The Russell Proposal - The Numbers

25 comments

• C Crenshaw Sepulveda April 6, 2008

  The Crenshaw Sepulveda Summary:

  1. The City,State, and Federal Governments are finally going to spend the money they should have spent over the last 20 years. Except now it is going to cost even more than it did years ago.

  2. It is way cheaper to stay in Tacoma than it is to move to a location, albeit far more attractive, along the I-5 corridor. Attractive locations tend to be more expensive.

  As respected as the Russell Investment Group is (though you can’t tell by the faith the city of Tacoma has had in them) we are talking about a financial services company, seems to me a lot of these outfits are making the news these day for being in a lot of trouble. Is this really a good time to be putting all of our financial eggs in the basket of a company that could possibly be failing in the near future?

  The Crenshaw Sepulveda Conclusion:
  Let the Russell Investment Group do what they want to do, they are, after all, financial wizards, they can figure all this out for themselves and decide if staying in Tacoma makes sense. They have the Tacoma plan on the table, I wonder what the other cities are offering them? Tacoma is cheap and it still has that Destiny thing working for it. One has to wonder what will the I-5 corridor cities be offering Russell?

• J John Sherman April 6, 2008

  Question: Just how much money has Russell Investment paid to City of Tacoma or Pierce County each year for the past few years; for example, gross revenue business taxes, any other business and occupation taxes, any permits (elevator, boiler, building, tenant, fire alarm), down-town association dues, fees, or assessments; it follows, with this public money(s) future investment all the public should understand what is given back in real-dollar amounts and who what government agency receives how-much?

  Thanks for some real-community-benefit simple answers.

• Z Zintradi April 6, 2008

  Well with Norm Dicks involved, my spidey sense tells me that we’re going to perhaps get some federal money to build a new streetcar system, A LA Portland.

• R rich April 7, 2008

  Hey Cren, research what Russell actually does…ok….

• C crenshaw sepulveda April 7, 2008

  rich, how the heck am I supposed to research what Russell actually does. Like who could research what Bear Sterns actually did before they got into the trouble they did. These companies don’t really let anyone know what they are doing until it shows up on the front page of the New York Times or the Wall Street Journal. It would be naive for anyone, outside of an insider, to know what Russell is actually doing. I do understand they are one of the top 100 employers in the country to work for and they have offices all over the world. I seen nothing that confers upon them any immunity to what is going on with the economy and the financial industry in specific.

• N NM real estate April 7, 2008

  Pretty good point, crenshaw. I like your comparison of Bear Sterns.

• A Andrew April 7, 2008

  This is good news. Clearly the government folks involved in this have been working hard. Anyone who calls this a greedy corporate tax cut…is right. But it is one that our downtown desperately needs. Not only could this keep Russel’s high paying jobs here, but it will revitalize a section of downtown. When good jobs dissapear arts, hipsters, and development quickly follow. Too bad a North Tacoma to Russel direct streetcar is not part of the proposal.

• T Thorax O'Tool April 7, 2008

  This is a great opportunity, and the City and Russell both know it… I just hope our elected officials don’t blow it.

  I like the Haub highrises (not denying it… I’d love to see something 600’ go up here). I like the potential for Dicks to get some streetcar funds.
  Oh man, this potential is getting me seriously excited. Not to ignore other fine neighborhoods in Tacoma, but since I live in downtown, this is MY neighborhood.
  I honestly hope we get some nice new scrapers, a lot of road improvements, landscaping and the streetcar out of this. Crenshaw, you’re absolutely right that this should have been done decades ago. Let’s make sure city council knows we’re tired of waiting and letting our city stagnate.

• E Elliot April 7, 2008

  Well, remember this when you’re paying your taxes next year, that’s a lot of money.

  But seriously, the trend of companies blackmailing municipalities for tax cuts and hand-outs is disgusting (think the Sonics and Boeing in Seattle). The only thing that makes me more angry about this is that going through with this bribe is probably the right thing for Tacoma, as we can’t really afford to lose the employer. But still, the approx. $65 million that’s coming from the city would have done a lot for schools, police, and transportation in the area, but I guess Russell caught us down a dark alley and couldn’t resist mugging us.

• T Thorax O'Tool April 7, 2008

  No property taxes for those who rent (like me) admittedly, my rent will likely go up.

  Corporate mugging is a terrible trend, no doubt.
  But I was raised by eternal optimists… you know, “when life gives you lemons, make lemonade”.
  Well, We’ve been given an orchard’s worth of lemons in this city over the years. I just finally want the City to start making bad situations better, instead of suffering while our neighbors to the north benefit from our loss.

• E Erik B. April 7, 2008

  Well, remember this when you’re paying your taxes next year, that’s a lot of money.

  Very little of it is actually funds paid out by the city. If Russell moves out, there won’t be any B&O taxes to collect from them anyway.

• R rich April 7, 2008

  Well since your relying on the NYT for you news, I can understand your ignorancy on what Russell really does, and it explains why just the idea of a firm within the Financial industry seems like the sky is falling. But, Russell and their business model is nothing like what Bear Stears did. For instance, every hear of the Russell 1000, 2000, or 3000 indexes….if not check out any finance journal on the market activity. Also, Russell really specializes in DC programs, or pensions. They really are managers of large quantities of money from institutions (pension plans, etc) to foundations (The Gates Foundation)…….Bear Stearns was a Investment bank/broker/dealer in the sense that it had many different departments that exposed them to the credit sitution, but you really need to once again understand what really is going on in the credit markets (not what NYT tells you, but actually understanding the basics, not someones opinion)……and I could do a huge disertation on it, but I would just recommend researching it if it really is on your mind…(no, research is not just reading the NYT)…..so, my point, where I don’t know 100% that Russell is not exposed to what finally took Bear Stears down, I would be surprised..though there might be some indirect exposure through some of their mutual funds….it seems that they just have completely different business models……perhaps a Russell employee could expand upon my comments……

  But, anyways, I do like the Haub building…..seems to me Russell needs a nice tall highrise……..

• G Gorman April 7, 2008

  Although I think the Haub site would be great, I’m hoping Russell opts for the site next to them now.
  I think this will actually help make the Haub site more viable for another large company to move into Tacoma (and still have some of the same tax benefits apply to it as well).
  Can you imagine that? Two Russell sized companies in downtown Tacoma. That would do wonders for that area.

• A altered chords April 7, 2008

  Crenshaw Sepulveda: You don’t know me but I spent 12 years in the institutional fixed income field. That means I brokered bonds for institutional investors like banks and insurance companies.

  What Russell does is nothing like what Bear Stearns does.

  Surely even the New York Times pointed out the difference between Bear Stearns and J.P. Morgan – 2 firms that look much more similar than Russell and Bear.

  I’d like to take a moment to draw the readers attention to the closure of a great restaurant in Tacoma – Stadium Bistro.

  If Russell’s 1100 educated, well paid employees leave town, many other restaurants and business will close. We need not wonder why the city wants to keep them here.

  Thank you for compiling and displaying these numbers. Very informative.

• S Squid April 7, 2008

  OK, I was curious and had some time on my hands over the weekend, so I did a bit of research. The source of my curiosity was just who this Seattle-based Ilahie group is who bought the Russell building several years ago. Turns out, Ilahie is part of a “family-owned” conglomerate of companies who all fall under the umbrella of a holding corp named Saltchuck. Saltchuck owns a bunch of marine companes, transporation, petroleum distributing, stuff like that. They own Foss Maritime, Totem Ocean Trailer Express (aka TOTE) and a bunch of other similar companies. Hmmmm.

  This is when my inner conspiracy buff toggle flipped. If Russell has evolved into an uncertain cultural fit for Tacoma, Saltchuck would be the other side of the coin. One needs little imagination to understand how out-of-place and unloved such a company feels in Armani-clad Seattle these days. Consolidating their operations (now scattered throughout the Puget Sound region and elsewhere) in a real working port town that embraces a grittiness factor could look attractive to them. Couple that with more affordable housing and family neighborhoods for their decidedly less buttoned-down workforce. I’m no economic development genius, but I do know that sometimes a round peg don’t fit into a square hole.

  I’d hate to lose Russell, but what about a swap – Russell for Saltchuck? You don’t have to be Bill Bavasi to be tempted to make that trade, especially when you have an unhappy free agent in their contract year.

• T Thorax O'Tool April 7, 2008

  Squid… why not have both? If Saltchuck owns the current Russell building, let Russell build a tower at Haub and let Saltchuck move into their building and be further embraced by T-town.

• R rich April 8, 2008

  One’s past, sometimes, isn’t the best future.

• J J. Cote April 8, 2008

  Question: If “Joe Blow, Inc.” were to want to move to Tacoma or, God forbid, from Tacoma, would this much money be thrown at him in the same manner and fashion in order to get him to stay? Do the taxpayers of Tacoma/Washington have to pay for what equates to corporate fellatio in order to get a business to either come here or stay here?
  This area is becoming too expensive for the average working class family to live here. I don’t see Chris Gregoire at my door trying to convince me to stay.

• O Onslow P Squishington April 8, 2008

  She did come to my house to convince me.

  and by “she” I mean the far worse economic problems elsewhere in the US of A.

  Of course the city/state wouldn’t go so overboard for anyone. But then again, how many companies in Tacoma/Pierce employ like 1100 people?

• S Squid April 8, 2008

  JCote: Too expensive for working class families? You gotta get out more. Tacoma is about as affordable as it gets these days. Unless you are comparing to like Gillete, WY. Boise is pricier.

  Seriously, every place worth living is dealing with the same issues. We aren’t close to unique in that regard.

• O Onslow P Squishington April 8, 2008

  Very true, Squiddo… Let’s not forget that for $900/mo you can get a nice 2 bed or even a 3 bed (in the right areas) apartment here in T-town.
  What do you get for $900 is Bellevue or any part of Seattle that is even remotely desirable? A studio.
  Yes, you can do better than that in King Co if you try, but it isn’t family friendly.
  Hell, it’s more affordable here than in Everett (Ask my sister… she lives there).

• S Squid April 8, 2008

  OPS@21: Only my mother calls me Squiddo.

• E Elliot April 9, 2008

  Onslow,

  Your estimation of Seattle rent is off by a long shot. Last year at this time I was paying $800 for a very nice 1 bedroom in Wallingford a block off 45th, a very desirable location. If you look up Greenwood or further north, you’ll have no problem finding a two-bedroom for that price.

• E Elliot April 9, 2008

  @Erik B:

  “Very little of it is actually funds paid out by the city. If Russell moves out, there won’t be any B&O taxes to collect from them anyway.”

  First, it looks to me from these numbers that the expenses listed for the city add up to between 60-65 million, which is hardly “very little”. Second, I understand the argument that it’s an investment in keeping them here long term, and like I said I grudgingly agree. What I don’t like is the assumption that all this is coming from: Russell isn’t doing us a favor by paying taxes, they’re doing their civic responsibility. The attitude that the public owes a business something for being here is exactly wrong: rather, that business owes the public something for everything we’ve built and paid for (like roads, schools, police, etc) that allow that business to make money here. The people that run that business are making a profit and getting rich (otherwise they’d be investing in something else) in large part because we’ve built a community that they can thrive in.

• T Tacoma Ted April 18, 2008

  It’s true Russell is in a much different, much more diversified collection of financial services than a firm like Bear Stearns, so the chances of their collapsing overnight is minimal. They do not run their business on high amounts of leverage either, nor is there subprime exposure in their internal assets. Finally, they have a deep pocketed owner in Northwestern Mutual.

  However, Russell’s crown jewel, highest margin investment product, the hedge fund business, has just collapsed due to strong underperformance in 2007, the departure of their leader and massive global investor redemptions. The fund has been closed down, and this is going to put serious margin pressure on Russell’s budget and business in 2008, especially since it is also the final and most significant year of vesting of equity ownership by senior Russell management. If the profit and revenue outcome is bad for Russell in 2008, these incentive shares won’t vest fully. And I’m sure a lot of these execs want to ride off into the sunset after they are able to sell their shares, so they’re going to be motivated to boost profits. And if the markets aren’t booming and their high margin products are gone, you do this by cutting, and cutting hard.

  Don’t be surprised to see Russell accept Tacoma’s offer, making them look like saviors of the city and heros to the 1000+ employees that actually live in Pierce County. But in reality this will be motivated by cost-cutting (Seattle would be too expensive in this retrenching environment), the desire for the execs that live in Seattle to not be in it for the long haul after 2008, and the reality that this firm may not need more office space 3 years from now in WA state. They have been growing nicely in Europe, and NYC is probably going to be a bigger impact for Russell as a larger satellite location.

  Underperformance in your funds is a bitch for a firm whose philosophy is to overdiversify, overdiversify, overdiversify. You can never make back that underperformance, and the story is shot.