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Weird Housing Tales, Part 20

When foreclosures are involved, weird stuff happens.  From the Chicago Tribune’s Mary Umberger this past weekend:

A Minneapolis man who city officials say had ample warning that municipal employees were coming to board up his foreclosed, ramshackle house because it represented a safety hazard learned recently that apparently he should move more quickly.

Ted Poetsch, who uses a walker to get around, told the Minneapolis Star Tribune that he was eating lunch when the crew arrived, and he began gathering some possessions— and then the truck drove away, having boarded up the home with Poetsch inside. Unable to leave, he phoned his lawyer, who eventually got police and a representative of the board-up company to return to help him get out.

Why do I have a feeling there’s more to the story than this?  Did Poetsch purposely get himself boarded-up in order to play the sympathy card to save his home? Or perhaps some malicious city official wanted Poetsch boarded-up in his home (likely scenario here in the Windy City). Or maybe the board-up company employees were just plain careless all along.

I smell a lawsuit…

Source:

“The word from Washigton: Market near bottom- maybe”
Mary Umberger
Chicago Tribune, June 28, 2009

Signs Of The Time, Part 49

One of the bigger fallacies I’ve heard over the years, when it comes to job “security,” has been that first responders, meaning sworn police officers and firefighters, are never laid off.

Mind you, I don’t want them to go anywhere else. However, the fact is, their ranks are being trimmed by the new economic reality.

Back in 2005, I was working in the back office of some fire department in the Chicago suburbs when one of the fire officers passed along an article he thought I might be interested in reading. It was about how municipalities might soon be using private fire departments and their personnel instead of public sector employees. Already well aware this was no longer just a possibility but a reality by then, I asked the fire prevention bureau secretary what she thought of such talk. She looked me square and the eye and adamantly declared that it will never happen. Period.

I wonder if the fact that her husband was a firefighter with another suburb had anything to do with her position on this matter.

Anyway, the sad fact is, first responders, like any other profession, can and will be given pink slips when times are tough and the money is drying up.

If you have any doubts, Google “firefighters laid off” and “police laid off” and read the results.

With your FREE My Monster Account, you can: Set up job search agents and have your dream job emailed to you!

Anyway, here’s just one more example demonstrating how bad the situation is getting. Reuters’ Scott Malone wrote yesterday:

The oldest U.S. mounted police unit is going the way of the Pony Express, brought down by a tough economy and a budget crisis in Boston.

The unit’s 10 officers on horseback are a common sight at major Boston parks and historic sites, frequently photographed by tourists and deployed primarily for crowd control.

But after 150 years, police officials said they need to eliminate the mounted unit, a move city officials estimate will save some $700,000 for a city budget that has been strained by a 19-month long U.S. recession that has hammered tax revenue.

The 10 officers and their supervisor will be reassigned within the department, Police Commissioner Edward Davis said in a note to staff, while the 10 civilian staffers who cared for the animals will be laid off.

Source:

“Oldest U.S. mounted police unit gets budget axe”
Scott Malone
Reuters, June 29, 2009

Mayors: Give Us, Not The States, More Money

Speaking of bailouts… from Reuters’ Camille Drummond this morning:

Without more direct aid to U.S. local governments, Washington may make matters worse for cities facing falling tax revenues and increased spending needs, the nation’s mayors said at their annual meeting this weekend.

Mayors said they bear the tough task of cutting services and jobs vital to U.S. cities, even with help from the $787 billion in stimulus funds Congress passed in February…

Local governments, struggling to issue debt in a largely stalled municipal bond market, expressed worries that current federal stimulus initiatives — including development grants, infrastructure funding, and the subsidized Recovery Zone and Build America Bonds — while helpful, may not be enough in the financial crisis.

“And it’s important that metropolitan areas get money directly for recovery, and not through the states,” said Los Angeles Mayor Antonio Villaraigosa, who has voiced concerns that states may use stimulus funds to close their own budget deficits, especially in California with its massive $24.3 billion gap.

“Take your stinking paws off our money,
you damn dirty states!”

Source:

“Mayors say cities need direct economic help”
Camille Drummond
Reuters, June 15, 2009

Signs Of The Time, Part 48

Bailouts are all the rage these days. So I’m not too surprised to learn that a country club in Palm Desert, California, is looking to its local government for financial relief as well. From The Desert Sun’s K Kaufmann on June 9:

Palm Desert Country Club could be on the brink of financial failure and is looking to the city for a bailout.

The club closed its nine-hole executive course last week, said Dave Simmons, a resident who also is the club’s general manager. A second 18-hole course remains open.

“It’s a matter of not being able to generate the income you need during season to get you through the summer,” he said. “Financially, we’re on life support. It’s at the point that the club can’t meet its obligations.”

As a result, club members have approached the City of Palm Desert for a bailout. Kaufmann wrote:

Owners Randy Case and Larry Kosmont were not available for comment Monday, but club members have put forward two city-funded rescue proposals for consideration, Simmons said.

The city could buy 10,000 rounds of golf at $20 per round for a cash infusion of $200,000 per year for the next 10 years. City residents would then be able to play at the club for $25 a round. Current regular summer rates are $45 until noon and $35 after noon. Season rates are as high as $80 a round.

The second proposal centers on the city buying the club’s nine-hole executive golf course and turning it into a public course, possibly for children and seniors…

Mayor Pro Tem Cindy Finerty said with the city facing its own financial crunch — a projected 13 percent drop in revenue for the coming fiscal year — Palm Desert Country Club may be facing some hard choices.

“The concern is how is that (helping the club) going to impact Desert Willow,” Finerty said, referring to the city’s upscale golf resort on Country Club Drive, which is also feeling the pinch. “We have to ask ourselves, do we want to be in the business of bailouts?”

According to the piece, the National Golf Foundation estimates that as many as 15 percent of private country clubs across the country are facing financial or membership crises.

Source:

“Country club asks city for financial bailout”
K Kaufmann
The Desert Sun, June 9, 2009

Picture Of The Day

On April 15, 2009, thousands of Americans attended “Tax Day Tea Parties” in more than 800 cities across the country to voice their opposition to out of control spending at all levels of government, among other things.

Sure, the protestors were angry. But this didn’t prevent their creative juices from flowing…

More Boats Abandoned As Economic Castaways

On April 1, I talked about a New York Times piece which highlighted the growing number of boat owners discarding their vessels during these hard economic times.

Two months later, it sounds like the problem is getting worse in some areas of the country. Robert Nolin wrote on the South Florida Sun-Sentinel website on May 21:

A sinking economy, along with past hurricanes, has left a waterlogged legacy in Florida waters: slowly decaying wrecks of once proud boats abandoned by their owners.

They’re called derelicts. They threaten other vessels and pollute the environment, and they’re more prevalent than ever these days.

“Every time the water goes down, another 10 derelict vessels show up,” said Phil Horning, who runs the derelict vessel removal program for the Florida Fish & Wildlife Conservation Commission. “It’s just amazing how many of these there really are out there.”

In 2005, the FWC said some 750 abandoned boats cluttered the state’s waterways.

Nowadays the commission estimates their numbers at 1,500.

Officials attribute the increase to boats sunk or damaged by hurricanes, more exact reporting of such vessels and, of course, a foundering economy in which boats, expensive to maintain even in good times, can become unaffordable luxuries.

“Because of the economic crisis, some people have walked away from vessels that they can no longer maintain,” Horning said from his Tallahassee office.

That’s after the owners usually scrape identification numbers off the hull so they can dump it with no legal consequences.

There was one abandoned casino boat in the Keys that the state cut up and removed at a cost of $94,000; its owner faces criminal charges. Two 100-foot-long barges in the mud off Miami were removed for a total of more than $200,000, Horning said.

But those are exceptions. The average derelict is 22 feet in length and costs $2,500 to $5,000 to remove.

Horning said 150 derelicts are currently slated for removal statewide; 52 have already been yanked from the water and the FWC expects to remove the remaining 98 before June 30. That’s when the agency will have burned through the $1.5 million allocated by the state for derelict removal, money which will pay to pluck just a tenth of the estimated derelicts from their resting places.

Still, the program is large-scale compared to last year, when the FWC removed just eight boats. But it may be a one-time operation: no more state funds have been appropriated.

Meanwhile, Maj. Paul Ouellette, with the FWC’s boating and waterways section, said the number of derelict watercraft is increasing “slowly but surely.”

“My perception is there is probably a lot more out there that we don’t know about,” he said.

The FWC doesn’t break down the number of derelicts by county, but South Florida ranks at the top, followed by St. Petersburg/Tampa Bay.

Distressed boat owners thinking about abandoning their vessel in this manner might want to think twice before they try. Nolin added:

Owners who do so may be sought by local law enforcement or FWC officers. They can be charged with a second-degree misdemeanor, which carries a one-year jail term, or in cases of larger boats, a felony dumping charge whose maximum penalty is a five-year prison term sentence and $5,000 fine.

Owners also can be ordered to pay for their boat’s removal.

The derelicts, especially when underwater and unseen, pose a hazard to navigation. By leaking fuel, or tearing up the bottom, they can damage the environment.

Though vessel dumping is on the rise, South Florida has one advantage to deter it: dense waterfront development, which means it’s hard for anybody to abandon a sailboat or powerboat without being spotted.

To any distressed boat owners out there. Rather than abandoning your prized vessel and harming the environment, other boaters, and your local government’s already-stretched budget (in addition to the possibility of a fine and/or jail time), please visit here (go to “Responses” section at end of post) and get in touch with some of our readers who have expressed a strong interest in giving your boat a good home.

UPDATE (7/3/09):

Anyone who’s interested in acquiring a boat might want to check out the following wesbite (thanks Tony M!):

Wooden Boat Rescue Foundation
http://www.woodenboatrescue.org/

From their home page:

The Wooden Boat Rescue Foundation is dedicated to placement, saving, locating, researching, wishing, learning and dreaming of wooden boats. All boats are free.

Just remember. When viewing the listings, boats belonging to the type “dingy” are no longer available.

Happy hunting, and I hope to see you on the water soon!

Christopher E. Hill
Editor

Source:

“Abandoned ships more prevalent than ever in South Florida”
Robert Nolin
South Florida Sun-Sentinel, May 21, 2009

Quotes For The Week

“I am a citizen.”

-John Hamilton, at his Sandusky (Ohio) Municipal Court arraignment last Thursday after being arrested by the Sandusky Police Department for refusing to stop mowing overgrown grass at a public park (for which the city has limited funds to maintain).

“I am 100 percent sure that the U.S. will go into hyperinflation.”

-Legendary money manager Marc Faber, during an interview with Bloomberg Television last Wednesday.

“I don’t know why they got Bernie Madoff in jail… They ought to make him secretary of the Treasury.”

-Peter Schiff, President of Euro Pacific Capital and author of the upcoming book Crash Proof 2.0: How to Profit From the Economic Collapse, at the Ira W. Sohn Investment Research Conference in New York City last week.

“We are all grieving over the loss of ‘upward only’ lifestyles and the David Copperfield-style disappearing act of our net worths and savings. Even more frustrating is that we all feel that it was not ‘our’ screw up. We were lured into a false sense of security and aspirations of wealth accumulation by the cosmos. It just happened!!! We were all hit by a pandemic economic plague, not by sniper fire, so we are left without a rationale, reason or an understandable cause. We search the airwaves and the internet for solace and comfort. Why did it happen? Who is to blame? Is there a magic wand that might bring us back to life? We have an unquenchable thirst for information to help answer these questions. However, the ability to cheer up and get on with life does not rest in the plethora of governmental programs enacted to ease our economic pain, or in the well-intentioned commentary of pundits on the history and future of financial engineering and statistics. The solution rests in first, immediately adapting and surviving so that we are around in order to, secondly, understand what information is important and how that information is harvested.

The first objective is most easily achieved by understanding the Kubler-Ross book On Death and Dying, which outlines 5 stages of grieving:

Denial
Anger
Bargaining
Depression
Acceptance

I will save you 200 pages of reading by concluding that recovery is the amount of time required to go from Stage 1, denial, to Stage 5, acceptance. What we have learned after 30 years of investing and cyclical roller coasters is bypass 2 to 4 and go immediately to 5. In short: Get over it and get on with it!”

-Legendary real estate investor Tom Barrack, in his latest “Chairman’s Corner” column on the Colony Capital website.

When Good Deeds Get Punished

A few years ago while reading a local paper, I came across the story of a high school kid from a Chicago suburb who was arrested for removing snow from his neighbor’s property. From what I recall, the young man went outside to shovel after a sizeable snowfall here in the Chicagoland area. As he was getting a good workout from the task, the high school wrestler decided to push on and shovel snow from sidewalks, walkways, and driveways down his street as well.

I remember thinking to myself. Wow. I want this kid living next door to me.

Apparently, not everyone thinks like me, and one of his neighbors decided to call the cops on the teenager upon seeing him shoveling her property.

Sure, the young man should have asked the owner’s permission before he came onto her property, but was it really necessary to call the police department on him? Come on!

Just last night, I came across yet one more example of how some good deeds are being “rewarded” these days. From the Associated Press:

An Ohio man arrested for mowing unkempt grass at a public park said he just wanted to make his city look nice. John Hamilton said he took control of the situation because the grass in Sandusky’s Central Park was about a foot high. According to a police report, a witness said Hamilton was blowing grass onto the sidewalk and shredding trash in the park that had not been picked up.

Police said they arrested 48-year-old Hamilton after he refused to stop mowing and charged him with obstructing official business and disorderly conduct.

City Manager Matt Kline called the arrest unfortunate and said he understands Hamilton’s frustration. Kline said budget cuts have left Sandusky understaffed for seasonal maintenance work.

And from The Sandusky Register yesterday:

According to the police report, he was seen mowing the grass by Penny Randleman, a forestry department employee.

The employee said Hamilton was blowing grass onto the sidewalk and shredding trash in the park that had not been picked up prior to mowing, so she called the police.

Upon their arrival, Hamilton told police officers “he is sick of seeing the grass so long in parks, so he is fixing the problem” Police arrested him after he continued to mow when they told him to stop. Officers cited “liability reasons” in the police report.

What “liability reasons?” From Dave Nethers of Cleveland’s FOX 8 News yesterday:

The acting police chief tells Fox 8 News that the park was littered with trash and Hamilton was mowing over all of it. City Manager Mat Kline says there were bottles and other debris that were being thrown by his mower into the street. Kline also says there are employee issues with unions that are supposed to cut the grass that had to be considered.

Nethers also noted:

A police report obtained by Fox 8 shows one of the officers measured the grass, which was in fact more than a foot high. City crews finished cutting the grass there later on Thursday.

Hamilton was arraigned in municipal court early Friday.

Sources:

“Ohio man arrested for mowing unkempt grass at park”
Associated Press, May 29, 2009

“Arrested for mowing city grass”
The Sandusky Register, May 29, 2009

“Sandusky Man Arrested for Mowing Grass”
FOX 8, May 29, 2009

Quotes For The Week

For 11 years, I had the privilege of working as a civil servant within the various levels of American government. It was an experience that was eye-opening, to say the least.

During that time, I met some fine public servants, whose work on behalf of their fellow citizens was of the highest caliber.

Regrettably, I also crossed paths with some of the most unprofessional individuals I ever had the displeasure of meeting and having to work with. In their minds, government existed to serve them. So much so, I often wondered why these men and women ever ran for office or entered civil service in the first place.

On that note, here are some quotes that all of us should do well to remember:

“The government is us; we are the government, you and I”

-Theodore D. Roosevelt (26th U.S. President. 1858-1919)

“Let us never forget that government is ourselves and not an alien power over us. The ultimate rulers of our democracy are not a President and senators and congressmen and government officials, but the voters of this country.”

-Franklin Delano Roosevelt (32nd U.S. President. 1882-1945)

Americans See First Tax Hike On April Fool’s Day

Kind of ironic that on this April Fool’s Day, Americans are witnessing the first tax increase of the Obama administration. Brad Schiller, an economics professor at the University of Nevada-Reno, wrote in the Wall Street Journal today:

“I can make a firm pledge . . . no family making less than $250,000 a year will see any form of tax increase.” Remember that? It was Barack Obama, campaigning to become president last Sept. 12 in Dover, N.H.

Indeed, he promised repeatedly that 95% of American families would get a tax cut. So it’s especially fitting that he chose April Fools Day to implement his first tax increase — which will fall mostly on individuals and families who do not make anywhere near $250,000 per year.

Early in February, the president signed a law to triple the federal excise tax on cigarettes — which will jump from 39 cents per pack to $1.01 today. His administration projects this tax hike will bring in at least $38 billion over the next five years.

If you don’t smoke, maybe you don’t care. Maybe you even think a higher “sin tax” is a good thing. But health issues aren’t the only concern here. There are also questions of fairness, federalism, macroeconomic impact, and crime.

The fairness issue is particularly troubling. According to the Centers for Disease Control and Prevention, only one in five Americans smokes, so the excise targets a minority — and over half of all smokers are low income, and one of four are officially classified as poor.

Mr. Obama prefers to tout his tax cuts for low-income households. But his “stimulative” Make Work Pay tax cut gets dribbled out at $8-$10 a week. A pack-a-day smoker will pay half of that back in higher cigarette taxes. Smokers getting welfare, unemployment or disability checks instead of paychecks won’t get as much in tax cuts, but they will still pay the whole cigarette tax increase. Anyone concerned about widening income inequality should have second thoughts about this distribution of the tax burden.

We should also note how this tax increase affects state finances. State governments rely on their own cigarette excise taxes for hefty revenue streams. In 2008, according to the National Tax Foundation, state governments took in $15.4 billion in cigarette taxes. Hard-hit Michigan, Pennsylvania, and California each took in over $1 billion; New York and Texas took in $1.5 billion each.

Higher taxes discourage cigarette sales. Nobel economist Gary Becker pegs the long-run price elasticity of demand for cigarettes at 0.8 — i.e., a 10% increase in price causes an 8% decline in unit sales. The Obama tax hike translates into a 13.3% increase in the average pack price. That implies a 10.6% decline in unit sales — which the National Tax Foundation has calculated adds up to a $1 billion overall revenue loss for hard-pressed states.

Because Southern states have low tax rates (most less than 40 cents per pack), the federal tax hike raises their cigarette prices by a larger percentage and thus cuts deeper into their unit sales. New York, by contrast, has the highest state taxes ($2.75 a pack) and prices, so it gets hit less in percentage terms. The Tax Foundation estimates a 12.6% revenue loss for South Carolina this coming fiscal year, and a 6.7% loss for New York.

None of this is good for the economy. Consumers and state governments are already having a tough time making ends meet. Burdening them with a new $38 billion tax and a $1 billion cut in revenues isn’t going to help create jobs. Estimates by the National Association of Tobacco Outlets of the job losses in cigarette manufacturing and distribution alone exceed 100,000.

Smugglers and counterfeiters won’t lose their jobs, though. Both the General Accounting Office (GAO) and the Alcohol, Tobacco, and Firearms (ATF) agency have concluded that the multibillion-dollar cigarette-smuggling business grows with every excise tax increase. The ATF and GAO also believe that cigarette-smuggling is a form of cash laundering and profits for both organized crime and terrorist organizations.

Clearly, we were fools to believe that if we weren’t wealthy, Mr. Obama wasn’t going to raise our taxes. We’ll be even bigger fools if we acquiesce to further tax increases of this kind.

Don’t hold your breath, professor. I predict we’ll see a lot more taxes and fees being implemented by all levels of government down the line. And I suspect the powers-that-be aren’t done taxing tobacco yet either.

Smoke one for the Gipper?

Source:

“Obama’s Poor Tax”
Brad Schiller
Wall Street Journal, April 1, 2009

Rise Of The Superheroes

Continuing on the topic of crime today, if it seems to you that criminal activity is escalating in your neighborhood or town, there’s a pretty good chance that’s actually the case. Reuters’ Ross Colvin noted back on January 27:

Police chiefs in the United States say the economic downturn is fueling a rise in crime and warn that cuts to their budgets could handcuff their efforts to tackle it, according to a report on Tuesday.

Of 233 police agencies surveyed by the Police Executive Research Forum, a Washington-based law enforcement organization, 44 percent reported a rise in certain types of crime they attributed to the United States’ worst economic and financial crisis in decades.

The survey, conducted in late December and early January, also found that 63 percent of the departments were making plans for overall cuts in their funding for the next fiscal year…

The PERF said on average the agencies who participated in the survey were planning a 6.24 percent cut in their overall funding, while many had already reduced funding in many areas.

Enter the superheroes.

That’s right— they exist. Kind of. From John Harlow of The Sunday Times (UK) back on December 28, 2008:

For Mr Invisible, the first and last blow to his burgeoning career as a superhero was an unexpected punch that flattened his nose.

“After months of designing my costume, getting my street moves just right, it was my first week out as a Real Life Superhero – and probably my last. This tiny, tiny girl did not like me trying to calm down her screaming boyfriend. She blindsided me, I’m still bruised. It’s dangerous out there,” said the deflated would-be crime fighter last week.

Mr Invisible is cheered that at least his grey one-piece “invisibility suit” works, proven when a drunk urinated on him in an alley. But he is weary of lurking in dark, down-town Los Angeles after dark.

The 29-year-old graduate is “refocusing” on his day job as an insurance salesman. His farewell appearance will be at a New Year’s Eve party.

Mr Invisible may be living up to his name but his spray-painted “supershoes” will quickly be filled by another Real Life Superhero eager to save America from itself. There are, according to the recently launched World Superhero Registry, more than 200 men and a few women who are willing to dress up as comic book heroes and patrol the urban streets in search of, if not super-villains, then pickpockets and bullies.

They may look wacky, but the superhero community was born in the embers of the 9/11 terrorist attacks when ordinary people wanted to do something short of enlisting. They were boosted by a glut of Hollywood superhero movies.

In recent weeks, prompted by heady buzz words such as “active citizenry” during the Barack Obama campaign, the pace of enrolment has speeded up. Up to 20 new “Reals”, as they call themselves, have materialised in the past month.

The Real rules are simple. They must stand for unambiguous and unsponsored good. They must create their own Spandex and rubber costumes without infringing Marvel or DC Comics copyrights, but match them with exotic names – Green Scorpion in Arizona, Terrifica in New York, Mr Xtreme in San Diego and Mr Silent in Indianapolis.

They must shun guns or knives to avoid being arrested as vigilantes, even if their nemeses may be armed. Their best weapon is not muscle but the internet – an essential tool in their war on crime is a homepage stating the message of doom for super-villains.

This is more than bravado, say veterans. It may help as evidence after a Real has been arrested or even committed to a mental health hospital for evaluation. That happened to Mr Invisible’s equally short-lived predecessor, Black Owl, who last summer had to be sprung from a psychiatric ward by his teenage daughter who told doctors: “Dad forgot for a moment, when faced with police, just for a moment, that he did not have real superpowers. He could not just fly away.”

Funny as that last tale may be, I’m not about to mock these people. After all, they’re doing more than most Americans to make our communities safer places to live.

Along wth a little bit of flair, of course…

Source: Capital City Super Squad

Sources:

“U.S. recession fuels crime rise, police chiefs say”
Ross Colvin
Reuters, January 27, 2009

“Amateur crimefighters are surging in the US”
John Harlow
The Sunday Times (UK), December 28, 2008

Get Ready For Higher Taxes

I know, I know. One of President Obama’s campaign promises was a tax cut for Main Street. Tax credits of up to $500 per person or $1,000 per family, and the elimination of income tax for seniors making less than $50,000 a year, from what I recall.

Well guess what? There’s a pretty good argument to be made that your taxes are going up anyway. Howard Gold wrote on the MarketWatch website last week:

Sometime in the next couple of years, you are likely to pay higher taxes — and it’s not for the reasons you think.

Sure, the Bush tax cuts will almost certainly expire in 2011, virtually guaranteeing higher marginal tax rates for top earners. House Speaker Nancy Pelosi, D-Calif., is pushing to end them even sooner. And tax rates on capital gains and dividends may move up as well.

But President-elect Obama, faced with the biggest financial and economic crisis since the Great Depression, has pledged to go slowly on tax hikes, which he fears would take consumer demand off life support and put it in the morgue. He’s made some tax cuts a cornerstone of an economic-stimulus package Congress will debate in coming weeks.

No, the real danger to your wallets comes much closer to home — from cash-strapped states and municipalities, which are in their worst shape fiscally in decades.

Though they may resist at first, governors and state legislatures could be forced to raise income taxes, sales taxes, state university tuitions, transit fees and whatever else will help pay the freight.

That may mute the impact of any federal stimulus package, because if one government takes while another gives, you’ll still have less money to spend at the mall.

If your mall hasn’t gone under, right? Just how bad are finances at the state and local government level? Gold pointed out:

The situation is dire. The recession and the housing crash have landed body blows to local governments, severely reducing tax revenues. The National Governors Association projects fiscal 2009 budget shortfalls may reach $60 billion, and fiscal 2010 deficits could top $80 billion.

The Center on Budget and Policy Priorities, a Washington, D.C.-based liberal think tank that focuses on state and local finances, says: “Combined budget gaps for the remainder of the fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion.”

FREE PUBLICATIONS for Finance Professionals

Sounds pretty serious. And as a result, local bodies of government are starting to slash spending. But will it be enough to prevent higher taxes? From the MarketWatch piece:

California has imposed furloughs on state workers and may cut funding of K-12 education by $5 billion amid a mind-boggling, $42 billion budget gap by the middle of next year. Teachers in South Carolina face salary freezes. Nevada has increased premiums on children’s health care. Florida, with an elderly population that tops 4 million, is considering cuts in Medicaid reimbursements to nursing homes.

And where budget cuts come, tax hikes are sure to follow.

Truth is, the hole is just too big to fill by budget cuts alone without decimating services on which the voting public has come to rely. President Obama’s proposed stimulus package can provide some relief, but it won’t cover the whole shortfall.

Further, if the economy remains as weak for as long as expected, tax revenue could slip even further while states face greater demand for services from the newly unemployed and the working poor.

Plus, state pension funds have racked up an estimated $865 billion in losses because of the stock market crash, and they could require taxpayer funding.

Looks like some areas of the country are further along in the process already. Gold noted:

So, it’s no surprise we’ve seen some tax hikes bandied about already. California Gov. Arnold Schwarzenegger has proposed boosting and expanding the state’s sales tax for three years, while Democratic legislators there want to impose a “temporary” income-tax surcharge of 2.5%.

In New York, Gov. David Paterson has requested 137 new tax and fee increases, including extending state sales taxes and imposing a new tax on iTunes songs and non-diet sodas. So, if you want to have a Coke while you’re downloading the latest from Jay-Z or Radiohead, it’ll cost you.

And the New York Times’ Kate Galbraith reported last week:

Several states are considering the rare step of raising gasoline taxes to help fill growing budget gaps and potholed roads.

Politicians in California, Massachusetts, New Hampshire, Illinois and Oregon, for example, are introducing bills that would raise gasoline taxes for road and bridge repair, as state legislatures around the country begin their new sessions…

State lawmakers clearly see an opportunity to push through a tax. The recent sharp drop in gasoline prices, to less than half of last summer’s high of more than $4 a gallon, means that drivers may be less hesitant to pay slightly higher prices.

I wonder how long it will take before higher state income taxes come into play?

Hold onto your wallets, folks.

Sources:

“The tax time bomb is ticking”
Howard Gold
MarketWatch, January 15, 2009

“Some States in a Pinch May Raise Gasoline Tax”
Kate Galbraith
New York Times, January 16, 2009

New York City, Los Angeles Looking At Huge Job Losses

The U.S. Conference of Mayors released a metropolitan unemployment forecast this past weekend. And the outlook sucks, to be blunt. From the Associated Press yesterday:

Only five metropolitan areas in the U.S. will escape job losses this year, according to a forecast released Saturday by the U.S. Conference of Mayors.

New York is expected to take the biggest hit as thousands of jobs are lost on Wall Street. Big financial firms are slashing workers as they cope with bad debt. Other companies have gone under, like Lehman Brothers Holdings Inc., which filed for bankruptcy in September.

The New York area is expected to lose 181,000 jobs in 2009, the report said. Consulting company IHS Global Insight produced the report for the group.

The Los Angeles area is expected to see 164,000 lost jobs, in part because of the huge drop in home prices that has punctured the California economy.

After New York and Los Angeles, the Miami area is expected to see the greatest loss, with a decline of 85,000 jobs. Chicago and the surrounding area are next, with losses projected at 80,000.

Unemployment is expected to top 10 percent in 70 areas, from already hard-hit cities like Detroit and Cleveland to places that had until recently been prosperous like the Riverside-San Bernardino area in California. Other big cities like Denver and St. Louis are expected to see unemployment rise above 9 percent.

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On Saturday, Reuters’ Lisa Lambert wrote:

Global Insight, an international economic forecasting firm that put together the outlook for the mayors’ group, projected that by the end of 2009 one-third of all metropolitan areas in the country would have experienced no overall job growth for the first decade of the century…

Metropolitan areas are home to 90 percent of the country’s wage income, according to the firm.

I really hope Global Insight is wrong on this one… and not because I’m based out of the Windy City.

You can access the report (in .pdf format) here.

Sources:

“Report: New York to lead US cities in job losses”
Associated Press, January 18, 2009

“Almost all U.S. cities to lose jobs in 2009: forecast”
Lisa Lambert
Reuters, January 17, 2009

Shopping Center Blues

Are your local government and business leaders pinning their hopes (and your tax dollars) on a new shopping center anytime soon? Good luck. CNN Money’s Parija Kavilanz wrote earlier today:

As the recession leaves more retail casualties in its wake, rising store bankruptcies and mall closures could have devastating economic consequences.

As more stores exit malls, vacancies in regional malls could rise past 7% by year-end, a level not hit since the first quarter of 2001, according to real estate research firm Reis.

Major cities across America will be affected, said David Birnbrey, Chairman and co-CEO of Atlanta-based The Shopping Center Group, a retail real estate services firm…

Many municipalities are heavily dependent on retailers for the tax revenue and jobs that they generate…

The impact will be felt on local police service, schools and roads, said Birnbrey.

The CNN Money senior writer painted a gloomy picture for retail in the near term. Kavilanz wrote:

The International Council of Shopping Centers (ICSC), in its most recent forecast, expects that 6,100 chain stores will shutter this year, the highest level since 2004 “as the U.S. recession continues to take its toll on the retail sector and its job market.”

In 2009, the ICSC estimates that store closings could exceed 3,100 in just the first half of the year. However, the number of potential closings rises exponentially when the firm takes into account both public and private sector businesses.

The ICSC projects that about 148,000 retail establishments – both public and private – will go out of business this year and another 73,000 stores will close in the first half of 2009.

And what is the outlook for retail employment in this environment? Kavilanz added:

The ICSC projects that about 625,000 retail jobs will be eliminated this year “with little change in the pace for early 2009.”

Source:

“The dead mall problem”
Parija Kavilanz
CNN Money, December 17, 2008