My Blog

Category: Finance

  • Unions Investment in Chicago (Elections)

    Four years ago, SEIU spent almost $2.5 million in Council races, spearheading a union effort that helped depose Daley allies like Madeline Haithcock, Shirley Coleman and Dorothy Tillman. Asked about the budget for this election, Balanoff said SEIU expects to be involved “at the same level as last time.” Total expenditures by SEIU and other labor groups, including the CFL, could top $4 million, union sources told the CNC.

    (Full story here.)

    Just ask yourself, why would unions spend $4 million of their members money on municipal elections?  Because it’s worth it.  They get an excellent return on their investment.

    The union makes millions in political donations and they get multiple millions in return.

    So who’s looking-out for the taxpayer?

  • Big Tax Hikes Result in Less Revenue

    Last year, voters in Oregon voted to raise taxes on the highest income earners in the state, giving Oregon the highest tax rates of any state in the nation. It hasn’t worked out too well for Oregonians, according to the Wall Street Journal:

    In 2009 the state legislature raised the tax rate to 10.8% on joint-filer income of between $250,000 and $500,000, and to 11% on income above $500,000.  …

    Congratulations. Instead of $180 million collected last year from the new tax, the state received $130 million. …

    One reason revenues are so low is that about one-quarter of the rich tax filers seem to have gone missing. The state expected 38,000 Oregonians to pay the higher tax, but only 28,000 did.

    (Full story here.)  Hat tip to SCC for the story.

    As Homer Simpson says, Doh!

    Again, I’ve written about this here and here.  People simply leave.  Those who do not understand the Laffer Curve will perish from it.

    And note, this does not happen with a bang.  This happens slowly, quietly, over time.  One middle class family moves to Evanston, then one to Riverside, and another to Elmhurst.  Pretty soon10% of the people paying the bills have left.  Those first on the bus get to pick the best seats.  The rest have a real problem.

    But we can stop this.  We just need to say “Enough!”

  • Wisconsin ‘Open for Business’

    Wisconsin is open for business. In these challenging economic times while Illinois is raising taxes, we are lowering them. On my first day in office I called a special session of the legislature, not in order to raise taxes, but to open Wisconsin for business. Already the legislature is taking up bills to provide tax relief to small businesses, to create a job-friendly legal environment, to lessen the regulations that stifle growth and to expand tax credits for companies that relocate here and grow here. Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, ‘Escape to Wisconsin.’ Today we renew that call to Illinois businesses, ‘Escape to Wisconsin.’ You are welcome here. Our talented workforce stands ready to help you grow and prosper.

    —  Wisconsin Governor Scott Walker

    (Full story here.)

    Wow!  Thanks to the trifecta of stupidity known as Quinn, Madigan, and Cullerton we can begin to shed even more jobs from Illinois.

    Of course, we can’t really blame Quinn, he ran on the platform of raising taxes.  So it says more about us (and by us I mean the people, not including myself, who voted for him) than it does about him.

    Despite the fact that the state voted these people into office, we really, honestly, deserve better than this.

  • $5/gal gas? Yes Says Former Shell Exec

    NOTE:  This story is a few weeks old.  12/28/2010

    Gasoline rationing and $5 pump prices are predicted by 2012 for consumers if U.S. politicians don’t get their act together, a former Shell executive said.  …

    John Hofmeister, a former president at Shell Oil, told the Platts news service that energy shortages and record-high gasoline prices were on the horizon because of high demand and ineffective governing.

    “The politically driven choices that are being made, which are non-choices, essentially frittering at the edges of renewable energy, stifling production in hydrocarbon energy — that’s a sure path for not enough energy for American consumers,” Hofmeister told the news service.

    He said 2012 might create “panic time” for U.S. lawmakers who are “suddenly” going to be pressed to rethink U.S. energy strategies.

    “When American consumers are short or prices are so high — $5 a gallon for gasoline, for example, by 2012 — that’s going to set a new tone,” he added.

    (Full story here.)

    I read this story back in December, thought about posting it, then it passed.  With the news yesterday that Chicago has the highest gas prices in the country, my memory clicked and I went and found this gem.

    Talk about killing the economy.  Since the 1980’s we’ve all been on the cheap energy economy.  Looks like that’s about to change.

    Poor leadership across the board: federal, state, local governments have done nothing to assist the citizens at making sure that the we continued to get a good deal at the pump.

    If $5/gal gas come to pass, you can bet the bank on a double dip of the great recession that will last another 10 years.

  • O’Hare Bonds Downgraded

    The cost of debt is going up because of years of bad management.

    A major credit rating firm delivered a stern warning Monday regarding the mounting risks that Chicago is taking by going deeper into debt in an attempt to build more runways at O’Hare International Airport without securing financial support from the airlines.

    Moody’s Investors Service downgraded to a “negative” outlook from “stable” some of the revenue bonds that the Chicago Department of Aviation has issued to help pay for the $15 billion O’Hare Modernization Program and related projects.

    (Full story here.)

    The city needs to borrow another $1 billion in order to keep expansion alive.  Because of the downgrade, the interest rate is going up.  Interest on a billion adds up fast.

    Less money for necessary services; more money to debt service.

  • Convicted But Still on the Payroll

    Chicago, the city that works, is also the city that keeps on paying city employees long after they’re convicted of corruption.Nine former city employees were paid a total of $383,205 after they pleaded guilty or were found guilty in corruption cases, records show.

    (Full story here.)

    Simply unbelievable.

    Another clear example of how one no is looking out the taxpayer.  When people have had enough they will toss all the bums out of the city counsel and demand more from their elected representatives.

  • Parking Meter Analysis

    So Monday is the Chicago Tribune Editorial Board review for the Second Ward candidates and as I was having breakfast this morning I got to thinking.  How bad really was the parking meter deal?  So I started poking around to find out.

    Ten minutes later I was shocked!!

    Based on this story here I estimated that initial annual revenue from the parking meters was $19.5 million.  Then, on this page here I figured that long term municipal bonds were around 5%.  Then I built a quick spreadsheet using OpenOffice’s Calc (I’m a big fan of open source software.)  But I had to stop because I needed one more piece of information; so I found this story here about rate increases.  A few clicks later I was reaching for the Advil.

    If one assumes a 7.5% annual increase in rates (2011 was around 20%) and a fixed 5% interest rate, then the present value of the parking meter revenues is:

    $3,775,457,416.73

    That’s right, $3.775 BILLION dollars.  How much did we get?

    $1,160,000,000.00

    That’s right, the Mayor and the City Counsel left potentially over $2 Billion on the table.

    What’s amazing is that this took me 10 minutes.  Why didn’t anyone in the City Counsel or the Mayor’s office — or the media for that matter — do this very simple analysis?  My guess is that they didn’t even think about it.  Politicians do NOT even understand the concept of time value of money.

    Just doubly insane that Bob Fioretti voted for this abomination.

    If you want to see my spreadsheet you can find it here.

  • State Dems Press Ahead on Tax Hikes

    Gov. Pat Quinn and top Democrats are pressing forward on a major income-tax increase and a $1-a-pack hike in cigarette taxes.

    The personal income tax rate would rise from 3 percent to 5.25 percent, Senate President John Cullerton said this evening. The amount tracks with what the Tribune reported today. After four years, it would fall to 3.75 percent, he said.

    The corporate tax rate on businesses would rise from 4.8 percent to 8.4 percent.

    (Full story here.)

    This will kill growth, jobs, and will hurt all of us in Chicago.  The recession is going to last longer in Illinois than elsewhere because of measures like this.

    Two weeks ago I wrote about how people are fleeing high tax states for low tax states.  Say what you will about Prof. Laffer, but his analysis of tax elasticity appears to be dead on.  The Laffer Curve is real and accurate.

    The problem is two fold: not only will businesses leave, but companies that were thinking of relocating to Illinois will chose someplace else instead.  The loss to the state as a result of this will be billions.

    Interestingly, Democrats seem to love to talk about how our friends in Europe govern.  Recently in the UK, the bi-partisan government agreed to both modest tax increases (not nearly double) and also extensive cuts in spending.  Seems that Dems on this side of the pond only want to tax and tax and tax and not cut a single nickel.

    If Chicago goes down the same path were doomed.

  • Media Drops Ball on Taste Proposal

    Chicago aldermen responded coolly Tuesday to a lone bidder’s proposal to charge Taste of Chicago patrons a $20 admission fee — and up to $65 for tickets to a music stage that draws the biggest-name talent to the lakefront festival.

    (Full story here.)

    This is the whole story; $20 admission & $65 concert tickets.  Completely missing is the length of the proposal, the up-front payment to the city, any other details of the deal, and financial records from previous years’ Tastes.  As such, the deal is impossible to evaluate.

    When the media can’t even get the simplest of details out to the public it’s no wonder that public expectations are so low.

    Someone should get the entire proposal and make it available with a nice 150 word executive summary.  That would be some fine journalism.

  • Truism

    Someone sent me this quote today as part of a longer email:

    It is incumbent on every generation to pay its own debts as it goes.
    A principle which if acted on would save one-half the wars of the world.
    —  Thomas Jefferson

    I can’t help but thinking that the debt we have created for our children will be the cause of their wars.