Category: Finance

  • Unions vs. Taxpayers – Part 2 of 2

    Also from the New York Times:

    Faced with growing budget deficits and restive taxpayers, elected officials from Maine to Alabama, Ohio to Arizona, are pushing new legislation to limit the power of labor unions, particularly those representing government workers, in collective bargaining and politics. …

    But in some cases — mostly in states with Republican governors and Republican statehouse majorities — officials are seeking more far-reaching, structural changes that would weaken the bargaining power and political influence of unions, including private sector ones.(Full story here.)

    This is interesting because it’s the second NYT story on public unions in three days.  Also, because it’s something that’s been on my mind over the last few weeks.

    I got to thinking about what happens when union workers strike at a manufacturing plant like Ford or GM.  The citizens have alternate sources for these goods.  People can buy a Jeep, or a Toyota, or some other car.  People can also buy a used car.

    So the conclusion is that labor unrest at a manufacturing company may restrict consumer options, but it does not deny the consumer of the goods.

    This is very different with labor unrest in a public employees union.  In Illinois police are not permitted to strike.  The reason is obvious.  But school teachers are permitted to strike.  That completely denies the taxpayer, the consumer, of the services.  That seems unjust to me.

    It seems that some other people, albeit in other states, were having similar thoughts.

    For example, Republican lawmakers in Indiana, Maine, Missouri and seven other states plan to introduce legislation that would bar private sector unions from forcing workers they represent to pay dues or fees, reducing the flow of funds into union treasuries. In Ohio, the new Republican governor, following the precedent of many other states, wants to ban strikes by public school teachers.

    Some new governors, most notably Scott Walker of Wisconsin, are even threatening to take away government workers’ right to form unions and bargain contracts.

    “We can no longer live in a society where the public employees are the haves and taxpayers who foot the bills are the have-nots,” Mr. Walker, a Republican, said in a speech. “The bottom line is that we are going to look at every legal means we have to try to put that balance more on the side of taxpayers.

    I’m not suggesting that we restrict collective bargaining, but we should certainly have the conversation about who should have what rights.

    We should at least be allowed to have the conversation.

  • Unions vs. Taxpayers – Part 1 of 2

    From the NYT a few days ago:

    Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy. In California, New York, Michigan and New Jersey, states where public unions wield much power and the culture historically tends to be pro-labor, even longtime liberal political leaders have demanded concessions — wage freezes, benefit cuts and tougher work rules.

    (Full story here.)

    Wow!  That the NY Times would write such a story means you know things are tough for unions.

    I’m not anti-union, I’m pro-taxpayer.  We need an environment that is pro-growth in order to overcome the massive debt we’ve accumulated over the years.  Pro-growth means pro-business.  Pro-growth means low taxes.  Pro-growth means balanced budgets, a talented labor pool, good infrastructure, and easy access to capital.

    If we’re not pro-growth then we will NOT survive.

  • Illinois’ $13 Billion Deficit Took Years to Produce

    The legislative session that began today as the House convened will take aim at a budget deficit of at least $13 billion, including a backlog of more than $6 billion in unpaid bills and almost $4 billion in missed payments to underfunded state pensions.

    The fiscal mess is largely of the lawmakers’ own making, and failure to address the shortages threatens public schools, local governments and other public services, said Dan Hynes, the state’s outgoing comptroller.

    “We’ve reached a very critical and concerning point,” Hynes said in an interview in his Chicago office, with packing boxes stacked in the corner. “What’s missing right now is a general understanding by the public of where we are, of how bad it is, and what the fallout would be if we don’t deal with it properly.”

    (Full story here.)

    Hey Dan, I agree with you.  But where have you been for the last four years?  Now that you’re out you’re going to claim that “lawmakers” are responsible?  Let’s just call them “politicians” because that’s what they are.

    The full story is worth reading.

    What the public may not appreciate, Wall Street does. Illinois shares with California the lowest U.S. state credit rating from Moody’s Investors Service, which in September forecast possible “further financial deterioration.” Unlike California, Moody’s assigned Illinois a negative outlook.

    Illinois’s deficit, about half its $26 billion general-fund budget, puts it among the U.S. states confronting $140 billion in shortfalls in the coming fiscal year after closing $160 billion in gaps this year, according to the Center on Budget and Policy Priorities, a Washington research group.

    In other words, we’re in real trouble.  Sufficient trouble that people in the know, like maybe the State’s comptroller, should have been screaming bloody murder years ago.

    Hynes’ puffing now is just too little too late if you asked me.

  • Abu Dhabi Shares Profits From Parking Meters

    In fact, a Chicago News Cooperative investigation has found that investment arms of the oil-rich Abu Dhabi government hold more than a 25 percent stake in the company that privatized the city’s 36,000 parking meters. German financial company Allianz also has a large minority interest, and the remaining 50.1 percent is held by partnerships assembled by Morgan Stanley.

    The participation of Abu Dhabi’s sovereign wealth funds and other international investors exposes the level of sophistication of the money behind the city’s parking meter deal. Mayor Daley and other proponents of the contract argue that it is too soon to know if the parking investors will enjoy solid returns, but the players in the Chicago parking company are known for their acumen for profitable long-term deals.

    (Full story here.)

    Kudos to the Chicago New Coop in breaking this story wide open.

    This deal just keeps getting worse and worse.  It’s clear that no one in city government knows anything about putting deal together.  Da Mare and the city counsel simply got played by professionals on this one.

    This is a continuing example of why the city should not lease assets.  There is no one capable of doing the background work necessary to make sure these are good deals.  As such, all should be avoided.

  • Parking Meter Rates Going Up

    The rates will soon go up for people parking in the city.  Electric pay boxes will begin charging $5 an hour in the downtown area, up from $4.25.And it will cost $3 an hour to park on streets outside the downtown area.  The rate increase will go into effect Jan. 1.  As part of the controversial deal to lease the parking meters, LAZ Parking were given permission to increase rates every year for the first five years of the arrangement.

    (Source.)

    This is a nice New Year’s reminder that everyone who voted for this is an incompetent buffoon.

    The more the rates go up — the worse this deal is for the city.

    It’s just that simple.  Not one person did the math on this.  My belief is that not one — not a single alderman — understands the concept of time value of money.

  • Your in Debt, Your Children are in Debt

    Tribune ran a great story this week about how the city is hopelessly in debt.  The story is worth reading and can be found here; but what’s really interesting is a chart (actually a series of charts) attached to the story.  Here’s what you need to know:

    • Chicago’s cash debt is about $6,87 Billion or around $2,371 per person.
    • We know from previous stories that our past due pension obligations are apx. $7,000 per person

    So your total CITY obligations are about $9,371 per person.  This naturally does not take into account continuing interest on the debt, the 2010 city budget, or ongoing pension obligations.

    The people of this city have a choice, they can bury their head in the sand and continue to elect these numb-skulls or do what’s necessary to turn this place around.

    We know from today’s previous story, that raising taxes will only scare people and job creating businesses away.  We need pro-business, pro-middle class tax policies and we need them now.

  • Yes Virgina, People Flee High Taxes

    The results of the 2010 Census are coming in and show:

    First, the great engine of growth in America is not the Northeast Megalopolis, which was growing faster than average in the mid-20th century, or California, which grew lustily in the succeeding half-century. It is Texas.

    Its population grew 21 percent in the past decade, from nearly 21 million to more than 25 million. That was more rapid growth than in any states except for four much smaller ones (Nevada, Arizona, Utah and Idaho).

    Texas’ diversified economy, business-friendly regulations and low taxes have attracted not only immigrants but substantial inflow from the other 49 states. As a result, the 2010 reapportionment gives Texas four additional House seats. In contrast, California gets no new House seats, for the first time since it was admitted to the Union in 1850.

    There’s a similar lesson in the fact that Florida gains two seats in the reapportionment and New York loses two.

    This leads to a second point, which is that growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.

    Altogether, 35 percent of the nation’s total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.

    (Full story here.)

    You cannot tax your way to growth and prosperity.  People will (a/k/a already have and continue to) leave high tax areas like New York, Massachusetts, California, and Illinois for low taxes places like Texas, Nevada, and Florida.  High debt plus high taxes means the loss of the middle class, jobs, and everything a city (or state) needs to survive.  In Chicago we have the trifecta, debt, taxes, and corruption.

    We need real change and we need it now.

  • Mendoza: Advertising on City Stickers

    The flip-side of Chicago’s 1.25 million city stickers would carry advertising to generate $15 million-a-year — enough to hire 100 new police officers and give motorists a modest break — under a plan proposed by the frontrunner for city clerk.

    State Rep. Susana Mendoza (D-Chicago) wants to turn city stickers into money makers, much the way Mayor Daley has talked about letting private companies put holiday decorations and their corporate logos on bridge houses along the Chicago River.

    (Full story here.)

    I’m not sure of the idea.  Have to think about for a day or two.

    But I do like Mendoza’s attitude:

    “It really advertises me, if I’m elected. It’s a complete waste of real estate. We have an opportunity to open it up to corporate advertisers to raise $15 million,” said Mendoza, who’s running for city clerk with the backing of powerful City Council Finance Committee Chairman Ald. Edward M. Burke (14th).

    “Nobody is talking about how they’re gonna bring that type of revenue to the city and it’s such a no-brainer. As clerk, I should not be the beneficiary of that very valuable real estate. Taxpayers should be the beneficiaries.”

    Yes!!  Someone is giving the right answer.  Of course, with Burke involved everyone should be skeptical.  But congrats to Mendoza for realizing that everything on the city sticker belongs to the taxpayers.

  • Media on TIF does not understand TIF

    Media tries, fails to explain why TIF is so confusing:

    [E]ven Mr. Orr and top aides [are] unsure exactly how much money is in Chicago’s TIF coffers.

    There are now 158 TIF districts in Chicago, and they generated $519 million last year, Mr. Orr said. In all, there may be a shade over $1 billion in unspent TIF money.

    While Mr. Orr contends it’s a “travesty” that most Chicagoans are clueless about all that money, one can’t dispute that TIFs are central to development, especially downtown. And it’s hard to dispute how they allow municipalities to support development without raising property taxes.

    (Full story here.)

    Well, let me be one to dispute.

    First off, the “travesty” is the city bookkeeping is so bad that we cannot even tell the citizens how much money is in the accounts.  That’s front page news and a good reason to toss every last elected bum out at their arse.

    Second, it is also unacceptable that over $500 million is placed into the TIF’s annually for dubious reasons.  These are funds that could be used to put more police on the street, improve failing schools, or simply to shore-up our pension liabilities or now annual budget shortfall.

    But more to the point, TIFs are not central to development.  TIFs were invented in California in 1952.  Illinois didn’t create its TIF statute until 1987.  How did we develop prior to 1987?

    The Chicago TIF truth is that dozens of brand-name companies have received millions and millions of tax dollars from TIF funds.  UPS, CNA Insurance, MillerCoors, the Chicago Mercantile Exchange, Willis Insurance (the “Willies Tower” people), Quaker Oats, United Airlines, and CareerBuilder and just a few.  TIF dollars also went to support a local Mercedes dealer to build new dealership on some of the most valuable land in the city.  Oh, ya, and the Wrigley people to build on the best peninsula in the river (payback for helping with Millennium Park.)

    The simple truth of TIF can be explained in one simple graph.

    TIF Graph
    TIF Graph

    Click on the image to expand.

    TIFs are a way to rob the person to actually invests in a neighborhood, the home or business owner.  A family moves into a neighborhood effected by a TIF and part of their property taxes goes not fund their police, their schools, their garbage collection or other city services, but rather to improve the lifestyle of the rich-and-famous and politically connected.

    TIFs are inherently evil and should be done away with.