The Marysville City Council on Tuesday night took another major step in the redevelopment of its B Street property that has more or less laid dormant for a number of years, in part due to past council and city decisions.
The 5-acre property, located between 12th and 14th streets in Marysville, has been identified as a prime location by officials for development because of its proximity to Bryant Field and the fact it is along one of the major corridors of the city.
Buying a house is a complex and emotional process, and we don’t always make perfect decisions once we’ve determined a particular property is our dream house. But even if you’re careful to think of your home as an asset and an investment, it’s difficult to swing a down payment and harder to figure out how much house you can really afford. And here’s the real kicker: Even if you’re careful with your money, you can still wind up “house poor.”
Being house poor simply means the cost of owning and maintaining your home eats up most or all of your income, leaving you with very little to cover other bills or aspects of your life.
You might have calculated those costs before buying and judged yourself capable of meeting your financial obligations, but becoming house poor can sneak up on you. Purchasers tend to focus on the mortgage payment, but there are dozens of other expenses involved in home ownership, from property taxes and insurance to higher utility bills (due to a larger space), to new furniture purchases, and unexpected repair bills. Some of those costs can rise unexpectedly, too—and if your home loan has an adjustable interest rate, it can jump alarmingly.
You can also become house poor if other parts of your life go in the wrong direction, too—if you get laid off or go through a serious health crisis that drains your bank account, you may suddenly find yourself scrambling to pay the mortgage and other house-related bills. Here’s what to do about it.
How to figure out if you’re really house poor
Math is a crystal ball that can reveal whether you’re house poor or at risk of becoming house poor. The U.S. government advises that your total debt load (aka your debt-to-income [DTI] ratio) shouldn’t be more than 36%. That means that you shouldn’t be spending more than 36% of your gross income on debt maintenance—including your mortgage. If you make $120,000 a year, for example, your monthly gross income is $10,000, so your debt payments (including credit cards, mortgage, and everything else) shouldn’t be more than $3,600. Keeping track of your DTI after a home purchase can offer you an early warning sign that you’re at risk of becoming (or already are) house poor.
So let’s say you’re tracking your DTI and after a few rough months you realize you’ve achieved the American nightmare and become house poor. What can you do about it?
Increase income, lower expenses
First, let’s get the obvious out of the way: “House poor” is a fancy way of saying “poor,” so your first order of business is to change the money conversation. A second job or a side hustle to increase your income will help (at the expense of your sanity and enjoyment of your life, of course), as will reducing your expenses as much as you can stand. You can also consider selling some stuff if you have anything worth selling.
Something to think about is whether hanging onto the house is worth it. If you can sell it and pay off the remaining mortgage, it might be a better idea to admit defeat, even if you take a hit and lose some of your equity. It’s easy to become emotionally attached to a property, especially if it’s a dream home you’ve been working towards for years. But if you’re already house poor there is a risk that you will spend several miserable years working and scrimping—and still lose the house, possibly in a foreclosure situation.
It’s a different scenario if you’re years deep into a mortgage and have a ton of equity. The key here is to sit with the numbers and have a definitive plan for covering your housing costs—and for dealing with the emotional costs of devoting most of your energy towards paying your bills.
A possible alternative to increasing income is debt consolidation. Rolling up several debts into one big lump can reduce the overall monthly payments you have to make, and possibly reduce the overall interest you’re paying on multiple debts as well.
Another strategy to reduce expenses is to eliminate Private Mortgage Insurance (PMI) payments, if you have them. Typically PMI goes away when you achieve 22% equity in the property, but it sometimes takes time for your lender to realize this has happened, especially if it happens because of rising property values that give you more equity. If you think your house has increased enough in value to give you that magic 22%, having it appraised might be worth your time if you can stop making PMI payments on top of your mortgage.
Monetize the house
If you’ve done the budgeting work to increase income and/or decrease expenses and you’re still struggling, you can try to find ways to turn your property into positive income generator. This could be as old-school as getting a roommate or two to occupy your spare bedrooms and pay you rent (not to mention splitting up your utility bills), or you could rent the house part-time through a short-term rental platform like Airbnb.
Of course, most of us would like to think we’re leaving annoying roommates and hounding people for their share of the internet bill for good when we buy a house, so have a good think on whether going this route is worth it to you. Renting in any form can also put a lot of wear and tear on your house, as you’ll have more people using its infrastructure—and some of them simply won’t care as much about the property as you do, because they don’t own it.
Refinance your debt
A lot of folks don’t realize that if you have what’s known as a conventional mortgage, you can refinance that sucker just about any time you want to (if you have an FHA loan, a “jumbo” loan, a VA loan, or a loan through the Department of Agriculture, it’s a bit more complicated). Refinancing your mortgage essentially swaps your current loan for a new one. If interest rates have dropped since you bought your house, you can often get a much better rate. You can also extend or shorten the term, which can have a huge impact on your monthly payments. And if you have a lot of equity, you can sometimes cash out a lot of it, which can help with immediate expenses.
The rule of thumb here is pretty simple: If you can get an interest rate at least 1 point lower than your current rate, it’s probably worth your time. But there are other considerations. Even if the rate remains essentially the same, extending the term of the loan (from 15 years to 30, for example) might make your monthly costs more manageable even though you’ll be dealing with them for a longer period of time.
But! There are also a lot of fees associated with a refinance—as much as 6% of the loan balance. Be aware of what those fees will be before you pull the trigger, or you might find yourself right back in house poor territory.
The nuclear option
If the conditions that are making you house poor are likely to be permanent, or if the idea of rearranging every aspect of your life in order to afford your house exhausts you, you can always consider the nuclear option: Sell the house. Sometimes it’s just best to admit that mistakes were made. Do the math: Can you plausibly pay off the mortgage balance from a sale? Can you afford a Realtor’s fee or other expenses (e.g., necessary repairs)? Will you owe any tax for capital gains if you sell (especially if you haven’t owned the house for more than 2 years)?
Selling the property might give you the opportunity to buy a smaller, less-expensive home, or at least rent a place with a much lower monthly cost. It might be an emotional decision—it might feel like a defeat or setback—but when your other option is a few miserable months or years followed by a foreclosure or similar financial disaster, it might make the most sense.
SAIPAN — Marianas Consultancy Services and its sole member, Alfred Yue, are claiming ownership of funds seized in 2019 from two Bank of Saipan accounts totaling $310,276.26.
Represented by attorney Mark Hanson, Marianas Consultancy Services, or MCS, and Yue filed a verified claim in federal court Tuesday.
Hanson said MCS is the beneficial owner of the bank accounts from which the property was seized and the beneficial owner of all the property seized from those two bank accounts.
“As the sole member of MCS, Alfred Yue also has a vested property interest in some or all of the seized property as the beneficial owner/distributee of the profits and earnings of MCS and for payment or reimbursement for expenses, taxes and other MCS obligations to Alfred Yue,” Hanson added.
In January, District Court for the Northern Mariana Islands Magistrate Judge Heather Kennedy issued the arrest warrant following a complaint from the U.S. attorney’s office for the districts of Guam and the NMI, which sought to forfeit funds seized from two Bank of Saipan accounts in 2019 for wire fraud and money laundering totaling $310,276.26.
The complaint was a civil forfeiture action and did not provide names of any defendants but refers to two bank accounts of “MCS” at Bank of Saipan.
According to the complaint, $271,087.88 was seized from “MCS account 1,” and $39,188.38 was seized from “MCS account 2.”
A resident of the CNMI, “A.Y.” is the sole owner and operator of MCS, the complaint added.
The seized funds are currently in the custody of the U.S. Department of the Treasury.
The complaint arises out of an FBI and IRS investigation of a suspected conspiracy by foreign entities and entities and individuals in the CNMI to commit wire fraud and money laundering.
“The suspected conspiracy involved the transfer of funds, including by international wire transfer, for the purpose of promoting two schemes to defraud: first, to promote the misrepresentation of material facts to, and the concealment of material information from CNMI regulatory authorities, in violation of Title 18, United States Code, Section 1343; and second, to illegally influence government officials in exchange for preferential treatment, thereby depriving the citizens of the CNMI of their intangible right to honest services of those CNMI government officials, in violation of Title 18, United States Code, Sections 1343 and 1346,” the complaint stated.
The suspected conspiracy involved a third scheme: “to evade the payment of the proper amount of income taxes owed to the CNMI government, in violation of Title 18, United States Code, Section 1343.”
According to the complaint, the “conspirators used international wire transfers made with the intent to promote the carrying on of any one or more of these wire fraud schemes, each of which constituted specified unlawful activity.”
“The wire transfers therefore constituted acts of international promotional money laundering,” the complaint added.
A.Y. incorporated MCS for the stated purpose of “banking and financial services, real estate development, and business management,” the complaint added.
On Nov. 7, 2019, the FBI executed search warrants at the Office of the Governor, casino investor Imperial Pacific International and the office of Alfred Yue of Marianas Consultancy Services LLC, among other offices. Marianas Consultancy Services LLC was a consultant of IPI.
by Calculated Risk on 2/07/2023 07:48:00 PM
From Dodge Data Analytics: Dodge Momentum Index Dips in January
The Dodge Momentum Index (DMI), issued by Dodge Construction Network, fell 8.4% in January to 201.5 (2000=100) from the revised December reading of 220.0. In January, the commercial component of the DMI fell 10.0%, and the institutional component receded 4.7%.
“The Dodge Momentum Index weakened in January, after 10 consecutive months of gains. While planning activity slowed, the Index remains elevated, and the volume of projects remains steady,” stated Sarah Martin, associate director of forecasting for Dodge Construction Network. “After such strong growth in 2022, we expect the Index to work its way back towards historical norms this year, in tandem with weaker economic growth. Overall, levels of planning activity remained comparatively strong over the month — which bodes well for the construction sector.”
Weakness in commercial planning in January was broad-based, with office, warehouse, retail and hotel activity declining. Slower activity in education and amusement projects drove down the institutional portion of the Index, nullifying the impact of gains in healthcare and public planning over the month. On a year-over-year basis, the DMI remains 32% higher than in January 2022. The commercial component was up 40%, and the institutional component was 16% higher.
The DMI is a monthly measure of the initial report for nonresidential building projects in planning, shown to lead construction spending for nonresidential buildings by a full year.
This graph shows the Dodge Momentum Index since 2002. The index was at 201.5 in January, down from 220.0 in December.
According to Dodge, this index leads “construction spending for nonresidential buildings by a full year”. This index suggests a solid pickup in commercial real estate construction into 2023.
ST. LOUIS — After halting new sales for over six months, the board overseeing the city’s land bank on Monday approved new policies governing the sale of the nearly 10,000 properties in its inventory and said sales could resume by the end of February.
The Land Reutilization Authority’s new rules will limit how many lots buyers can purchase or put under option and require proof of financing before the LRA board approves sales or option contracts. The LRA board won’t even entertain most offers without proof of at least a quarter of a project’s financing, potentially limiting speculators buying LRA land without a plan.
“Proof of financing is a key part of this process,” said LRA Director Lance Knuckles.
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Other changes will limit the length of options LRA approves to as long as five years for larger projects and require developers to maintain vacant lots (but not buildings) while they are under option.
“That shift is being made because the property is actually off the inventory, thus preventing anyone else from making an offer,” Knuckles said. “That luxury does come with a responsibility to help us manage the inventory.”
The revamp of the LRA’s sales processes follows a shakeup at the city’s largest property owner, including the April ouster of director Laura Costello and the installation of Knuckles.
LRA officials announced the sales pause June 6, a few days after three aldermen were charged with accepting bribes for official acts that included helping a businessman buy land from the land bank. And while land bank officials and Mayor Tishaura O. Jones said the pause was in response to the indictments, one real estate industry veteran said LRA officials had been weighing a pause for months in order to revamp the authority’s policies.
Some aldermen have complained that there weren’t clear guidelines for their involvement and how LRA decided which offers to approve. A recent LRA survey of more than 500 people found one-third were frustrated with the LRA sales process and among the most common request was to clarify the application process and why some offers were rejected.
The LRA is the oldest land bank in the country, created over 50 years ago to take title to the exploding number of abandoned properties in St. Louis during a decadeslong exodus to the suburbs that slashed the city’s population by more than half to around 300,000 people today. The LRA is supposed to try and return the land to private ownership, though by the time properties make their way through the tax foreclosure process, they’ve often been vacant for years and have deteriorated to the point of being unattractive investments.
With about 8,500 vacant lots and 1,400 buildings in its inventory, many of them concentrated on the beleaguered north side of the city, the LRA has struggled to keep up with grass mowing on its roughly 8,500 vacant lots and board ups at its 1,400 buildings.
The LRA has begun stabilizing some of its properties using the Prop NS fund approved by city voters in 2017, limiting further deterioration and making them more attractive to potential buyers. And it has worked to demolish some of the buildings in the worst condition to reduce its inventory.
Earlier this month, the LRA approved an agreement with the St. Louis Regional Crime Commission to demolish potentially hundreds of properties and stabilize dozens using $15 million in federal pandemic relief money Missouri lawmakers last year appropriated to the nonprofit commission.
The LRA also hopes to pare its inventory by streamlining how smaller, undevelopable lots are sold. Those lots were previously sold to adjacent homeowners through the LRA’s “mow to own” policy. That policy has now been scrapped in lieu of a blanket policy putting side lots available for sale to adjacent property owners for $100, plus closing costs of about $85. About 1,000 such properties are eligible for sale to neighboring landowners under the new side lot policy.
LRA’s new pricing policies are still being hammered out, Knuckles said, and will be presented to the board in the next month. The new sales guidelines will be available on LRA’s website, and interested buyers can submit offers by mid-February for consideration at LRA’s Feb. 22 meeting.
Charlottesville homeowners saw the value of their property rise over the past year but at roughly the same clip as the prior year. It’s commercial property owners who are likely to get hit with a steeper hike in their taxes after the latest revaluations were released last week.
Commercial property includes apartments, stores, offices, industrial space and vacant land. The value of those properties in the city increased by an average of 12.16%, according to the 2023 figures released by the city’s assessor on Friday, before offices closed for the weekend. The assessor reported that 83.62% of commercial assessments increased in value this year, while 3.22% decreased and 13.16% did not change at all.
It’s a far cry form last year, when commercial values increased by just 2.79% in Charlottesville and City Assessor Jeff Davis said the local commercial real estate market was still taking a beating from the economic fallout of COVID-19.
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Home assessments in Charlottesville increased by an average of 11.52%, according to the 2023 figures. That’s compared to an 11.69% uptick reported this time a year ago.
Combined existing residential and commercial property increased in value by 11.78%, the assessor said. New construction value included for 2023 is 0.56%. When new construction and reclassifications are added to the value of the existing property, the total value of property in the city increased by 12.33%.
The new figures are a boon to the city’s coffers, which already boast a $5 million surplus for the current fiscal year.
Property values are on the rise across the region.
Albemarle County property owners will see the steepest increase in their property taxes in 15 years after it reported earlier this month that the average assessment leaped 13.64% over 2022.
Property values are also up 13% in Fluvanna County for 2023.
Louisa, Nelson and Greene counties still haven’t reported their assessments. Those are expected to be published later this spring.
The growth in Albemarle County at least has been attributed to appreciation in the housing market.
The county and the city of Charlottesville that it surrounds have been growing in recent years. Charlottesville’s population reached 51,278 in 2022, according to the latest data from the Weldon Cooper Center at the University of Virginia, which studies population demographics. The 2022 figure is 0.4% up from the 2020 census figures, but it is 16.5% higher than it was reported in 2010.
A more detailed analysis of the city’s property assessment is expected in the near future.
Property owners may appeal the city’s valuation of their property by requesting a review of their assessment. After an appeal application is received, the assessor who valued the property will meet with the property owner and decide what change, if any, is appropriate. The city promises a notice of the decision will be provided within 30 days. If a property owner disagrees with the assessor’s decision, they may pursue an appeal process.
There’s good news on the inflation front: December 2022 marked the sixth straight month that the U.S. rate of inflation has decreased. According to the latest figures from the U.S. Bureau of Labor Statistics, released January 12, the Consumer Price Index (CPI) fell 0.1% in December 2022. It had risen by the same amount in November. The inflation rate rose 6.5% between Dec. 2021 and Dec. 2022, versus 7.1% between Nov. 2021 and Nov. 2022.
And while 6.5% inflation might still feel uncomfortably high to consumers, it is certainly cooling.
What will the Federal Reserve do with this latest information? We’ll find out January 31, when the Federal Open Market Committee (FOMC) meets for the first time in 2023. In the meantime, here’s a peek into how inflation affects the housing market.
Inflation and the housing market now
The CPI’s 0.1% monthly decrease was led by a 4.5% decrease in the energy index, including a 9.4% decrease in gasoline and 16.6% decrease in fuel oil. However, shelter — which represents housing-related costs — was up 0.8% in December.
According to Bankrate’s data, the current 30-year fixed mortgage rate is 6.46%, down from last month’s rate of 6.64%.
In contrast, both the CPI rent index and owners’ equivalent rent index rose 0.8% between November and December of 2022.
Nationally, home prices rose 8.6% year-over-year in November, CoreLogic reports. October’s yearly increase was 10.1%, and September’s was 11.4%. Clearly, this represents a slowdown — although it’s still high by historical standards.
Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased 3.7 points in December to 61.0, but the index remains only slightly above its all-time low set in October. Just 21% of respondents believe it’s a good time to buy, mostly due to the combination of still-high mortgage rates and home prices.
Consumers still pessimistic: “In December, the HPSI inched upward slightly, as consumers reported increased expectations that mortgage rates and home prices may decrease over the next year,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist, in a statement.
“However, the HPSI remains very low by historical standards, and respondents continue to cite high home prices and unfavorable mortgage rates as the primary reasons for their pessimism. As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers. At the same time, existing homeowners may continue to wait to list their properties, since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable. We think the resulting tension will contribute to a continued decline in home sales in the coming months.”
Should you wait for inflation to come down more?
With inflation still weighing on the housing market, should you buy a home now or wait? What about selling your home now?
If you can’t make the numbers work, it’s OK to wait things out instead of buying a home today to beat increased prices and rates, especially if you’re a first-time buyer. While you’d be putting off building equity, you might find you’re in a better position to buy in the future, as the market continues to cool and your income can potentially grow.
“Even when inflation does come down on a consistent basis, it doesn’t mean prices falling; it just means prices not rising as fast,” says Greg McBride, CFA, chief financial analyst for Bankrate. “For homebuyers, a more modest pace of appreciation or even a period of stagnant home prices can allow for incomes to grow further. Rather than stretching too much now, you may be able to buy a bit more comfortably in a couple of years if your income growth outpaces home price growth. But there are no guarantees, and rents have certainly spiked in the meantime.”
That said, life circumstances might require you to buy a home now, regardless of market trends, and that’s as good a reason as any. But, when you’re buying near the peak of the market, be prepared to stay in the home for a while if you want to come out ahead when you sell.
—For home sellers
For sellers, the tides are turning. Depending on where you live, you could find fewer takers, or need to come down on price. Don’t forget what happens on the other side of the transaction: When you go to purchase your next place to live, you’ll be another buyer competing for a limited number of available properties — and now likely requiring a new mortgage at a higher rate, to boot.
Homebuying tips when prices are high
If you’re set on buying soon, here are a few ways you can stretch your dollars:
—Put your down-payment savings in a high-yield account: One upside to inflation and the Fed’s response: higher interest rates on savings accounts. If you aren’t already, put your down payment contributions in a high-yield account. Just make sure the account allows you to access your money easily when it comes time for closing — some online savings accounts take three days to deliver your funds when you withdraw.
—Consider a mortgage lender with low or no fees: While it might be more convenient to get a mortgage at your bank, banks typically charge an origination fee, often 1% of the amount you borrow. Many non-bank and online lenders don’t, so if you can find a no-fee lender with attractive rates, you’ll keep more money in your pocket.
—Lock in your mortgage rate: When you find a lender and are applying for a loan, ask about locking in your rate. Now’s not the time to take a chance on your monthly mortgage payment suddenly soaring in price, right before you’re set to close.
Strange how few details landlords and tenants recall from their lease agreements. Outside of payment amounts and end dates, the rest grows hazy over time. Beware: There is peril for the forgetful. Your signature carries significant responsibilities. A valid lease agreement has the muscular force of law behind it. It is the first arbiter of disagreements. And you are bound to that dotted line, hazy or not.
Misunderstandings between the landlord and tenant can arise anywhere. No area is more susceptible to error than those involving maintenance and repairs. These items are not in fine print or located in obscure, sneaky locations at the back of the lease agreement. Maintenance and repair language is in conspicuous locations in almost all commercial leases. If you missed that part, it’s your fault.
Take the the Texas Realtors Commercial Lease, Form TXR-2101. The form has a list of 21 specified maintenance and repair items. You can add more items as needed. Responsibilities lie in the checked boxes. These items are negotiable, but the final agreement’s lucidity condemns the responsible checkbook. You may be unaware of potential financial exposure when things begin to break.
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Triple net charges are especially baffling. These expenses do remind one of charges for additional luggage at the airport. Property taxes, property insurance and common area maintenance, known as CAM, are the titular three.
CAM can mean many things. It implies a common area shared with others and assumes a multi-tenant property. The term is a misnomer if a single tenant leases a property. In that case, a more accurate term may be external maintenance. This may include big ticket items like roof replacement and parking lot repairs. Smaller expenses could be landscaping, electricity for parking lot lights and property management. Whatever items the list contains, you ought to know who is responsible.
To determine property taxes, multiply the property assessed value by the tax rate. The total tax rate is the sum of revenue-seeking taxing entities like cities, counties and schools. Somebody must pay them. You might get away with some deferred maintenance, but you don’t defer tax payments. It is a significant expense and had better be accounted for.
Insurance costs are mostly devoid of controversy.
In gross leases, the landlord pays the property taxes. There may also be a gross lease with a base year adjustment. The tenant pays for increases in taxes over the base year, usually the year the lease executed. In triple net leases, the tenants pay the property taxes. The taxes are often paid in monthly installments. The landlord escrows and then pays to the taxing authority when due. Sometimes the tenant pays them all at once when they become due.
Tenants sometimes grouse that property taxes should be the landlord’s expense. For some oddball reason, they have the notion that property taxes are the operating expense of ownership. That is not necessarily so. If the landlord pays the property taxes, his base rent will likely be higher. He’ll absorb the extra expense. Property taxes are no different than any other operating expense. But who pays what and when is important.
Repairs, maintenance and triple net operating expenses are permanent fixtures to improved real estate. They always exist. Clear the haze. Read your leases. And most of all, cover your assets.
Randy Reid, co-founder of
Reid Peevey Commercial Real Estate, has nearly 40 years of property experience in Waco and dozens of Texas cities. He is a member of the Tribune-Herald Board of Contributors.
On Wednesday, Vermilion County Presiding Judge Thomas M. O’Shaughnessy announced that the county was awarded a second technology grant in the sum of $88,058.31 from a Technology Modernization Funding program offered by the Illinois Supreme Court and the Administrative Office of the Illinois Courts.
The second grant follows an initial grant received during February 2022 in the sum of $303,811.80.
Judge O’Shaughnessy, in announcing the second award, explained that “during the past several year, Vermilion County Tech Services personnel, Karen Rudd and Brian Talbott, and the Court Administrator, Cindy Savalick, along with Building & Grounds Director, Jennifer Jenkins, developed a Courthouse Technology Upgrade plan for significant technology upgrades for the four jury trial courtrooms in the Rita B. Garman Vermilion County Courthouse. The plan provided for enhanced sound systems, improved internet connectivity, and a system of computers and monitors for the presentation of electronic evidence. The second award, which was submitted by Tech Services, will pay for electrical networking and wiring infrastructure for the project, along with computer equipment for the court’s technology clerk, who will operate the new evidence system. The grant also included a new mobile app and court calendar system upgrades for the Circuit Clerk’s office.”
O’Shaughnessy remarked: “The Supreme Court of Illinois and its administrative office have done an exceptional job in identifying the trial courts’ needs in utilizing technology as a means of maintaining court access, while making funds available to the courts to meet those needs. This funding allows us to complete the technology upgrades to the Courthouse systems which began during the early days of the 2020 COVID-19 pandemic when equipment for remote hearings was first acquired. These upgrades will greatly improve the trial capacities and environment of our jury courtrooms. The judiciary again extends its thanks and congratulations to Tech Services for their hard work in planning these important and substantial upgrades to our courtrooms and securing this second critical grant. And we appreciate the support for this plan offered by the County Board and its Chairman, Larry Baughn.”