Local

July 08, 2009

Murtha to hire Dewey Cheatum & Howe

By Fester:

Rep. Murtha will be hiring the prestigious law firm of Dewey Cheatum & Howe as some of his associates are being very friendly with the Feds investigating an alleged kickback scheme for earnmarks.  Via the Pittsburgh Post Gazette:

Federal prosecutors filed corruption charges yesterday against a onetime defense contractor who has ties to both U.S. Rep. John Murtha and a suburban Johnstown defense contractor currently under criminal investigation.

Richard S. Ianieri, former president and CEO of Coherent Systems International Corp., was accused of accepting $200,000 in kickbacks. He is charged through a criminal information and is expected to plead guilty.

July 06, 2009

The tax revolt of 2010 (cont...)

By Fester:

People are in pain right now. Twenty million homeowners are underwater, a systemic debt reduction effort is underway, the employment picture now just sucks instead of horrendously sucking, any productivity and compensation gains are getting eated up by health care premiums and energy prices have bounced back up after an easy first half of the year.

In November 2007, I thought one of the dynamics that we would be seeing in 2009 and 2010 would be a property tax revolt. Property owners in bubblicious areas would see their homes go underwater as values and the regional economy that was built on bubble building deflated, and these property owners would be in pain and in a political position to do something about some of their pain:

People who are stuck with mortgages and houses that they can not sell, refinance or service will be looking for help. They will be looking for refinancing deals, special breaks, holds on foreclosures, delays on credit reporting, and most significantly at the local level, assistance on minimizing the quasi-fixed costs. That means support for more heating and energy assistance, lobbying for lower insurance limits for flooding and hurricanes in disaster prone areas with the hope of either dodging the bullets, or shifting those costs to someone, somewhere else, and most importantly, constant and downwardly revising re-assessments without concurrent increases in millage rates...

Homes are the primary asset for most people, and right now homes are under systemic threat as a symptom of a greater problem. People want to make that pain go away without the costs of fixing the greater problems, and engaging in a local government financial death spiral and micro-local education arbitage seems like a decent short term fix, so we'll see a full scale tax revolt in 2010 or no later than 2012 as the last round of housing bubble junk Option ARM mortgage resets will be hitting in 2010/2011 --- what we are seeing now is just the tip of the iceberg

We have seen refinancing deals, special breaks, and holds on foreclosures as federal policy. These efforts have probably brought marginal relief but they have not addressed the systemic problem of way too much debt and not enough carrying capacity. Local governments are just starting to get slammed as the combination of a decent first half of FY 2009 on revenue collection and short term reserves have made the FY-09 budgets austere but not dramatically shrunked. Those reserves are no longer in place for most states as they face massive budget deficits. Balancing those state budgets will often mean school and local jurisdictions that rely on state funds will see a significant hole in their budget that can either be filled by new taxes or spending cuts.

Local taxing authorities will want to maintain assessed values from the bubble peak years and fight like hell against appeals for lower, closer to market values. Politically it is easier to have a low millage rate on an artificially high base than to have a high millage rate on an accurate base. The New York Times reports on this fight:

Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets....

The pain at the state level is trickling down to county and local governments. To compensate, about 10 percent of large counties are raising the tax rates associated with home values to minimize the revenue loss, the county association said....

The revenue losses are coming as homeowners prod towns for new assessments, and as municipalities conduct regular revaluations of their real estate. While declining residential values weigh heaviest on many governments, the value of commercial real estate is also sliding as businesses shut down and move out of storefronts or shopping malls....

Mr. Kramer, the assessor in Contra Costa County, said homeowners started swamping his office with requests for new assessments in December. As many as 500 people would call in one day. His voice mail message now begins: “If you’re calling to request an informal review of your property value due to the declining real estate market.”

Contra Costa has now reduced the recorded value of more than a third of the 350,000 privately owned properties in the county....

I still think that there is a significant political opening for demagogues who call for tax cuts uber alles as that will seem to alleviate some of the pain for a little while and when people are getting beaten down, a breather and a break is a very attractive promise.

June 18, 2009

G-20 Economic Displacement

By Fester
At the end of May, I was skeptical that the G-20 would provide a significant net boost of regional economic activity in Pittsburgh because the combination of a massive security bubble, low local value-add to the goods and services that will be consumed by the summit goers and significant displacement would occur:

So the combination of typical activity displacement, opportunity cost and massive security disruptions will make most probable estimates of economic impact be far less than the hopes of local officials...

Hotel reservations will be gobbled up by summit attendees but they will be displacing normal business travellers as well as any other potential conventions that could have been occurring at the same time. ...

Downtown will be massively disrupted.... It is likely that many downtown businesses will not be open during the summit. Normal spending will not occur, and it may be replaced to some degree by summit spending


The Post-Gazette is reporting that these disruptions are already occurring as they tell the story of a disrupted wedding and throw in a couple of other useful hooks as well:

plans for a Sept. 25 wedding at the Sheraton Station Square wilted faster than a fragile boutonniere.

While the hotel staff at first told the Bethel Park couple that the gathering here of 20 world leaders on Thursday and Friday, Sept. 24 and 25,would not affect their Big Day, the two learned the following week that their guests would be subject to background checks and security checkpoints....

Andrew Sliben, director of sales and marketing at the Sheraton Station Square, said his staff explained to the couple that the G-20 summit might interfere with their wedding, adding that it could take an hour to get up and down in an elevator because of security....

So the wedding was moved to another Friday at the hotel, Aug. 21...

While the same florist and photographer were still available on the new date, about 30 of their 150 intended guests were not -- including key relatives...


The G-20 summit in this case has cost the Pittsburgh regional economy between twenty and thirty out of town visitors with attendant hotel fees, car rentals, meals out, as well as some number of airline seats that will no longer be bought, as well degrading some utility from the prospective bride and groom. And this is not just the story of a single wedding getting displaced. The PG article notes that a medium size meeting for American Eagle, a locally headquartered company, will most likely take place in another city due to the G-20 instead of Pittsburgh.

Furthermore if Station Square is within the security perimeter, the disruption to Downtown will be far more significant than I had previously projected as I had projected a small perimeter of only a few hundred yards/a few blocks around the Convention Center would be heavily secured while it looks like a much larger region will be in the security zone.

Specter is in trouble... (again)

By Fester:

My great fear of not having Senator Specter's career circling the toilet to write about when I have nothing else to write will not be realized.

Rasmussen reports a race where the fundamental dynamics are working against Senator Specter in the Democratic Primary:

1* Suppose the Democratic Primary for the 2010 United States Senate were held today. Would you vote for Arlen Specter or Joe Sestak?
51% Specter
32% Sestak
4% Some other candidate
13% Not sure

Sure Senator Specter is up by 19 in this poll, which is a significant improvement from being down by half a dozen in the last polling on the Republican Primary before he flipped caucuses, but this is a weak position compared to Joe Lieberman in 2006. The Pennsylvania Democratic Primary is about ten months out. Two months out, Ned Lamont was trailing Senator Lieberman by fifteen points in the Democratic Primary that Mr. Lamont went on to win. Several weeks out, Rep. Toomey was trailing by fifteen points in the 2004 Republican Primary. He closed the gap by thirteen points by primary day. A well funded and well run campaign by a competent candidate who only has to make up two points per month against an incumbent with 100% name ID and little passionate support is in very good shape.

June 04, 2009

Police Pensions and the G-20

By Fester:

I wonder if the G-20 summit and its attendant ring of security will be the light breeze that destroys the fragment of imagination that is the Pittsburgh Police pension system?  Right now, the police pension is massively underfunded, Chris Briem estimates it might be at 20% to 22% of its obligations.  There is a chance the G-20 summit will significantly add to obligations without a concurrent increase in pension assets.

Police pensions for officers in or near the retirement zone are defined benefit pensions.  Officers get a benefit defined by a formula (for as long as the money lasts).  The formula is some variant of either years of service times a base level, or in the case of Pittsburgh, a percentage of either the best couple of years of inflation adjusted earnings OR a percentage of the average earnings over the last couple of years of active service.  I have not recently looked at the contract so I forget what the percentage is applied to.  In either case, the incentive is for an officer nearing retirement to rack up as many overtime hours as possible.  This increases the base upon which the multiplier is applied against.

The G-20 summit will be an all-hands security operation for local law enforcement.  That security requirement will extend on either side of the summit, into the weekend and from the work-week, as leaders begin to fly into town earlier in the week, and protests continue through the weekend.  The protest groups in the city are starting to organize for a sustained week of activity. 

It is plausible that plenty of senior cops who are nearing retirement age and who are already in their 'inflation' window will be working an unexpected 100 hour or 120 hour week.  The city and other local government units will be reimbursed for security expenses by the federal government.  However the current city reimbursement rate for police is insufficient to cover expected pension obligations as it is.  The combination of a significant increase in overtime for the entire near-retirement cohort as well as insufficient incoming assets to cover those obligations could push the funding ratio of the police pension fund into the teens.   

May 26, 2009

"Apparent?"

By BJ Bjornson

From the BBC:

Canada politician eats seal heart

Canada's governor general, Michaelle Jean, has helped to butcher and eat a seal in an apparent act of solidarity with hunters.

Ms Jean used a traditional Inuit knife to help gut the animal then ate a slice of raw heart.


Trust me, unless you've been raised on the stuff, you don't chaw down on raw seal for anything short of real solidarity.  I've been up here for better than twenty years and I still have trouble with the taste, even if it is a lot better for me than cattle meat.  (Granted I tend to be a picky eater, but near as I can tell, the aversion is widespread amongst those not raised on the east coast diet.)  I do love the fur though, particularly for mitts.  The recent furor is over the European Union's decision to ban the import of Canadian seal products because of the commercial hunting methods, which happen to be far less distasteful than most farming practices they turn a blind eye to.  Cattle, pigs, and chickens just aren't as cute as seal pups after all.

Inuit exemption or not, the EU ban is already having a negative effect on traditional hunters in the region, which is why GG Jean is up here trying to bring some attention to the issue.   Just for the love of dog, don't be comparing her to Sarah Palin.

May 19, 2009

The High Price of Poverty

By BJ Bjornson

A pretty good article in the Washington Post regarding the high cost of being poor. They leave out the real biggie of health care, which costs those without insurance far more than what those with insurance pay for the same services, but they do a decent job of noting a lot of the day-to-day costs that come from not having enough money.

Like food: You don't have a car to get to a supermarket, much less to Costco or Trader Joe's, where the middle class goes to save money. You don't have three hours to take the bus. So you buy groceries at the corner store, where a gallon of milk costs an extra dollar.

A loaf of bread there costs you $2.99 for white. For wheat, it's $3.79. The clerk behind the counter tells you the gallon of leaking milk in the bottom of the back cooler is $4.99. She holds up four fingers to clarify. The milk is beneath the shelf that holds beef bologna for $3.79. A pound of butter sells for $4.49. In the back of the store are fruits and vegetables. The green peppers are shriveled, the bananas are more brown than yellow, the oranges are picked over.

(At a Safeway on Bradley Boulevard in Bethesda, the wheat bread costs $1.19, and white bread is on sale for $1. A gallon of milk costs $3.49 -- $2.99 if you buy two gallons. A pound of butter is $2.49. Beef bologna is on sale, two packages for $5.)


This sounds not too dissimilar to the situation where I live, right down to the crappy fruit and veggies, where the entire territory can be considered a poor neighbourhood, with a small population and isolation conspiring to ensure costs are very high.  There are two major ways to beat these high prices up here. The first is a federal program called food mail, which subsidizes the rate the airlines charge for freight on perishable, nutritious foods.  But in order to use the program on an individual basis, you basically need a credit card or another banking arrangement not available in many communities or to those in without steady income.   Northern retailers also use the program, but a recent report noted that they aren’t terribly good at passing their savings on to the consumers.  (Weirdly, the same report recommended cutting the individual orders from the program, as apparently the best way to convince northern retailers to pass on the savings is to further eliminate any competition they face. One really has to wonder at the Conservative view of the free market sometimes.)

The other method is to bring up bulk shipments of non-perishable goods on the summer sealift, particularly those not covered by the food mail program.  (A true must if you have pets. I usually save enough on the dog food alone to pay for the shipping of the entire order, and my understanding is the costing of cat litter is even worse.)  The issue here is that you’re facing a large up-front cost to save money over the rest of the year.   Even some people who aren’t poor have difficulties with that one.

The end result of both methods is that you need money to save money.

The laundromat example they use is another I recognize.  I used to hate even living in an apartment without in-house laundry.  Fortunately the only time the machines where I was staying broke down, I was only a couple of blocks from the laundromat, but hiking over with the dirty laundry was most definitely a pain, not helped by the fact that my only previous experience with said service was during my short stint working the oil patch, where I was advised to take my grease and oil-soaked clothes down to the laundromat to clean rather than muck up the home machines.

But it is the last example of Marie Nicholas that really gets me.  Rather than the caricature of the lazy and shiftless poor, here is someone working their ass off to get ahead and finding themselves in even worse shape than had she just stayed at home.  It is the mark of the poor design of many of the programs that target the poor that there is a pretty significant swath of income levels where the cut-offs for those programs are actually a disincentive to going out and getting a job. (This also makes the whole living wage argument a lot more relevant as well, don't you think?)  Add that to the above problem of paying more for things when you don't have the money to save money, and you get a really good idea how poverty can become chronic.

May 02, 2009

Assessment food fight

By Fester:

The very big news for the very small community of Western Pennsylvania financial wonk bloggers (we meet monthly in the phone booth at the Monroeville Mall by the Dairy Queen --- plenty of space for new faces) this week is the Pennsylvania Supreme Court affirmed Judge Wettick's order that Allegheny County can not use the 2002 base year system for property taxes as that system is fraught with errors and violates the uniform taxation clause of the Pennsylvania Constitution. 

"[T]he Allegheny County scheme, which permits a single base year assessment to be used indefinitely, has resulted in significant disparities in the ratio of assessed value to current actual value in Allegheny County. The disparity is most often to the disadvantage of owners of properties in lower-value neighborhoods where property values often appreciate at a lower rate than in higher-value neighborhoods, if they appreciate at all."

The base year property assessment system was not declared unconstitutional as the Courts are kicking it to the Legislature to figure out how to fix things.  My bet is two fold:  First Harrisburg will attempt to duck the issue for as long as they can and then some more, secondly, whatever mangled compromise that no one claims credit for passes, it will be declared unconstitutional. 

So what does this mean.  On the very practical level, it means that Judge Wettick will be ordering a re-assessment of all property in the county.  New values will be calculated and new tax bills will be prepared.  And then the fights begin.

This is political dynamite as property owners (who are high propensity voters) do not like to see their assessed values increase as that means their taxes will increase without any other actions taken.  Pissed off voters make for very scared elected officials.  County Executive Dan Onorato is one of those very scared elected officials, especially as he is strongly rumored to be ready to run for the Democratic nomination for governor.  His angle would be the only candidate from Western Pennsylvania and as a pragmatic executive who did not raise taxes on old people during his time in office.  He has vowed to fight the re-assessment and delay it for as long as possible.

On the more pragmatic level, a reassessment within the next eighteen months blows a massive hole in the county budget.  The best guesstimates say a complete re-assessment will cost the county more than $30 million dollars in general revenue funds.  The county is effectively broke right now and it can not afford that type of payment without dramatic cuts in general revenue expenditures such as the police and courts.  The drink tax is a potential source of revenue if the County can get the Legislature to give it permission to raise the drink tax back to 10% from the current 7% and devote the increment to re-assessment.  If that proposal was approved,two years of incremental drink tax revenue would be sufficient to pay for the reassessment.  I would wager that the courts would allow for tri-annual or quadrennial re-assessments as constitutionally valid, so a smaller tax increment may be possible. 

The biggest story that has yet to be talked about is the impact that this ruling has on other counties in the region.  Most of Pennsylvania uses the base year system.  The surrounding suburban and exurban counties use the base year system.  Most of the counties have assessed no more than once in my lifetime.  This gives them a massive advantage on giving new development low assessment values instead of something approximating fair market value assessments, so it is an implicit subsidy from older. pre-assessment built-up properties to new properties.  Requiring regular re-assessment removes this implicit subsidy which should marginally help Allegheny County attract new retail and light office developments near the county lines. 

Be ready for one hell of a food fight on this issue over the next three years....

April 27, 2009

Base locks (local and national)

By Fester

Steve Benen at Political Animal is looking at the GOP's problem at a national level. It is the same problem that Senator Specter faces. Right now the GOP is a base only party and that base is locked into its positions without a willingness to take an 80% ally or solution:

These rank-and-file Republicans that make up the party's base have a straightforward agenda -- make the party as right-wing as they can on issues such as immigration, taxes, and marriage equality. "I've never seen the grass-roots quite as motivated, concerned and angry," said Steve Scheffler, the head of the Iowa Christian Alliance and the state's RNC committeeman.

It's not that there are no voices trying to pull the party in the other direction -- the Main Street Republican Partnership, the Republican Majority for Choice, and the Log Cabin Republicans exist -- it's just that those voices are hopeless, powerless, and ignored.

The result is obvious: a Republican Party that stays exactly as it is now. Same coalitions, same priorities, same ideology, same agenda.



The GOP's elected leadership is dependent on their base to re-elect them without primary challengers. That base ise nationally growing smaller. The Washington Post reports that its most recent poll shows Republican partisan identification at 21%. This is the lowest number in twenty six years for the Republican Party. It may be a bit of statistical nosie but it lines up with other generic ballot test and partisan identification questions. The GOP is losing its non-movement conservative base; they are losing people who will vote Republican 80% of the time, and then third party or Optimus Prime more often then they vote Democratic.

And right now that base is locked into its ideological comfort zone despite the fact that those positions are repugnant and repellent to quite a few potentially persuadable voters. Until there is either a massive screw-up that the public attributes to Democrats or systemic change in the base's priorities (purity versus relevance), the GOP is screwed. For a while, I'll enjoy the schradenfreude, but it is not healthy over the long run of a political system to have the opposition party be run by the ridiculous.

April 23, 2009

Four-footed Seal Fossil Found

By BJ Bjornson

A rather impressive discovery of the "missing-link" variety.

It may look like a cross between a seal and an otter; but an Arctic fossil could, scientists say, hold the secret of seal evolution in its feet.

A skeleton unearthed in northern Canada shows a creature with feet that were probably webbed, but were not flippers.
Writing in the journal Nature, scientists suggest the 23 million-year-old proto-seal would have walked on land and swum in fresh water.

It is the oldest seal ancestor found so far and has been named Puijila darwini.

Pujilla is the term for "young sea mammal" in the Inuktitut language, spoken by Inuit groups in Devon Island where the fossil was found.

And the reference to Charles Darwin honours the famous biologist's contention that land mammals would naturally move into the marine environment via a fresh water stage, just as pinnipeds - seals, sealions and walruses - have apparently done.

. . .

Darwin forecast the transition from land to sea via fresh water in his seminal work On the Origin of Species, published 150 years ago this year.

"A strictly terrestrial animal, by occasionally hunting for food in shallow water, then in streams or lakes, might at last be converted in an animal so thoroughly aquatic as to brave the open ocean," he wrote.


The really cool part of the story is that the discovery is in large part due to someone running out of gas on the tundra. The CBC story does note that Pujila probably isn't the direct ancestor of today's seals, but rather an offshoot of a common ancestor. It still provides proof of concept for Darwin's theory, which is a nice touch this year. I just hope nobody finds themselves trying to explain this to Rep. Joe Barton, as amusingly painful as that may turn out to be.

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"Whoever can speak, speaking now to the whole nation, becomes a power, a branch of government, with inalienable weight in law-making, in all acts of authority. It matters not what rank he has, what revenues or garnitures. The requisite thing is, that he have a tongue which others will listen to; this and nothing more is requisite. The nation is governed by all that has tongue in the nation: Democracy is virtually there."
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~Thomas Carlyle, On Heroes and Hero Worship, 1841