americans, what happens to those who can't pay?  Hospitals and emergency rooms will still provide care.  Their costs will go up.  And they will pass those costs to other patients in the form of, say, an $8 dose of ibuprofen.  We pay.

If we provide government-paid health care to them (or to ourselves), what happens?  Our national deficit will rise.  This week's projection of a $9 trillion deficit over 10 years amounts to about $30,000 per man, woman, and child.  Which will have to be funded through taxes.  We pay.

If we have full universal coverage in a government program, what happens?  Because they don't bear the initial brunt of the costs, patients get more health care than they really need.  And doctors and medical institutions will happily provide (or suggest) that profitable care.  More deficit.   More taxes.  We pay.

If we squeeze insurance company profit (or put greater requirements on them), what happens?  They will likely refuse coverage for the riskiest, least profitable customers.  Unable to find private coverage, those customers will opt to go without coverage or to go with a public plan.  More $8 (or, now, $10) ibuprofen.  More taxes.  We pay.  

If we squeeze drug or equipment company profits, what happens?  They have less to invest in research and development.  They take fewer risks, and release fewer blockbuster drugs or fewer equipment breakthroughs.  Improvements in our medical care falter.  We pay.

If we collar lawyers and malpractice suits, what happens?  Doctors' malpractice insurance costs will likely go down.  But a few careless doctors who commit malpractice may inflict injury or death without significant penalty.  And who ultimately bears the cost of that irresponsibility and that injury or death?  We do.  We pay.

If we allow more competition between insurance companies, what happens?  The insurance companies look at the same basic actuarial tables.  They evaluate risks in the same way.  They put a price on the 'bets' they are willing to take in the same way.  And their prices remain about the same as without as much competition.  We pay.

We want ever-better medical care.  We are getting unhealthier.  We want someone else to pay for it.  But they won't.  We must bear the responsibility.  We must pay.

Can government, insurance companies, hospitals, and doctors get more efficient?  Sure.  Are there opportunities to eliminate waste?  You bet.  Can we patients get healthier and do more preventative care?  Absolutely.  But it will cost us in some way.

There are no painless solutions.  In the end, we all pay.

The moral obligation
"Is health care a right or a privilege?"

It is a question that we don't talk about enough, and which underlies much of the national divide about health care today.  Is health care a right to which all people are entitled?  Or, is it a privilege bestowed only upon those who have earned it?  

It is an interesting question, and the health care debate has hinged upon how people answer it.

Except that I think that it is the wrong question.

The "right or privilege" question presupposes that rights and privileges are somehow separable. I don't think that they are.

I think of health care in many of the same ways as I think of citizenship or, even, to being a human being.  As citizens and as humans, we have certain 'inalienable' rights.  Heck, our country was built upon them - "Life, liberty, and the pursuit of happiness".  

But those citizen's (and human) rights come with deep responsibilities.  We must participate.  We must act in certain ways.  We must work together to improve our nation and our well-being.  We can't abuse the fundamental rights we have been given.

For me, health care comes down to a moral issue.  I can't tolerate 45 million fellow citizens living without a safety net.  I can't tolerate wasteful spending on needless tests and procedures on the public dime.  I can't tolerate 45% increases in insurance costs over 2 years.  I can't tolerate 'competition' which triples my existing rates.  I can't tolerate people (including me, unfortunately) who don't take good enough care of themselves.

I can't tolerate the status quo.  Can you?

For me, health care is a citizen's right.  And an earned privilege.  We must strive to provide health care for fundamental human needs whenever possible, while simultaneously striving to ensure we grapple with the responsibilities that come along with that privilege.

So to the politicians, lobbyists, pundits, and citizens engaged in the public debate, I say: Grow up.  Step up to the plate.  Quit attacking.  Get realistic.  Have adult discussions.  Lose the scare tactics.  Work together.  Compromise.  Take responsibility.  Live up to your moral obligations.

Then, maybe, just maybe, we can build a better health care system.  For our nation.  And for one another.

LexMob: Final Schedule

When we started LexMob on July 22nd, the idea was to keep patronizing businesses affected by the closure of South Limestone for a month. It has been extremely rewarding to meet fellow LexMobbers and to meet owners and workers in the targeted businesses.

It has also been very time-consuming.  I've decided to stop organizing LexMobs after Monday, August 31st, so that I can better tend to my business.

This doesn't mean that LexMobs have to stop.  In fact, we'd be thrilled if LexMob continues into the fall.  And anyone can organize a LexMob for South Limestone: The idea is to 'show up' with our feet and our wallets to help out these businesses.  Whether it is a mob of 1 or a mob of 100, simply show up and ask others to show up as well.

The easiest way to organize a LexMob: Send out a notice on Twitter with the hashtag phrase "#LexMob for #SoLime".  In my experience, it is good to send out a few tweets at different times of the morning to let different people know when and where the LexMob will be.  Then, after your LexMob, tell the twitterverse how it was and thank those who came.  That's all it takes. 

I've had a number of suggestions for how LexMob could continue:

• LexMobs could be weekly (or a couple of times a week) instead of each day
• Perhaps the businesses on South Limestone could organize LexMobs themselves
• We could just see what happens; Hopefully, other LexMobbers could continue to organize mobs without a central planner

We support any or all of these options. 

In any case, here is our 'final' schedule for LexMob:

• Wednesday 8/19, Lunch: Sav's Grill
• Thursday 8/20, Lunch: Hanna's, Zag's, & Failte Irish Imports
• Thursday 8/20, 7 PM: Social Event at Pazzo's Pizza Pub (sponsored by the Lexington Fashion Collaborative)

• Monday 8/24, Lunch: Banana Leaf
• Tuesday 8/25, Lunch: Tolly Ho
• Wednesday 8/26, Lunch: Cloud 9
• Thursday 8/27, Lunch: Han Woo Ri, The Album, Sqecial Media, and ReBelle
• Friday 8/28, Lunch: Sav's Grill and Oneness

• Monday 8/31, Lunch: Pazzo's Pizza Pub and CD Central

We hope to see you there!  Who's in?

What you told us: How Zappos would fix cars

This week we asked for your help in defining an astoundingly great car repair experience.  We summed it up this way: How would Zappos fix cars?

In Wednesday's post, we talked a little about what Zappos does and why customers love them, including the famous I Heart Zappos post.  And in the past two days, we've gotten some really great responses on Twitter, Facebook, and here on the blog - including one response from a Zappos employee!

Over on Facebook, Joan commented that she thought that Zappos was actually the "Lowell's of selling shoes".  (We heart Joan.)  We love that sentiment and will try to live up to it, but still think we have a lot to potential to improve our own customer service.

On Twitter, Jim suggested that Zappos "would come to your house and fix it at night while you slept".  Allan and Mari joked about needing to buy parts online from Amazon (an allusion to Zappos' recent purchase by Amazon.com).

But the strongest theme running through the comments: The need for greater transparency in auto repair.  I'll run through some of the comments, and then talk a little about what Lowell's does (and what we could do based on your comments).  On Twitter, Jupiter said he'd like to prevent that "being had" feeling, perhaps by getting greater detail on what was being repaired and why it was needed.  Ace Weekly chimed in "They would spoon you before giving you the bill?"  Here on the blog, Letha (a Zappos employee) shared a friend's experience with a body shop which sent her daily text messages about the status of her car after a wreck, including a countdown to when it would be ready.  Jim added this comment:

"The thing the frustrates me about car repair is the unexpected nature and size of the expense. It would be nice to provide as part of the service an educational piece that says here are the expected life cycles for key systems for your car and what you might expect to pay. And here are indicators of failure so we can start to diagnose these issues BEFORE they happen. At some point, owners need to start BUDGETING for system replacement and failure and that takes planning and information."

What's clear from this last batch of comments is that automotive service is all-too-frequently a kind of mysterious 'black box' where a car goes in one side and nasty, unpleasant surprises emerge from the other. 

At Lowell's we try to prevent such surprises in the following ways:

• On each invoice, we print a list of factory-recommended maintenance given vehicle mileage, including a rating of the severity or urgency of each one, and pricing.  We try to review that list with our customers when they pick up or drop off their vehicle.  We sometimes fail to discuss maintenance needs during busy pick-up and drop-off times.
• We always get customer approval before doing work on a vehicle, providing customers with estimates of the costs before we do the work.  If they are available, we'll also offer less-expensive alternatives, like fixing or cleaning a part instead of replacing it.  (Ace, we try to reduce the need for 'spooning' whenever possible.)
• When we call a customer to get approval, we tell them what a technician found and explain why action might be needed.

Based on your comments to us, here are some ideas of what we could do:

• Explainers.  For frequently-done maintenance and repair service items, we could provide detailed "explainer" sheets, including text and pictures regarding what the service is, why it is needed, and what a part might look like when it needs replacement. 
• Schedules.  With ongoing maintenance, it is easier to implement Jim's suggestion that we provide more of a roadmap of service.  And we do that, to some extent, with our list of factory-recommended maintenance.  But it is very difficult to predict with accuracy when something will break and require repair, and for many repairs there are few warning signs until something breaks.  When visible, we'll tell customers about signs like brake or belt wear or engine leaks.  One idea: We could take pictures of the actual parts that are wearing or of the places that are leaking, to show the thing that needs service.
• Convenience.  Not sure yet how we might do something like this, but Jim's other suggestion of working on vehicles overnight is interesting.  Perhaps we could pick a car up and have it back in the morning for very basic items, but a big part of our process is communicating back to customers about what we find (and they probably won't welcome updates at 2 in the morning).  But Jim's suggestion got us thinking: Are there other ways we could make getting auto service easier?
• Updates.  As a mechanical shop, most of our repairs are completed same-day, so we almost never have the 20-day delay in getting completed that Letha's friend had at the body shop.  But Letha's post got us thinking: Are there other ways you'd prefer to be contacted?  While the phone is our usual way of updating customers, we do frequently find ourselves in a kind of phone tag during the service approval process.  We could provide more contact alternatives: text messages, Twitter DM's (direct messages), etc. 

Which of these things would matter to you?  What other things would create an astounding car repair experience for you?

We really appreciate your thoughts, and please, keep giving us ideas on how to improve.

Chaos: South Limestone Closure Lawsuit Details

When we initiated LexMobs to help businesses on South Limestone on Wednesday, we noted that the closure of the street seemed hasty and poorly-planned.  Well, now we've obtained the Fayette Circuit Court filing from a lawsuit intended to stop the work on South Limestone (first reported by Jake at Page One Kentucky).

And that filing reveals just how chaotic the closure process actually was.

Filed by the owners of several businesses and properties lining the route, the lawsuit seeks an immediate injunction to halt the roadwork and to reopen South Limestone to traffic.  It also seeks damages for the interruptions to business operations along the street.  The suit names the Mayor, LFUCG Urban County Council, and ATS Construction (the firm contracted to renovate SoLime) as defendants. 

And the filing tells a story of a poorly-communicated, hastily-assembled, highly-inconsistent project with an escalating price tag:

• Communication.  Initial letters from the LFUCG Public Works Commissioner to the affected businesses invited them to a open house to discuss "a streetscape design" and "utility needs", but didn't indicate a complete road closure was immanent. The actual details of the project (and of the changes to the project) were usually disclosed to owners through rumors or media accounts.
• Timing.  Owners had six days' notice before the first open house (May 18th), and there was no mention of a road closure.  A second "utility needs" meeting was held on June 3rd, and the full closure of South Limestone was disclosed.  But some owners didn't learn of the possibility of closing SoLime until the day before; The letter announcing that meeting didn't mention closing the street.
• Consistency.  In June 3rd discussions, South Limestone was to be closed from Euclid to High.  After voicing opposition, property owners were told on July 10th that SoLime would initially be closed from Euclid to Maxwell, opening up a full block between Maxwell and High Streets.  On July 21st - the day before the project began - owners learned from media accounts that SoLime was now to be closed all the way to High Street again.  That day, owners met with the Mayor and others from LFUCG to learn that ATS and LFUCG won't know what they're dealing with until they dig up the street.
• Price.  The "Downtown Streetscape Master Plan" proposed improvements to South Limestone costing more than $5.2 million.  The LFUCG council approved the streetscape plan in August 2008.  On July 7th, 2009, the council approved the $13.1 million contract with ATS.  Two weeks later, media accounts put the total at $17 million.

The patterns emerging from this (admittedly one-sided) account of the closure of South Limestone parallels with what we've seen recently from LFUCG on urban development projects:

• Projects languish for years, then are suddenly initiated.
• Decisionmakers seem to have little sense of the full scope or true impacts of their decisions.
• The true impacts of the project are only understood, if ever, after it is long underway.
• Communication with citizens is unclear, intermittent, and/or non-existent.
• The project changes direction suddenly.
• It is unclear who is accountable for the success or failure of such projects
• Because they are so committed to the (frequently noble) idea of the project, decisionmakers accept a series of concessions which cause the project's price to balloon to multiples of original estimates.

We've seen some or all of these elements in numerous recent urban development projects: CentrePointe, Tax Increment Financing (TIF), the Lyric Theatre, the Newtown Pike extension and, now, the South Limestone Streetscape.  

What results is chaos.

Business owners on South Limestone had 2 months to prepare to lose customers for 12 months.  Many owners had one day to figure out how to get customers and suppliers to their door.  The cost of the project is 3 times what was initially approved. 

And the results of the chaos are easy to predict.  Confused commuters and shoppers stay away from "the mess" downtown.  Downtown businesses die.  And, after fits and starts, Lexington ends up with a beautiful street.  To nowhere.

Chaos is no way to run a business.  And chaos is no way to run the business of our city.

LexMobs on South Limestone?

The South Limestone streetscape project gets underway this morning.  Using Twitter, Lexington's Mayor announced that the closure will result in traffic delays of up to 45 minutes. 

From a public point of view, the closure seems hastily and poorly planned, although the promised streetscapes look wonderful.  The project stems from a noble goal: to better connect the University of Kentucky campus with downtown Lexington. 

But businesses lining South Limestone (SoLime) had little time to adapt to the closure, and I wonder how many can survive being starved of traffic for so long.  When Lexingtonians realize that there is a "mess" surrounding SoLime, they will stay away in droves.  (With a business just off of North Limestone, I'm concerned about the disruptions to our southside Lexington customers making it in to Lowell's.) 

There are a lot of great businesses along SoLime that would be a shame to lose: Sav's, Pazzo's, Tolly Ho, Failte, Sqecial Media, and many, many others.  Some (maybe all) of these are Lexington institutions.

How long could they operate without significant customer patronage?  How long could they retain employees?  How long can they make debt / rent payments?  How long can they pay bills?  How long can they survive?

So, here's a challenge for our readers: Let's go out of our way to demonstrate that we care about those businesses.

Beginning today, and continuing through the next month, let's pick one or two businesses to "flash mob" each day.  Let's get together to show, with our feet and our wallets, that we want those businesses to survive.  Let's show up.  And eat.  Or buy.  Or drink.  Let's refuse to let these businesses fail.

If our LexMobs get too big, that's OK - I'm sure that the plentiful nearby businesses would also love some of our overflow business.

Will this effort be well-organized and well-thought-out in advance?  Not a chance.  Will it be messy?  Yes.  Will it be chaotic?  Absolutely.  Will it be inconvenient?  Certainly.  Will you be too busy to interrupt your day?  Undoubtedly.

But that is precisely the point: to go out of our way to demonstrate we care for these businesses.

So... Let's LexMob South Limestone.  Look for more details on Twitter with the hashtags #LexMob and #SoLime.  See you there!

Update: The inaugural LexMob will be Wednesday, July 22nd @ Pazzo's Pizza Pub at 11:30 AM near Euclid on SoLime.  Can't make it?  We'll try for other times and places with future LexMobs!

What to look for in Lexmark's earnings release

Lexmark reports its second-quarter earnings tomorrow.  Since we've written about the decline and fall of Lexmark and the recent rise in its stock price, we thought we'd tell you what to look for tomorrow to determine Lexmark's health.

Under its current management, Lexmark has been very conservative in its earnings guidance (what it hopes to earn in the near future).  This conservatism has historically created two notable dynamics around earnings announcements:

• The vast majority of Lexmark's earnings announcements have exceeded analysts' expectations, primarily because management guided those expectations lower.  This is the epitome of "under-promise and over-deliver".
• Because the future guidance has been so low - with management essentially saying "we don't expect to make much money in the future" - the stock market's reaction has been overwhelmingly negative, driving Lexmark's stock price down the day earnings are released.

Update 7/21/2009: Lexmark announced earnings (before restructuring charges) that were 55 cents, while analysts projected 60 cents per share.  Lexmark management also provided lower 3Q guidance.  By both missing 2Q expectations and giving lower 3Q guidance, Lexmark was down over 20% in early trading, approaching 12-year lows.

So, tomorrow, don't be surprised if Lexmark beats Wall Street's expectations for the second quarter, and yet the stock price falls because of very conservative guidance.

But these regular dynamics around Lexmark's reporting dates tell us little about the true health of the company.  Here's what to really look for tomorrow:

• Failing to meet expectations.  If Lexmark fails to meet already-conservative expectations, it is a sign that earnings are deteriorating even faster than Lexmark's management anticipated.  It is also a possible sign that Lexmark is entering the death spiral we talked about here.

Update 7/21/2009: As mentioned above, Lexmark missed expectations by 5 cents (nearly 10%).

• Continued / accelerating declines in supplies, especially in PS&SD.  The majority of Lexmark's revenues (and the vast majority of its profits) come from its supplies business.  In other words, Lexmark makes much more from toner and ink than it does from the printers that use them.

Lexmark's inkjet division (Imaging Solutions Division, or ISD) has seen continuous erosion in its supplies sales, which implies that the installed base of Lexmark inkjet printers is shrinking.  Because of the upside-down economics of the printer business, a decline in supplies business can rob the division of its ability to fund future growth, and signal the impending doom for that business. 

If the Printing Solutions and Services Division (PS&SD - ISD's larger sibling) continues to lose supplies sales - a trend which started within the last year - then Lexmark's decline will be even more pronounced.  Without the supplies-driven profit to 1) maintain its existing business structure and 2) invest in future growth, the company will continue to spiral downward with little prospect for pulling out.

Update 7/21/2009: Overall supplies sales dropped by 18%, and dropped in both PS&SD and ISD (both major divisions).  This is a very troubling sign that Lexmark is entering the death spiral we've written about previously.

• Additional restructuring.  Over the past few years, Lexmark has announced a series of "restructuring" efforts: Closing plants, reducing headcount, shifting resources, reducing costs.  Unfortunately, those efforts have done little to stem the bleeding at Lexmark.  If they announce similar moves tomorrow, it is a sign that management is still flailing and failing.

Update 7/21/2009: No additional restructuring was announced this morning.

It is tough to gauge the health of a company from a single quarter of earnings, and tomorrow will be no different.  But if some (or all) of these items find their way into Lexmark's earnings report, it will be another nail in Lexmark's coffin, and will be troubling confirmation of the continuing failure of Lexmark's executive team.

Update 7/21/2009: Second quarter earnings indicate that Lexmark is continuing the long, downward slide that we have seen over the past 5 years.  As they have 1) invested in ways that don't promote real growth at the company, and 2) made continual strategic missteps, Lexmark's management has slowly bled economic vitality from the company, and robbed it of its ability to invest in the future.

Why has Lexmark's stock price jumped?

Since we chronicled the implosion of Lexmark on June 25th, Lexmark's stock has seen a remarkable run-up in its stock price.  In less than 4 weeks, the stock has moved up over 22%: from just over $15 a share to $18.61 at Friday's close.

So does the run-up prove we were wrong on our assessment of the failures of Lexmark executives?

No.

While a 20% increase in a single month seems impressive, Lexmark needs to turn in a 1000% increase to overcome the failures of the past 5 years.  And even after the gains of the past month, Lexmark's market value is still down almost 90% from where it was five years ago.

But such an aggressive jump in price still begs the question: Why has Lexmark's stock price jumped?  The question is especially interesting given that there has been no significant news coming from the company.

There are three plausible explanations for such a run-up in stock price:

1. Earnings Surprise.  Lexmark announces its earnings on Tuesday.  It is possible that some traders believe that Lexmark will have higher profits and better future prospects than are currently expected by Wall Street analysts.  In the past couple of weeks, there has been a heavy increase in options calls - bets that the stock price will rise.  This could be in anticipation of much-better-than-expected earnings.
2. Takeover Speculation.  As we mentioned in the Implosion post, Lexmark's ability to generate cash has led to the company being seen as a potential takeover candidate, with Dell, Xerox, and Lenovo frequently cited as potential suitors.  Lexmark takeover rumors pop up occasionally, with the last batch in late 2007.  Traders could be speculating that such a takeover would include a "buyout premium" - a buyout price well above the current trading price to help "seal the deal".  This could also explain the unusually high activity in options calls.   
3. "Window Dressing".  Over the past five years, Lexmark executives have bought back the company's stock on a massive scale.  The $3.2 billion of stock buybacks have been a catastrophic failure - losing over 70% - which destroyed Lexmark's mountain of cash.  In our last Lexmark post, we talked about how such buybacks could boost stock price while simultaneously insulating the company's failed management from takeovers.  Lexmark's management could be buying back stock as a form of "window dressing" to improve their stock price in advance of Tuesday's earnings announcement.

So which of these explanations is most likely?  A chart of Lexmark's stock price (below, from Google Finance) shows that almost all of the recent increase came in July, with a conspicuous jump in price on July 1st.  July volumes have also been nearly 50% higher than average.  The July 1st pop in price was the first significant move up after drifting downward throughout June.

Why would the price jump on that date, and continue to increase through July?

July 1st is the first day of the third quarter.  More importantly, it is also the first day after the second quarter, and second quarter financials will be reported on Tuesday morning. 

The timing and volume of the surge in Lexmark's stock price make us suspect that Lexmark's management has been buying back even more of the company's stock - the "window dressing" explanation above.  By buying back stock beginning July 1st, they could improve stock price while not having to report buybacks until September (and not having to include those purchases in Tuesday's report).  If management is buying back a lot of stock, that could also account for the increase in options calls as traders try to feed off of the temporary boost in stock price.

The recent run-up in stock price is probably not due to improved business fundamentals at Lexmark.  All outward signs show that those fundamentals are deteriorating.  Instead, our bet is that Lexmark's stock price has risen because of share buybacks, a traditional crutch for Lexmark's management.

And, historically, buybacks have been a failed long-term strategy for Lexmark.

Update 7/21/2009: After Lexmark's earnings announcement this morning, Lexmark stock has given up all of the gains from the past month.  If Lexmark's management did buy back stock early in July, it would fit the long-term pattern of failed buybacks.

Implosion: The Decline and Fall of Lexmark

I have written a great deal about the failure of CentrePointe, the downtown Lexington development which has failed to produce promised jobs and economic contributions to our city.  It has left a scar in the middle of our city which has persisted for the better part of a year.  It has exposed just how flawed Lexington's planning and economic development processes are.

As much as I have commented on CentrePointe, however, it is primarily a failure of omission, of delivery.  There is a far larger and more important story about a failure which has actively destroyed jobs and economic contribution in our city.

It is a story of the colossal mismanagement of one of Lexington's biggest employers.  It is a story of the destruction of shareholder value and the bleeding of high-tech jobs in Lexington.  It is a story about how a $12 billion company became a $1.2 billion company in just 5 years.  It is a story of wasted opportunity.

It is a story which serves as a damning indictment of the failed executives who have presided over this corporate implosion.

This is a story of the decline and fall of Lexmark International.

About 5 years ago, Lexmark had a market value of over $12 billion, and its stock was over $95 a share.  As of this writing, it is worth less than $1.2 billion, and its stock is struggling to stay above $15 a share.  What happened?

Through a series of misinvestments and strategic blunders, Lexmark's executive management has simultaneously squandered a huge pile of cash, strangled most of their inkjet division, and destroyed some $11 billion in shareholder value. 

In this post, we'll explore a big strategic mistake which is leading to the downfall of Lexmark's inkjet division.  Then, we'll look at how management has failed to invest properly for the Lexmark's future.  But in order to understand the true extent of this failure we need to start with how a printer company makes money.

Business Model
Essentially, a printer business has two major components: 1) Printers and 2) Supplies for printers.  (Lexmark has also been trying for years to expand a services business for corporate customers, but we'll keep it simple here.)  Lexmark has two major divisions: the Printing Solutions and Services Division (or PS&SD) which focuses on enterprises and uses more-expensive laser-based technology; and the Imaging Solutions Division (ISD - formerly known as the Consumer Printer Division, or CPD), traditionally a more consumer-oriented division which mainly uses cheaper inkjet technology.

The printers are relatively expensive to buy, but are narrowly profitable or even unprofitable - especially with inexpensive 'low end' inkjet printers - for their makers.  Printer sales can be fairly volatile - up one quarter, down the next.  All of the active printers that a manufacturer has in the market are considered the 'installed base' of printers. 

Compared to printer costs, supplies tend to be relatively inexpensive.  Even though they cost less to customers, they offer a high profit percentage for their makers.  Supplies sales also tend to be much more stable and reliable, because supplies are generated from multiple years of sales of printers.  In other words, supplies are not generally subject to excessive swings like printers are.

Most of the printer industry tries to offset each high-dollar, low-margin printer with several low-dollar, high-margin supplies sold over the life of that printer.  The initial printer sale yields little profit (or a loss - as Lexmark has admitted they lose money on many of their inkjet printers), while supplies sales from that printer help (eventually) drive high profits. 

This business model is often called a razors-and-blades model for its similarity to how Gillette made enormous profits: Sell the razors for as little as possible, and make it up with profits from blades.

As the installed base of printers ramps up, more and more of the company's revenues (and, of course, profits) come from supplies sales.  Eventually, the more stable and reliable supplies business will outpace the more volatile printer business.  Over the past 5 years, supplies have accounted for between 60 and 70% of Lexmark's revenues. 

Upside-Down Economics
In order to get access to the market, most inkjet products are sold through major retailers like Walmart, Best Buy, and Staples.  These retailers wield enormous influence over printer manufacturers. 

Retailers are driven to maximize the profitability of their limited shelf space.  If a product isn't creating enough selling "velocity" for a given space, then the retailer will discontinue, or "de-list" it.  And because manufacturers are in a blind competition with one another for shelf space, de-listing poses an enormous threat to future supplies sales.  Lexmark's competition for retail shelf space is intimidating: it includes market-leader Hewlett-Packard (HP), as well as Canon, Epson, Brother, and Kodak.

To ensure continued access to the retailer's customers (and to the future supplies sales), manufacturers often feel compelled to sweeten the pot for retailers when their selling velocity isn't high enough.  Most often, this comes in the form of price cuts for printers. 

Lexmark was in the vanguard of the low-priced printer movement, offering the same (or more) functionality for lower prices than the competition.  For a few years, this was Lexmark's main competitive edge in the inkjet market.  But in 2003, HP - who had almost always used its market leadership to demand premium prices - changed its strategy and began to match Lexmark's pricing.

Over time, the printer industry kept giving more and more ground in this Faustian bargain with retailers, driving printer prices lower and lower, until they ultimately lost money on many of the printers they sold in order to get access to profitable supplies sales. 

But when a company loses money on its initial printer sale, funny things start to happen to the business model.  If it grows too fast, then the losses from printers can drain the profits from supplies: In other words, building the business for long term profit can require the sacrificing of profitability in the short term.  Conversely, if printer sales drop dramatically, then the business can appear enormously profitable: Management can enhance short-term profit even while destroying long-term business fundamentals.

These upside-down economics can be difficult to manage, especially during strategic shifts: it is expensive and uncomfortable to change, but it is also expensive and uncomfortable to remain in place.  In the case of Lexmark's inkjet-focused ISD, Lexmark executives failed to manage those economics - to the detriment of the ISD business.

Strategic Blunders
For several years, Lexmark executives have signaled their intent to get "higher-usage customers" for ISD.  The premise of these announcements was that Lexmark would sell fewer printers, but that they wouldn't lose (as much) money on printers and would simultaneously gain enormously-profitable customers who used lots of supplies. 

HP has traditionally been very strong among small businesses and other high-usage customers, and Lexmark was attempting to crack into that market.  Repositioning to get higher-usage customers would also be a marked departure from Lexmark's history (and its brand image) of cheap, low-end inkjet products.

Trouble is, the executives never identified any sustainably differentiated qualities in their high-end products which would tempt customers to leave the vaunted HP brand for the Lexmark label.  To date, Lexmark's products are "me-too" products: the same basic functions, features, and performance as the products offered by other printer manufacturers.  The few differentiated features that Lexmark has introduced (wireless printing, for example) have been quickly matched by rivals.

And it isn't clear that Lexmark has, in fact, gained higher-usage customers with the few printers it has managed to sell.  Spot-checking product prices in stores and online, it is common to see Lexmark's "high-end" inkjet products at nearly half the price of competitive products from HP.  This is a clear signal that Lexmark's products aren't getting the velocity of HP's products, and that retailers are extracting price concessions as a result.  Further, as these high-performance, heavily-featured products drop in price, two other upside-down dynamics kick in:

• The magnitude of losses for high-end products might be greater than the losses for low-end products.
• The lower prices likely appeal to the same lower-usage consumers which Lexmark is attempting to avoid

An example: a feature-laden product designed for the, say, $200 price point might lose even more money when repriced to $149 than a sibling product which was designed for $49 and reduced to $29.  And that bigger financial hole might be even harder to get out of if Lexmark "wins" customers who don't print frequently.

So, how did this "repositioning" strategy play out?

With new ISD leadership in 2008, Lexmark began to aggressively abandon low-end printers in the pursuit of the high end of the printer market.  Almost immediately, Lexmark's retail presence was dramatically reduced as it was de-listed at or kicked out of retailer after retailer, ending up with a significant presence only at Walmart and Circuit City - not the kinds of retailers where higher-usage customers would be expected.  Perhaps feeling the sting of being locked out of so many retailers, a more flexible Lexmark began regaining listings earlier this year. 

By the end of 2008, the damage was done: Lexmark lost almost half of the printers sold in 2007.  2008 revenues were down 22% from 2007, while profits were up 47% in the same period.  Remember when we said that a dramatic drop in printer sales usually creates a temporary boost in profits?  Well, in this case, Lexmark's supplies revenue and profit - usually the most stable part of a printing business - have also been dropping, which is a particularly worrisome trend.  This implies significant deterioration in Lexmark's cash cow - its installed base of printers.

In the past 5 years, the attempts to move to the high end have has disastrous effects: Since 2004, ISD has lost two-thirds of its printer sales and 40% of its revenues.  Profits in the division have dropped by nearly 60%.  And the prospects for the future are not good.

Death Spiral
When the most stable generator of cash (supplies) starts drying up, it can put a printing company in a kind of death spiral.  Because of its leveraged, upside-down economics, the company can no longer fund the aggressive growth initiatives which could help pull it out of the downward spiral.

Will the move to higher-usage printers pull Lexmark out of the death spiral?  No.  As we outline above, Lexmark has failed to offer truly differentiated products with a compelling business model, and it appears that the aggressive move upmarket may actually speed the division's demise. 

What's even more troubling are the warning signs of a similar death spiral in Lexmark's larger, more-business-focused PS&SD.  While not as volatile as ISD, the same patterns are emerging to point toward flat or falling supplies revenue: declining overall revenue, declining printer sales, and what appears to be a shrinking installed base.  Once both divisions have entered the spiral, it will be difficult for Lexmark to maintain long-term viability.

Cash Burn
For years, Lexmark's executives have touted the company's amazing ability to generate cash from its supplies-heavy business model.  But how have they deployed that cash for investors' and the company's benefit?  They haven't.  It is another troubling example of the mismanagement of the company.

At a recent meeting with analysts, Lexmark executives crowed about returning $3.2 billion to shareholders through stock buybacks.  As we delve into the effects of those buybacks, we have to wonder what they were so proud of...

With a buyback, management essentially tells shareholders, "We've determined that the best investment we can make is in our own company, so we're going to buy back our own stock."  After a buyback, since there are fewer shares on the market, each remaining share owns a bigger chunk of the company. 

Normally, a buyback is a great thing for long-term shareholders.  Because each share owns a bigger chunk of the company, the share's price usually goes up.  And a buyback usually acts as a signal from management that they believe in their company's health and prosperity.

But sometimes, buybacks are used by management as a weak attempt to prop up the share price of a flagging company.  Buybacks are especially worrisome when they are the primary use of cash by technology companies: Executives are signaling to shareholders that they can find no innovative technology more worthy of investment than simply plowing that cash back into the company's stock.  As a result of depriving technology development and acquisition, a buyback company's technology often falls far behind that of competitors.

In Lexmark's case, the buybacks have backfired.  Over the past 5 years, management has used $3.2 billion to buy back some 59 million shares of Lexmark stock at an average price of approximately $54 a share.  At $15 a share, that $3.2 billion investment is now worth about $900 million - a loss of over 70%. 

But it is worse than that.  The 59 million shares Lexmark's executives repurchased represent about 45% of the shares they started with in 2004.  So each share should have nearly doubled in value.  Without the buybacks, Lexmark's share price would likely be around $8, instead of $15.    All in all, Lexmark's value has dropped by a scandalous 90%.

In 2004, Lexmark was sitting on $1.5 billion in cash and securities.  By 2008, Lexmark had burned through that cash (and other cash it had generated since 2004) through share buybacks.  So, it took on a $650 million long-term loan, and began using that to continue purchasing new shares. 

Rather than deploying this arsenal of cash to fund growth with significant new technologies (which might have helped to differentiate their products - see discussion above), Lexmark invested in its failing status quo.  And, by any measure, that investment failed.  Miserably.

Is this executive incompetence?  Perhaps.

But there is another, equally-distressing, explanation for why Lexmark's management engaged in this failed buyback strategy on such a massive scale: They were protecting themselves.

When a company builds a large mountain of cash, it becomes an attractive takeover target.  In Lexmark's case, this is especially true, because it has also had (until recently) a reliable stream of cash from its supplies business coupled with a depressed stock price.  A private equity firm would look at buying the firm and using the cash and future profits to finance the acquisition.  In 2005, one of the industry's best analysts (Toni Sacconaghi, now with Bernstein Research) suggested that Lexmark was ripe for precisely such a scenario.  

By buying back almost half of Lexmark's outstanding stock, executives could solve multiple 'problems' at the same time:

• They reduced their cash holdings, thereby reducing their attractiveness as a takeover target;
• They could potentially buy out dissatisfied shareholders (further reducing takeover potential); and,
• They could prop up their flagging stock price, with the hopes of deferring shareholder judgment on their failures.

All in all, such a strategy would have allowed Lexmark's executives and board to maintain and concentrate control of the company.  In the process, however, they have failed their shareholders, their employees, and the communities in which they live and work (especially Lexington).  

Incompetence.  Or self-interest.  Neither explanation is satisfactory.  And both are deeply troubling.

A call for change
CEO Paul Curlander, ISD President Paul Rooke, and PS&SD President Marty Canning have all been with Lexmark for over a decade.  They presided over the destruction of 90% of Lexmark's market value.  They have marshaled failed (and failing) business strategies.  They have continually pursued failed financial strategies through stock buy-backs.  They have destroyed some 600 mostly-local US jobs.

By every meaningful business measure, they have failed.

It is time for Lexmark's board to act decisively.  Lexmark needs a vibrant new strategy 1) to survive and 2) to grow profitably.  The current standard-bearers are clearly not up to the task.  My hope is that the board can bring in new executive management who can articulate and execute that strategy. 

As a Lexington business owner, I want and need Lexmark to thrive.  Lexmark's current leaders have failed its shareholders, its employees, and our community.  It is time for meaningful change at Lexmark.

* * *

A few disclosures are in order: 

• As a former Lexmark employee, I'm prohibited from using knowledge and insights I gained while I was employed by the company.  I'm not allowed, for instance, to talk about how board meetings are orchestrated.  I also can't use the insights I may have gained in meetings with current and former executives at Lexmark.  I can't talk about the specific products, internal strategies, and personalities which might have led to the failures which I document here. 
• As a result, this story is stitched together entirely from studying publicly-available financial statements, presentations to analysts, and other public releases from the company and others.
• I have not owned Lexmark stock for over 1 year.
• I have friends, family, and customers who still work at Lexmark.  This in no way reflects their views, or conversations I may have had with them.  I did not consult with any of them before writing this.  These observations are mine and mine alone.
• Finally, this critique is aimed squarely at Lexmark's executive management.  The failures I document here are theirs, not the failures of Lexmark's smart and creative rank-and-file employees.

We Were Wrong

Six months ago, the Lowell's Corporate Office of Fearless Predictions forecast that "Gasoline will be well above $3 a gallon by June, if not sooner."  As part of the prediction, we also said oil prices would reach $80 a barrel.

Well, we were wrong.

As of this writing, most stations in Lexington have gasoline at $2.65, and oil has been around $71 a barrel.

At the time of our forecast, gas was about $1.49 a gallon, and oil stood at $39 a barrel.  We predicted that a number of forces (weaker dollar, production cutbacks, greater demand, and speculation) would come together to drive oil prices upward.  We were generally right about the forces driving prices up, but we were wrong about their strength and timing.

In particular, it appears that the economic rebound and infrastructure build-out we foresaw to drive greater demand really didn't kick in as soon or as strongly as we expected.  We're slowly starting to see some signs of the rebound, but it didn't happen when we said it would.

We still expect $3-a-gallon gas by the end of the summer, and wouldn't be surprised to see $3.50 to $4 a gallon by the end of 2009.

That's what we see in our crystal ball.  What do you think?  Where will gas and oil prices go from here?

Tangled Webb

At the Lexington Forum last week, CentrePointe's developer spun a dazzling and dizzying tale about the history and the future of the pit in the middle of our city. 

His presentation resonated with the receptive Forum audience.  Looking around the room, filled with many of Lexington's other business and civic leaders, I was a bit confounded.  While many in the audience seemed familiar with the ongoing controversy of CentrePointe, few seemed knowledgeable about the actual details.

I then began to realize the scope of the challenge for CentrePointe critics: How do we effectively demonstrate the full extent of our skepticism and concern to the uninitiated or uninvolved (in other words, to the majority of our citizens)?  CentrePointe is an elaborate project with an equally elaborate backstory.  It is a complex web which is difficult for newcomers to disentangle.

Even so, there are at least 5 distinct patterns which lie within the web: 1) Secrecy, 2) Runaway Optimism, 3) Loss of Credibility, 4) Contingency, and 5) Victimhood.  These patterns form the basis of our critique of the project, and should raise important questions about CentrePointe for any public official, business associate, or concerned citizen.  

Secrecy.  From the beginning, CentrePointe was shrouded in secrecy, and the developers have been hostile to reasonable inquiry into the details of the project.  While seeking public commitments for tax increment financing (TIF), they refused to disclose the name of their secret financier.  They failed to disclose that their financier had been dead for six months.  On Thursday, the developer announced two new financial backers, but wouldn't disclose their names either.

The developer claims that private property rights let him maintain secrecy, even as he publicly sought specialized TIF tax status.  The premise of tax increment financing is that today's public debt would be paid for by future tax increases (the "tax increment") which arise from property improvements (increased property values, increased commercial activity, etc.).  While the developer maintains his right to secrecy, the special status which the public granted to his property should require him to be more forthright and more detailed about the project's timing, financing, and business model.  Or, the special TIF status should be removed.

Runaway Optimism.  The few details which have emerged have shown that the developers frequently engage in runaway optimism.  They bank on the flimsiest of commitments, and lean on them to demonstrate the viability of the project.  They are willing to mislead people to believe these commitments are real.  

In last week's presentation, the developer stated that one of the first calls he got upon announcing the project was from Hard Rock Cafe, who wanted to locate in CentrePointe.  This was met with murmurs of approval from his audience.  

Trouble is, it wasn't Hard Rock.  And they didn't initiate contact with the developers.  And they aren't coming to CentrePointe.  As Dr. Nick Kouns chronicles, Kouns initiated contact with House of Blues, who felt that Lexington wasn't a sufficient market for their brand, but met with the developers out of courtesy.  So the 'commitment' was never much more than an exploratory discussion.

Alas, such optimism pervades CentrePointe.  On Thursday, the developer announced that he had 65 'almost-certain' prospects for his 91 condominiums which will sell for an average price of $1.2 million.  Trouble is, only 10 million-dollar properties sold in all of Fayette County in all of 2008.  In today's even-more-depressed market, what would enable the developers to attract 6 times more luxury property commitments, just for an unbuilt CentrePointe alone?  Runaway optimism.

Loss of Credibility.  The trouble with runaway optimism is that, eventually, reality sets in.  And as the developer's gossamer threads of optimism unravel, they reveal his profound credibility problem.  

For the better part of a year now, the developer has continually decommitted from prior public statements.  These decommitments have been on videotape, in print, and to the Urban County Council, and have touched on all major dimensions of the project: its financing, its business model, and its timing.  The pattern which emerges is one in which the developer continually bends facts (and history) in the attempt to prop up his faltering story.

The developer rushed to create the pit in the center of our city last July, and was scheduled to begin construction on CentrePointe in 60 to 90 days.  As the months dragged on, he claimed that the permitting process was holding him back from doing anything else with the property, but that he expected the permitting issue to be resolved in 60 to 90 days.  Only later was it revealed that, even as he made such statements, he knew that his primary financier was dead.  But even though the financier was dead, the developer told the Urban County Council he was certain that construction would begin in 60 to 90 days.  Last week - some 60 days after he announced the death of his financier - the developer expected the financing to be resolved in 60 to 90 days.  

Contingency.  CentrePointe is a complex $250 million development with several intertwined components: over $100 million from 91 condos, a $100 million 250-room hotel, and some $50 million from retail and office functions in lower floors.  There has been a year-long delay in securing financing.  Construction has been delayed many times.  Every piece is contingent on the others, and it all has to come together flawlessly for CentrePointe's business model to 'work'.  And there are enough doubts about every single component that public officials, business associates, and concerned citizens should be worried.

As outlined above, the condo plans seem over-ambitious.  While Marriott has expressed interest in and support for the hotel, they aren't actually financing it, and the higher-than-average occupancy at higher-than-average room rates assumptions used in the CentrePointe business model are far from viable. The fact that the developer is willing to mislead a prominent audience about a major retail tenant raises questions about the rest of the project's business model.  The continual delays in securing financing and beginning construction - coupled with the secrecy of every major aspect of the project - have contributed to the mounting skepticism about whether CentrePointe is truly viable.

Victimhood.  In his public addresses, the developer often adopts a persecuted posture, which often positions him as a blameless victim of the sinister agendas of press, of bloggers, and of ambitious politicians.  He claims not to understand all of the fuss.  He just "wants to shut these people up".  

Let's take a look at the explanations the developer has provided for us:

• The financier was secret because he feared public backlash.  When he died, that was kept secret because it wasn't going to affect financing.  But when the financier's heirs wanted to know whether he had sufficient assets to cover obligations like CentrePointe, the assets were tied up in numbered Swiss bank accounts.  They couldn't get access to the accounts unless they also took on the obligations, which creates a Catch-22: the heirs can't see the assets without accepting the obligations, but won't accept the obligations without seeing the assets.  But even though the heirs can't be certain of the dead financier's assets, the developer somehow is...
• Last week, the developer introduced two new financing sources.  But both sources - an individual and an investment bank - also demanded anonymity.
• Even though the developer has always claimed the financing was rock-solid, last week he introduced three additional contingency plans.
• When challenged on the viability of CentrePointe's condominium assumptions, he claims that 65 of the 91 condos are 'spoken for' through undocumentable 'handshake deals'.  He also names vague tenants for the properties - horse farms in Ireland and Dubai and vintners in Napa Valley.
• He claims that people are lining up for the retail and restaurant spaces, but the one deal he has detailed to the public was both wrong and unconsummated.
• Every time he provides an update on the project, the projected start date is 60 to 90 days hence.  Unfortunately, '60 days from now' never arrives. 

To the extent he is a victim, he is the victim of his own machinations.  If he really wanted to shut these people up, he would simply provide some proof that his critics are wrong.  But the proof which would silence his growing list of critics never arrives.  

* * *

Looking through the tangle of explanations and the patterns outlined above, one is forced to make one of two conclusions about the developer's ability to silence his critics:

1. That he is the unluckiest man alive (every opportunity to exonerate himself is confounded by another unfortunate twist in his story);
2. That he is simply lying (every opportunity to exonerate himself is confounded by another convenient twist in his story).

Until we get a full and clear accounting for CentrePointe's real-world status, I, for one, choose not to be silenced.

An update on CentrePointe

At the Lexington Forum this morning, CentrePointe's developer updated the public on the status of the faltering project in the center of our city.  As he has done in other venues, he laid much of the blame for any CentrePointe controversy at the feet of bloggers and the media.

In his presentation, he revealed a few new details about the secretive project, along with several layers of backup plans.  In this post, I'll outline some of my notes and some questions which arise from the developer's presentation.  In a future post, I'll share more of my thoughts on the development in the wake of this morning's presentation.

Plan A

• The dead financier (call him Mystery Investor 'A' - or MIA, for short) was introduced to the developers by a pre-eminent, distinguished American who was heavily involved in the Justice Department.
• MIA was committed to 5 such projects around the world involving some $800 million, including 3 in the US worth some $550 million.
• He went into some detail on the reason that MIA's estate was held up.  He characterized it as a chicken-and-egg problem.  The heirs aren't sure they wanted access to the 'numbered Swiss bank accounts' until they knew whether those accounts had enough to cover the estate's liabilities (like CentrePointe).  The accounts and the liabilities seem to be a package deal, but the heirs are blind to the numbered accounts: They can't know what the actual assets of the estate are unless they also accept the liabilities.
• Question: If MIA's heirs don't have confidence that MIA had enough assets to cover these deals, then what makes CentrePointe's developers so confident that the money is there?

Plan A Minus

• If the developer's 'Plan A' falls through, he has an intermediate plan ('Plan A Minus'?).  In the last couple of days, he has talked with someone who happens to have 20 to 30 thousand cubic yards of dirt for free, so filling in the site is an option if the current plans fall through.  He also mentioned that he had talked with someone who hydroseeded strip mine sites who might be willing to help seed the place.
• The developer claimed "It is not our intent to embarrass the community" for the World Equestrian Games.  He hates to do it, but is tempted to backfill the pit and plant seed "even for 60 to 90 days, just to shut those people up".  The friendly crowd roared with laughter.  Later he said he thought about "putting in a liner and turning it into a lake".  More laughter.

Plan B

• CentrePointe now has a 'Plan B', complete with a Mystery Investor 'B' (MIB) who has recently come forward to express interest in the project (should 'Plan A' with MIA's estate fall through). They are "ready to go" if 'Plan A' does fall apart.
• Question: If MIB is so "ready to go", then why not relieve the heirs of MIA's estate of their burden and allow MIB to take over financing for the deal? 

Plan C

• Even though MIB is ready to go, there is also CentrePointe 'Plan C' involving a Mystery Investment Bank 'C' (MIC) who will put up $30 million, and the developer briefly mentioned some sort of 'bond arrangement' to finance the rest of it.
• Question: If Plans A and B are really viable, then why does CentrePointe need a Plan C?
• Question: What kind of bond issue supplies the other $220 million needed to build the project, if the investment bank is only ponying up $30 million?

Other notes

• If one of the financing options lines up today, CentrePointe would begin construction in the fall.  15 months after the initial demolition began.
• The developer claimed that 65 of the 91 condominiums at the top of CentrePointe had been committed to by many people, including horse farms in Ireland and Dubai.  (He didn't mention Napa Valley wineries this time.)
• He took pains to correct Herald-Leader writer Beverly Fortune for reporting that the 91 units had an average price of $1.2 million.  "That's just the average... The units will start at $600,000 and go up from there."
• "Hard Rock Café was one of the first to call us" when they heard about the project, strongly implying that they were lined up.  (Since the meeting, I have learned that the developer really talked with 'House of Blues' - not Hard Rock - and that they are anything but 'lined up'.)

The plethora of mystery investors and backup plans might have been intended to reassure his audience.  But they actually raise troubling questions about the future of the project, the developers' ability to obtain financing, and the financial viability of the development's business model.

A modest proposal to end blight

Comprehensive Care Parking Lot

Every morning when I walk into work at Lowell's, I see 8-foot-tall tree-weeds growing through unkempt hedges and spilling over into the public sidewalk.  I see a planter adjoining our building, burgeoning with weeds and grass and the massive stump of a long-dead tree.  I see a pitted, crumbling parking lot with clogged drainage.

Many customers assume it is our lot.  It does adjoin our building.  And they can't see the sign declaring "Comprehensive Care Center Parking Only".

116 Mechanic Street

Across the street I see a tiny old shotgun house with a gigantic half-rotted tree looming ominously over both the house and the main Lowell's parking lot.  After the ice storm and other storms this spring, downed branches lay in the asphalt front yard of the house.  For over two months.

Absentee owners neglect both properties.  Neighboring businesses have conducted the most of the maintenance on the properties over the past couple of years.  In effect, they are abandoned.

As a business owner, I worry about the effect it has on Lowell's famously loyal customers.  Even if they cherish us and the service we provide, I'm genuinely concerned about the ability of such eyesores to repel visitors to the shop.

I often talk with nearby business owners, who share my concern for the negative effects of these properties on our neighborhood.

* * *

Many folks have wondered why I have been so vocal on the CentrePointe mess.  There are many reasons, but one of the biggest is that the abandoned properties surrounding Lowell's have given me firsthand experience the negative effects of blight like the CentrePointe scar.

There are many such highly-visible, blighted, non-productive and apparently abandoned properties in Lexington: CentrePointe in Downtown, Lexington Mall on Richmond Road, and Continental Inn on New Circle at Winchester are some of the most apparent.  But there are numerous smaller examples littering our city.

Just like the properties surrounding our shop, the absentee owners seek to avoid any and all expenses.  They avoid capital gains taxes by refusing to sell their properties.  They avoid maintenance expenses by refusing to invest to make their properties economic contributors to the community.  They avoid property taxes by refusing to improve their decrepit real estate.

Such abandoned properties generate near-zero direct contributions to the economy.  Moreover, they generate negative economic effects for surrounding properties and businesses: They drive away business and drive down property values.

* * *

It is time for such neglect to end.  It is time to make sure that lazy landowners are motivated 1) to improve their holdings and 2) to transform their properties into contributors to our community's economic engine.

My modest proposal: Implement a 'blight tax'.  Lexington landownders whose property qualifies as 'blighted' would have to pay a moderately severe annual blight tax.

The definition of 'blighted' would need to be worked out, but should include an assessment of the property condition, as well as proof of substantial progress on needed improvements.  We could start with Division of Code Enforcement standards.

To overcome their avoidance of maintenance expenses, property taxes, and/or capital gains taxes, I'd propose that the blight tax have some teeth: Say, 35% to 50% of assessed property value per year.

In the CentrePointe case, the blight tax would generate $8 to $12 million per year of revenue to the city until the developers improve their land.  When historical buildings were demolished to make way for CentrePointe, many rationalized that the old buildings were greater eyesores than the pit which remains today.  I disagree.  But a blight tax may also have helped prevent the demolition-by-neglect which occurred on that block over the years.

I would imagine the former Lexington Mall and Continental Inn properties would generate amounts similar to CentrePointe, given their sizes and their locations on busy thoroughfares.

Such tax revenue could be specifically allocated to offsetting the effects of blight: community improvements to sidewalks, bike paths, streetscapes, parks, community centers, business incubators, community ventures, and the like.  If property owners avoid the blight tax by making their properties more valuable (i.e., by improving them), then all the better.

To create a vibrant city, we need to ensure that Lexington doesn't have the economic scars that blight leaves behind: dead spots which contribute little (or which actually destroy) monetary value in our community.

My proposal is the blight tax.  What's yours?

Unfortunately. Private.

There were two common refrains at Tuesday's Urban County Council confrontation between our vice mayor and the developers of CentrePointe. 

One was the word "Unfortunately" continuously invoked by the developers.  While "unfortunately" led some 6 sentences in the developers' prepared statement, it also led nearly every response from the developers to difficult questions from the Council.  Unfortunately, the developers didn't foresee the economic downturn.  Unfortunately, things change in projects like these.  Unfortunately, bloggers and the press and rumor-mongers have pointed out immense and inconvenient flaws in our business case.  Unfortunately, it is apparently their free-speech right to do so.  Unfortunately, people die.

Well, um, unfortunately, REAL businesspeople are supposed to anticipate and overcome such circumstances (not be paralyzed by them).  Anything less amounts to sheer speculation.  Which is what Lexington has encountered with CentrePointe.

The second refrain was actually more worrisome and more puzzling.  It came from members of the Council who acted as apologists for the developers (developers whose actions can only be characterized as bumbling).  These same councilmembers - Lane, Stinnett, Myers, McChord, and Beard - felt compelled to offer apologies for forcing the developers to account for their continuous inaction.

The refrain they used was "private".  Councilmember Myers asserted that this is private property assembled by private developers with private funds, that the developers could do whatever they wish with it, and that the council had no business forcing CentrePointe's developers to explain their incompetence.

Balderdash.

Before more libertarian readers resort to labeling me a socialist, let me assert my firm belief in property rights.  Unlike some of my more radical friends, I believe that property and capital and money have driven the vast majority of improvements in our living conditions and overall social well-being.  To be sure (and as we have seen quite clearly of late), capitalism often has an ugly downside driven by unrestrained greed.  But the long term gains have far outweighed that downside.

The crater created by CenterPointe's developers is certainly private property.  It belongs to them. 

But here's where the stalwart defenders of property rights are wrong: Private property always comes with civic responsibility.  Owners of private property cannot use their property in ways which destroy value for surrounding properties or surrounding businesses.

Let me illustrate this principle with a recent and vivid example:  A year and a half ago, in the Andover neighborhood, there was a private home that was infested with rats.  The community and the Health Department mobilized to eradicate the rats and eradicate the problem.  Nearby property owners (including yours truly) were rightly concerned for both our safety and our property values. 

Apparently, these same councilmembers would claim that the rat-infested house was private property, and, thus, the community had no right to defend their health or their property values.  Would councilmember Myers sit on his hands if a rat-infested house was next door to his house?  Apparently so.  Would councilmember Lane approve of a neighbor's right to spread pig manure (and noxious fumes) to fertilize their lawn in his Hartland Gardens?  Apparently so.  After all, it is their property, and they can do what they wish with it.  Right?

Of course not.  Private property comes with civic responsibility. 

* * *

With CentrePointe, we have a rathole downtown.  The rats, while not physical, are more insidious and more destructive:

• There's the bulldozer rat that razed buildings, jobs, businesses, and revenue last July.  The rathole has produced no jobs, no revenue, no businesses, and no buildings.
• There's the ugly-city rat that an out-of-town visitor takes back to their home as tourism dollars and tourists mysteriously disappear from downtown.  I suspect there will be many of this breed of rats available for the World Equestrian Games next year.
• There's the blight rat which drains surrounding property values and sucks patrons out of surrounding businesses.  
• And, finally, there's the developer rat, who repeatedly fails to deliver on public statements about CentrePointe's timing, funding, and business model. 

Councilmembers Stinnett, McChord, Myers, Lane, and Beard appear to sympathize with both the rats and with the rathole.

I do not.  And I don't appreciate our representatives who do.  And I'm not alone.

Private property comes with civic responsibility.  We need leaders who recognize that fact.

I choose both

"The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function. One should, for example, be able to see that things are hopeless yet be determined to make them otherwise."
                                                -- F. Scott Fitzgerald (via Ace Weekly)

"You must be the change you wish to see in the world."
                                                -- Mohandas K. Gandhi

There is a revolution brewing in Lexington.  Fed up with the intransigence and bureaucracy of 'old' Lexington, 'new' Lexingtonians are gearing up for an overthrow of the old regime.

As a lifelong rebel and iconoclast, I love it.  As a business owner, I want the more vibrant Lexington (and downtown) that these changes promise.  As a father of a two-year-old, I want my son to have the greatest opportunities to learn, live, play, and work - and want his birthplace to provide those opportunities.  Lexington must change, or it will not grow.  If it does not grow, Lexington will wither and die.

Still, I'm a bit troubled...

More on why in a bit.  First, we need to describe the new and old Lexingtons.  (Or, if you Twitter - and you should - #OldLex and #NewLex.) 

OldLex is rooted in our city's and our region's traditions.  It wants to build on the heritage of our horse farms, our coal, our bourbon, our tobacco, and our basketball.  It values formality and processes and order and control, and is often obstinate in the face of change.  OldLex tends to respect big international companies, large events, and wealth.  It generally shuns technology. 

NewLex is borne of our city's innovative and intellectual potential.  It yearns to be free of restrictions and limitations imposed by centuries of tradition.  It values innovation and creativity and transparency and freedom, and usually gleefully wallows in the messiness and chaos of change.  NewLex tends to respect speed, intellect, local-ness, and the environment.  It embraces technology.

So there, in admitted caricature, are the two cultures of Lexington.  They currently stand in perplexed opposition to one another.  They blink in bewilderment at the other's actions (or inactions) and question the other's motives.

I am a confirmed NewLex kinda guy.  As a reader of this blog, I suspect that you also lean toward the NewLex camp.

But, as I mentioned, I'm troubled by something in the conflict between NewLex and OldLex.  I also hear the same concern echoed in comments on my blog and in NewLex Twitter discussions.  In summary, it is this: The desire for continuity is almost as strong as the desire for change.

While we decry the adoption of outdated icons of horses as the central identity our city, we still love the beautiful horses, the farms, the racetracks, and the uniqueness they bestow upon our city and state.  

We wish that some of the $36.5 million that just went to our new basketball coach had gone instead to improve our schools or our university.  But we do love our 'Cats, our Coach Cal, and our championships. 

We cannot fathom why our city's representatives haven't adopted more transparent practices and implemented more current technologies, but what, really, have we done to facilitate that?  (Have I already forgotten how mystifying Twitter was just a couple of months ago?)

As much as we advocate overturning the old ways of thinking and the old ways of doing things, we NewLexers sure like a lot of the old things.

And we should like them.  The horses, the basketball, and the bourbon are all significant and important parts of our heritage and our identity.  They are a part of what makes us 'US'. 

And in that heritage lies our one bond with our OldLex foes, and, I believe, our single best opportunity to effect real and necessary change in our city.  As NewLexers, we must challenge ourselves to embrace and leverage our past as a springboard into our future.  

Can a vibrant horse industry exist alongside an even-more-vibrant Eds-and-Meds economy?  I think so.

Can we use Lexington's defunct distilling industry and empty warehouses to build a vibrant arts and cultural (and distilling!) community?  I think so.

OldLex certainly comes with many flaws.  But, if we're honest with ourselves, NewLex can be just as problematic.  We often come off as brash and abrasive.  I kinda like being brash and abrasive.  The problem is that 'brash and abrasive' doesn't get the hard work of changing our city done; It brings such work to a halt as OldLex digs in their heels.  

NewLex often appears impractical.  We are full of plans and ideas, but frequently come up way short on tangible actions and, ultimately, results.  We must learn to transform our ideas and plans into actions on the ground.  We must, in short, be the change we wish to see in the world.

So I make a declaration that may not be popular with all of my NewLex compatriots: I choose both.  I choose the heritage that makes Lexington great.  I choose the creativity and intellect that will drive us into the future.  I choose to act with transparency and speed.  I choose to love the singular beauty of our horse farms.  I choose to reject the parts of (Old AND New) Lexington which hold our city back from becoming truly great.  NewLex?  OldLex?

I choose both.  I choose Lexington.

The UnTower Manifesto: 1. Truth

[Note: The UnTower Manifesto is a three-part series about responding to the failure of CentrePointe.  You can read the full story of that failure here.]

As the CentrePointe project becomes the UnTower scandal, a general consensus has developed which agrees that CentrePointe will never be built on the crater that its developers rushed to create. 

A critical question, then, is this: If CentrePointe will not be successfully constructed, how should Lexington move forward in the wake of the UnTower scandal?

There is the obvious question of how to proceed with the colossal scar in the middle of our city.  But there is also the less obvious - but, ultimately, more important - issue of changing how Lexington works in order to prevent the next UnTower catastrophe.  Let me start there, and we'll return to the issue of what to do with the site.

Toward a Better Lexington
The details of how UnTower happened have slooowly trickled out from the developers.  Their secrecy, lack of candor, intimidation, outright deception, and possible fraud have sharpened questions about how decisions have been made throughout the project's approval process.  UnTower has exposed how opaque and how ill-informed our mayor's and our Urban County Council's decision-making processes have been.  And, if you look closely enough, the scandal shows us how Lexington should improve.

So, how did this fiasco happen?  The details have been covered many times from many, many, many quarters, so I'll simply summarize the key themes:

• Throughout UnTower, the developers have maintained great secrecy about the financing and the business model behind their development.  As details have emerged, neither looks viable.
• The developers claim their project is 'private', but have pressured the public to provide approvals and special Tax Increment Financing (TIF) for the project, with much of the TIF dependent upon a vibrant long-term business model which they don't have.
• The developers, the mayor, and some council members have not shared how and when they learned about key elements of and issues with UnTower which led to its ultimate demise.
• The developers, the mayor, and much of the council have responded to pointed and informed questions about the project with vague, non-responsive answers.  Often, they refused to respond at all.
• While there was public discussion about the decisions our government was making, the conversation was muffled by their timing and format.

In the end, the whole affair had a distinct 'backroom deal' flavor to it which left more questions than answers: How were these decisions made?  What information went into the decisions?  What information was withheld?  What information was fabricated? Who talked with whom about the project?  When did they talk? 

All of the questions have raised a bigger question: How is it possible that our community doesn't have absolute clarity into how decisions are made by our elected representatives?

In my business, if we failed to clearly explain how a vehicle was repaired, we'd lose customers.  If we came across as less-than-honest, our loyal customers would fire us.  If we refused to meet with a customer to address their complaints, they would tell their friends and family.  If we didn't make things right when we screwed up (and, yes, that does happen occasionally), our reputation would suffer.  In the end, our business would fail.

With UnTower, our community's 'business' failed us.

Clarity.  Explanation.  Honesty.  Availability.  Accountability.  These are the pillars of a transparent business that customers can believe 'does things right'.  A healthy, vibrant business which grows and prospers.

We wouldn't accept anything less than these qualities from a business.  And we shouldn't accept anything less from Lexington.

In an age of websites, blogs, Twitter, and Facebook, every business has had to engage in conversations with customers on the customers' terms.  The ubiquity of the internet means that these tools are available to nearly everyone, nearly everywhere.  The latency of the internet means that the conversations don't have to happen at the same time - they can build over time.  The internet's ubiquity and latency forms the foundation of a new and better town hall.

Why should we all have to cram into a room at the same time?  Why should we have to play 'beat the clock' when talking about issues which are complex and nuanced?  Why should we have to forgo pressing business or personal matters to attend a meeting which is designed to be convenient for our representatives?

The internet provides the perfect public forum for every citizen to express his or her public policy views, ideas, and thinking.  Even better, our ideas can build on one another as we tinker with and improve the ideas of our neighbors.  Plus, conducting civic conversations on the internet can happen around the clock.  Citizens can participate in the public discussion when and where it is convenient for them, not for the elected representatives who serve them.  Isn't that the way it should be?

Further, every single representative should publish their conversations, thinking, dilemmas, trade-offs, beliefs and positions (and the transactions between them and other interested parties - like developers or investors or campaign contributors).  These records should be posted online for all citizens to see, comment on, debate, and improve.

The council members' emails are listed on the city's website, as are the mayor's newsletters.  But these are old, closed, one-way forms of communication.  They aren't vibrant community discussions.

So, do I want to see tweets that the mayor's advisor is picking up eggs?  Or a Facebook entry featuring the halloween costumes of the councilwoman's children?  Not particularly.  But we deserve to see real-time updates of their thinking on critical community issues.  We should know why they have changed their minds at the last minute.  They should tell us who they talked with and what they said.  After all, they are public officials.  We should see into a transparent civic machine which serves all of us.

What is clear is that a 19th-century civic apparatus has hamstrung our 21st-century community. The ancient contraption allows far too many secrets to hide within.  Whether our representatives and our governments use blogs, Twitter, Facebook, or some other platform matters far less than whether they start participating in open conversations with the people they serve.

The technology already exists.  Millions of people already use it.  Thousands of your constituents use it every day.  It's easy.  It's free.  And it will make Lexington better.  What are you waiting for?

[Continued in: The UnTower Manifesto: 2. Consequences]

[where: E Main St & N Limestone St, Lexington, KY 40507]