By Will Oremus
Daily News Staff Writer
Posted: 11/26/2009 10:00:59 PM PST
Updated: 11/26/2009 10:01:00 PM PST
Palo Alto overspent its budget by $4.8 million last year, but didn't realize it in part because of a miscalculation, city officials disclosed this week.
"It looks like the budget office did not effectively track (employee) salary savings for last year," City Manager James Keene said. "They didn't track and count those savings accurately."
The mistake accounts for $2.1 million of the $4.8 million in overruns for the fiscal year that ended June 30, according to a city staff report published Wednesday. The rest of the overruns came from higher-than-expected benefit and workers' compensation claims and overtime pay for police and firefighters.
In the report, city officials propose to make up the gap by putting off spending on technology, from new computers in city offices to electronic identification chips at local libraries. They said they will also make new accounting rules to prevent future miscalculations.
Meanwhile, an estimated $10 million deficit for the current fiscal year has soared past $15 million due to a sharp drop in tax revenue, according to the same report. That could force a slew of other budget cuts and gimmicks, from 35 frozen staff positions to borrowing $2.7 million that had been set aside to plan for a new police building.
The city may also have to dip into its reserves for more than $1 million, bringing the total closer to the minimum 15 percent required by city ordinance. If the deficits continue in future years
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— which they probably will, Keene said — the city will either have to make deeper cuts or change the ordinance requiring a 15 percent reserve.
This news comes after the city council thought it had balanced the budget for both last year and this year through a series of cuts, including employee benefit cuts imposed over the objections of the city's service workers union.
"I've never in my entire career, going back to the late '70s, early '80s, seen a period in local government where you've got a four-year stretch of downward-trending revenues and increasing expenditures," Keene said. "It's going to mean that local governments in general, and Palo Alto in particular, are going to have to confront making more difficult service and funding decisions than we've all ever seen before."
The state's policy of borrowing money from local governments isn't helping, he noted. While the state is facing its own huge budget deficit, its "triple flip" borrowing plan makes it harder for local finance officials to make accurate forecasts, he said.
One upshot of the grim financial news is that the city will likely face another round of tough bargaining sessions with employee unions next year. Those include SEIU Local 521, which is still smarting from having cuts imposed without a contract agreement, and the firefighters union, which earlier this year declined Keene's request to delay big raises to save the city money.
The city remains close to a deal that will see the police officers union put off its scheduled raises by a year, Keene said.
The city council's finance committee will discuss the budget report at a meeting on Tuesday, Dec. 1 at 7 p.m. in the council conference room at Palo Alto City Hall, 250 Hamilton Ave.
Thursday, December 17, 2009
Lotterman: State revenue crunch makes Vikings stadium subsidy seem less of a priority
By Edward Lotterman
Updated: 12/10/2009 09:15:37 AM CST
A artists rendering of a proposed new Vikings stadium in downtown Minneapolis.
It's time for a national re-examination of government funding of sports arenas. Minnesota has deep budget problems. On a per-capita basis, the coming shortfalls may be as bad as California's, even though the total sum in that state is much larger. Virtually all cities in the metro area are cutting back on services, even things like snowplowing, because of fiscal constraints.
Yet many still call for government funding for a new football stadium. Vikings owner Zygi Wilf uses shaming phrases to describe elected officials who oppose spending several hundreds of millions of public money for a stadium. If they don't snap to attention, it is feared, Wilf will take his team somewhere else — probably Los Angeles. That is not an idle threat.
If this seems like an old tape being replayed, it is. The issue has been around for decades, and it will be as long as sports leagues and team owners succeed at playing cities and states off against each other. When times were prosperous, the issue was less pressing. But the economy is sour right now and likely will be for an extended period just as structural changes like baby boom retirements and increasing health costs cause enormous ongoing budget problems. So we need to deal with the issue.
Free-market purists argue that professional sports games are no different from selling onions or renting DVDs. Let free markets operate, and make team owners construct their own stadiums as in the old days. They will do so in areas where it is most profitable. Areas that lack enough fans to pay for a stadium or support a team will have to do without.
This ignores the fact that the structure of U.S. professional sports, with one monopolistic league — the NFL, NBA, NHL, etc. — in each sport is not a perfectly competitive market. The leagues' monopoly power to limit the total number of teams allows them to put state and local governments over a barrel and extract subsidies.
Local leaders are willing to go along because there are genuine spillover benefits to having professional sports teams. Their presence is an amenity like a good park system, good schools and good hospitals. Moreover, states with individual income taxes benefit from capturing some of the monopoly profits embodied in players' mega-salaries.
But these spillover benefits are finite. And unfortunately, the true cost of taxpayer-built stadiums is not well understood. A stadium costs taxpayers something like $5 million per game played there. Only die-hard fans see that as money well spent.
There are few good options. We can try to get a national law to limit state and municipal funding of stadiums. This will be opposed by the leagues, by team owners and by municipalities that dream of a new team. It would benefit cities that have teams right now to the detriment of cities without teams.
We can refuse to play the game and tell Wilf that if he is not willing to play in the Metrodome or build his own stadium, he is welcome to leave. In that case, he probably will. I'd be happy with that, but some of my friends and neighbors would be bereft without the Vikes.
Or we can give in to extortion and build yet another facility, using whatever accounting tricks, "public-private partnerships" and dedicated sales taxes we can to disguise the true amount transferred from the public to Wilf. If we do that at the same time we are cutting education funding, laying off police officers and dropping thousands from basic health insurance, it will certainly say something about our values.
St. Paul economist and writer Edward Lotterman can be reached at elotterman@pioneerpress.com.
Updated: 12/10/2009 09:15:37 AM CST
A artists rendering of a proposed new Vikings stadium in downtown Minneapolis.
It's time for a national re-examination of government funding of sports arenas. Minnesota has deep budget problems. On a per-capita basis, the coming shortfalls may be as bad as California's, even though the total sum in that state is much larger. Virtually all cities in the metro area are cutting back on services, even things like snowplowing, because of fiscal constraints.
Yet many still call for government funding for a new football stadium. Vikings owner Zygi Wilf uses shaming phrases to describe elected officials who oppose spending several hundreds of millions of public money for a stadium. If they don't snap to attention, it is feared, Wilf will take his team somewhere else — probably Los Angeles. That is not an idle threat.
If this seems like an old tape being replayed, it is. The issue has been around for decades, and it will be as long as sports leagues and team owners succeed at playing cities and states off against each other. When times were prosperous, the issue was less pressing. But the economy is sour right now and likely will be for an extended period just as structural changes like baby boom retirements and increasing health costs cause enormous ongoing budget problems. So we need to deal with the issue.
Free-market purists argue that professional sports games are no different from selling onions or renting DVDs. Let free markets operate, and make team owners construct their own stadiums as in the old days. They will do so in areas where it is most profitable. Areas that lack enough fans to pay for a stadium or support a team will have to do without.
This ignores the fact that the structure of U.S. professional sports, with one monopolistic league — the NFL, NBA, NHL, etc. — in each sport is not a perfectly competitive market. The leagues' monopoly power to limit the total number of teams allows them to put state and local governments over a barrel and extract subsidies.
Local leaders are willing to go along because there are genuine spillover benefits to having professional sports teams. Their presence is an amenity like a good park system, good schools and good hospitals. Moreover, states with individual income taxes benefit from capturing some of the monopoly profits embodied in players' mega-salaries.
But these spillover benefits are finite. And unfortunately, the true cost of taxpayer-built stadiums is not well understood. A stadium costs taxpayers something like $5 million per game played there. Only die-hard fans see that as money well spent.
There are few good options. We can try to get a national law to limit state and municipal funding of stadiums. This will be opposed by the leagues, by team owners and by municipalities that dream of a new team. It would benefit cities that have teams right now to the detriment of cities without teams.
We can refuse to play the game and tell Wilf that if he is not willing to play in the Metrodome or build his own stadium, he is welcome to leave. In that case, he probably will. I'd be happy with that, but some of my friends and neighbors would be bereft without the Vikes.
Or we can give in to extortion and build yet another facility, using whatever accounting tricks, "public-private partnerships" and dedicated sales taxes we can to disguise the true amount transferred from the public to Wilf. If we do that at the same time we are cutting education funding, laying off police officers and dropping thousands from basic health insurance, it will certainly say something about our values.
St. Paul economist and writer Edward Lotterman can be reached at elotterman@pioneerpress.com.
Once again, California balances budget with 'tricks'
By Daniel B. Wood Staff writer / July 24, 2009
Los Angeles
In dealing with California’s $26 billion budget deficit, Gov. Arnold Schwarzenegger is fond of saying he doesn’t want to just “kick the can down the road” – that is, deal with the problem later or borrow money from the next generation.
But several economists watching the budget wrangling in the Sacramento statehouse say lawmakers are choosing accounting moves – some say “gimmicks” – to provide the appearance of an acceptable budget, without really addressing the structural problems underneath.
“Some of these are accepted practice in other states, others are blatant tricks that have become common in California,” says Philip Romero, dean of business and economics at California State University, Los Angeles.
The California Senate on Friday approved a plan to close the state’s budget deficit. The 80-member Assembly was still arguing Friday afternoon over some measures in the 31-bill package, which combines deep spending cuts, borrowing from local governments, and some time-tested accounting maneuvers.
One “trick” is to bump payroll expenses by one day, from June 30 to July 1, to make them a fiscal year 2011 expense, when revenues might be flowing better. “This is a paper savings of $1.2 billion which in my mind is clearly a gimmick… How are you going to make up for that unless you do it every year?” asks Jessica Levinson, director of political reform for the Center for Governmental Studies.
Another move is to withhold more taxes sooner from state paychecks – even if the money must be paid back, it generates a temporary increase in cash flow.
Yet another device, says Mr. Romero, is to base budgetary calculus on “extremely dubious assumptions.” The current budget plan, passed by the state Senate Friday, approved $100 million in revenue from oil leases to be sold in the Santa Barbara Channel.
“It is more than dubious to assume that environmentalists will allow that policy which would reverse 40 years of no-drilling there,” says Romero, who was chief economist for Gov. Pete Wilson and hired in the early 1990s to restart the California economy, then suffering from the largest state recession since the Great Depression.
Many of these maneuvers pin their hopes on the economy recovering and tax revenue flowing again, although many economists don’t expect a recovery any time soon.
State lawmakers used the same tactic when they closed the $46 billion budget gap in February, he says. They did so by assuming that state voters would pass several initiatives in May that would provide up to $6 billion in revenue.
“It didn’t matter at the time that it was unknown whether voters would approve these,” says Romero. “At that point, the legislators were at wits end and needed to sign a ‘get out of town’ budget.” The measures were defeated by 80-to-20 margins.
One reason for resorting to these accounting “tricks” is the state’s inability to borrow – exacerbated by the lowest bond ratings in state history. That inability is also why cities and local governments are resisting the budget’s other big revenue solution – borrowing from municipal, redevelopment, and transit funds.
“We're going to have another budget problem as early as December or January,” said Esmael Adibi, an economist with Chapman University, to "The Bond Buyer." “The solutions offered here are not really addressing the structural problem.”
Los Angeles
In dealing with California’s $26 billion budget deficit, Gov. Arnold Schwarzenegger is fond of saying he doesn’t want to just “kick the can down the road” – that is, deal with the problem later or borrow money from the next generation.
But several economists watching the budget wrangling in the Sacramento statehouse say lawmakers are choosing accounting moves – some say “gimmicks” – to provide the appearance of an acceptable budget, without really addressing the structural problems underneath.
“Some of these are accepted practice in other states, others are blatant tricks that have become common in California,” says Philip Romero, dean of business and economics at California State University, Los Angeles.
The California Senate on Friday approved a plan to close the state’s budget deficit. The 80-member Assembly was still arguing Friday afternoon over some measures in the 31-bill package, which combines deep spending cuts, borrowing from local governments, and some time-tested accounting maneuvers.
One “trick” is to bump payroll expenses by one day, from June 30 to July 1, to make them a fiscal year 2011 expense, when revenues might be flowing better. “This is a paper savings of $1.2 billion which in my mind is clearly a gimmick… How are you going to make up for that unless you do it every year?” asks Jessica Levinson, director of political reform for the Center for Governmental Studies.
Another move is to withhold more taxes sooner from state paychecks – even if the money must be paid back, it generates a temporary increase in cash flow.
Yet another device, says Mr. Romero, is to base budgetary calculus on “extremely dubious assumptions.” The current budget plan, passed by the state Senate Friday, approved $100 million in revenue from oil leases to be sold in the Santa Barbara Channel.
“It is more than dubious to assume that environmentalists will allow that policy which would reverse 40 years of no-drilling there,” says Romero, who was chief economist for Gov. Pete Wilson and hired in the early 1990s to restart the California economy, then suffering from the largest state recession since the Great Depression.
Many of these maneuvers pin their hopes on the economy recovering and tax revenue flowing again, although many economists don’t expect a recovery any time soon.
State lawmakers used the same tactic when they closed the $46 billion budget gap in February, he says. They did so by assuming that state voters would pass several initiatives in May that would provide up to $6 billion in revenue.
“It didn’t matter at the time that it was unknown whether voters would approve these,” says Romero. “At that point, the legislators were at wits end and needed to sign a ‘get out of town’ budget.” The measures were defeated by 80-to-20 margins.
One reason for resorting to these accounting “tricks” is the state’s inability to borrow – exacerbated by the lowest bond ratings in state history. That inability is also why cities and local governments are resisting the budget’s other big revenue solution – borrowing from municipal, redevelopment, and transit funds.
“We're going to have another budget problem as early as December or January,” said Esmael Adibi, an economist with Chapman University, to "The Bond Buyer." “The solutions offered here are not really addressing the structural problem.”
California Bonds Fail on Advice Bill Lockyer Couldn’t Refuse
By Michael B. Marois
Dec. 17 (Bloomberg) -- For California Treasurer Bill Lockyer, the offer from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. was too good to refuse.
If California was willing to forgo competitive bidding for a $4.5 billion bond offering, the banks promised more orders from individuals and a lower bill to the taxpayers. The firms insisted that by negotiating with them, the state would benefit from its special relationship with the Wall Street troika and wind up with what two underwriters called a salutary “buzz” to boost demand for the debt.
When the October offering failed to sell as planned, California was forced to accept 8 percent less money than it needed and to pay as much as $123 million more in interest than the banks said was sufficient for the market. And the threesome made $12.4 million on the deal, contributing to record bonuses in the securities industry a year after getting a total of $80 billion in a federal bailout.
“Just because someone earns a big wad of money doesn’t mean that they can do what they say they can do,” said Marilyn Cohen, who watched the sale unfold from Los Angeles as president of Envision Capital Management, which oversees $250 million in bonds for individuals. “And shame on the state if they were drinking that Kool-Aid.”
The California sale helped send the municipal-bond market to its worst month in a year. It ended a rally that had pushed borrowing costs for cities and states to a 42-year low, as measured by the Bond Buyer’s index of 20-year general obligation bonds.
Familiarity Over Price
California, with a bigger economy than Russia’s, seeks bids for everything from building roads and schools to buying portable toilets and fire extinguishers. When the state with the worst credit rating sells municipal bonds, it usually chooses bankers through a negotiation process that lets experience and familiarity trump price.
For the October deal, state Treasurer Lockyer picked the world’s most profitable investment bank and the nation’s two biggest bond underwriters, which together have sold $31 billion of debt for California since he took office in 2007. The U.S. municipal bond market’s largest borrower has sold tax-backed debt nine times this year, for a total of about $37 billion, more than four times second-place New York’s total, data compiled by Bloomberg show.
‘Conflicts’
The state’s former public finance director, Juan Fernandez, worked on the sale as JPMorgan’s executive director in San Francisco. Goldman’s bankers included Kathleen Brown, a former state treasurer. She’s the daughter of one past governor, Pat Brown, and the sister of another, current Attorney General Jerry Brown.
“The whole business is full of conflicts, and that’s a gigantic problem,” Cohen said.
Goldman, JPMorgan and Citigroup declined to comment, as did Fernandez. Kathleen Brown didn’t respond to phone and e-mail messages.
The $2.8 trillion market for state and local government bonds used to be more competitive. In 1970, 73 percent of municipal offerings were sold at auctions, the General Accounting Office said in a 1983 report. In such deals, the bank that offers the lowest interest cost via the highest bid, or price, buys the securities and tries to sell them for more.
This year, 16 percent of $368 billion in new fixed-rate issues were sold that way, Bloomberg data show. The rest were negotiated offerings, in which underwriters are selected before the sale based on assurances they’ll deliver cheaper rates by lining up investors.
‘Bad Week’
When the New York banks’ promises to California proved unreliable, Lockyer, 68, not his underwriters, tried to explain the miscalculation to taxpayers.
“It turned into a bad week for bonds,” the treasurer said in an Oct. 9 interview. “This seemed to be a very hard week with some headwinds for issuers.”
The underwriters left Lockyer “standing on the platform alone,” said Christopher Taylor, former executive director of the Municipal Securities Rulemaking Board in Alexandria, Virginia, a self-regulatory organization. Taxpayers “probably didn’t get their money’s worth because California only got someone taking orders,” he said. “They didn’t get somebody out there that had any really strong incentive to sell.”
Banks don’t want “any unsold bonds hanging around,” so they prefer to help states set rates and see if the bonds sell, as happens in negotiated deals, Taylor said. If demand falls short, the dealers say, “Listen, we can’t sell this” without higher yields, he said. “It’s a wonderful world that the dealer community has created -- just fees, no risk.”
Saving a ‘Boatload’
Lockyer has no regrets about using a no-bid process because an auction would have led to even higher interest costs, said Tom Dresslar, his spokesman. While auctions may be effective for smaller issues, multibillion-dollar sales of both taxable and tax-exempt bonds like this one require advance marketing that banks will deliver only if they are hired beforehand, he said.
“We have saved taxpayers a boatload of money through negotiated bond sales,” Dresslar said, citing an analysis in the winter 2008 issue of the Municipal Finance Journal that was funded by the Securities Industry and Financial Markets Association.
The authors concluded that competitive sales have “no general advantage” and criticized past studies that found interest costs on negotiated sales were as much as 70 basis points, or 0.7 percentage point, higher.
True Interest Cost
California’s estimate of the so-called true interest cost on the tax-exempt portion of the October sale indicates it spent more the last time it sold competitively.
Including fees, the $1.3 billion negotiated sale cost 33 basis points less than the national average for 20-year general- obligation bonds at the time, excluding a risk premium of almost 1 percentage point the state paid after approaching insolvency, Bloomberg data show. When the state sold $1.1 billion in tax- free securities at auction on Feb. 14, 2007, the cost was 13 basis points over the average.
“Even though they couldn’t sell as much as they wanted, and even though they sold at yields at higher levels than what they wanted,” the deal “went well from California’s point of view,” said Gary Pollack, who oversees $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “They were able to borrow $4.1 billion at relatively historically low yields.”
After the sale, several states scaled back borrowing plans as municipal bond yields climbed the most in two weeks since December.
‘Litmus Test’
Maryland sold $200 million of debt on Oct. 21, about 25 percent of what it had wanted to offer, Bloomberg data show. Minnesota issued $576 million of bonds, or 64 percent of its planned total. Hawaii and Washington took similar steps after rising yields erased projected savings from refinancing.
“California’s large offering proved to be a litmus test for investors’ tolerance for new supply at relatively low yields,” said Chris Holmes, a fixed-income strategist at JPMorgan in New York, in a note to clients after the sale. It “set a tepid tone for subsequent large offerings by other issuers,” he said.
Municipal yields rose almost half a percentage point from their 3.94 percent low following the sale and were a quarter- point above that mark as of Dec. 10, the weekly Bond Buyer index shows.
Unemployment
California is strapped for cash amid the worst global recession since World War II. The most-populous state’s personal income tax revenue fell 33.4 percent in the second quarter, compared with a 27.5 percent national average, according to the Nelson A. Rockefeller Institute of Government in Albany, New York. Unemployment in California was 12.5 percent in October, the worst since at least 1976. Nationwide joblessness was 10.2 percent in October, a 26-year high, and 10 percent in November.
The October sale was California’s first long-term debt offering since Republican Governor Arnold Schwarzenegger and the Democratic Legislature settled a three-month impasse over how to erase a $24 billion deficit in July.
The stalemate, which put the state on the brink of insolvency for the second time this year, ended with the approval of an $85 billion budget. California has cut spending by $32 billion, raised taxes by $12.5 billion and papered over $6 billion in shortages with borrowing and what Pacific Investment Management Co.’s Bill Gross has called “accounting tricks that couldn’t fool a grade-schooler.”
Imminent Downgrade
The July compromise prompted credit-rating companies to remove California from lists of borrowers facing imminent downgrades. The state’s general obligation bonds are graded BBB by Fitch Ratings, Baa1 by Moody’s Investors Service and A by Standard & Poor’s.
Public Resources Advisory Group, a financial consultant for the state since 1991, recommended a negotiated sale instead of a competitive one, a memo obtained through California’s Public Records Act shows. In past auctions, winning underwriters couldn’t line up enough buyers ahead of time, so “they bear more risk and the price they are willing to pay the state for the bonds will likely be lower,” increasing taxpayers’ interest costs, the New York firm wrote.
If the consultant “had not recommended a negotiated sale, had they recommended a competitive sale to get the best deal for taxpayers, that’s what we would have done,” said Dresslar, the treasurer’s spokesman.
Taylor, the former MSRB official, said financial advisers rarely recommend auctions.
‘Blackballed’
“The FA has no incentive to irritate the underwriter community by pushing the risk on them,” he said. “Any FA that pushes a competitive sale is going to get ‘blackballed.’”
Lockyer’s staff advised him on Aug. 24 to hire Goldman and JPMorgan to manage a $3.2 billion mix of taxable debt, including federally subsidized Build America Bonds, and Citigroup to lead the simultaneous sale $1.3 billion of tax-exempt securities.
Goldman, which accepted $10 billion in bailout money last year and repaid it eight months later, produced a $3.44 billion profit in the second quarter, a record for a U.S. investment bank. Its shares have almost doubled this year. JPMorgan, which has repaid its $25 billion bailout, is this year’s top U.S. bond underwriter, according to Bloomberg data that excludes municipal issues. Its shares are up 31 percent.
JPMorgan’s investment bank and Goldman will set aside an unprecedented $32.1 billion for compensation this year, according to an estimate by David Trone, a Macquarie Securities Group analyst. That will produce record bonuses totaling $19.3 billion, based on New York pay consultant Options Group’s estimate that year-end awards usually account for 60 percent of compensation costs.
‘Lowest Borrowing Costs’
Second-ranked underwriter Citigroup is repaying $20 billion of its $45 billion bailout to escape U.S. Treasury Department- imposed pay restrictions as the government prepares to sell its remaining stake in the company to recover the rest. The shares are down 49 percent this year.
The three banks were told by California in Sept. 21 engagement letters that they were expected to “perform at the highest level to assist this office in achieving a successful sale at the lowest borrowing costs.” The sales syndicate also included Bank of America Corp.’s Merrill Lynch & Co., Siebert Brandford Shank & Co., Wells Fargo & Co. and about 30 other banks and brokers that made $13.4 million on the deal, for a total of $25.8 million in fees.
Before selling the long-term bonds, Lockyer shored up the state’s finances by borrowing $8.8 billion through one-year cash-flow notes, a routine move used to pay expenses while awaiting anticipated tax revenue.
Record Demand
That Sept. 23 offering, run by JPMorgan, attracted twice as much demand from individual investors as from mutual funds and other institutions. So-called retail orders totaling $6.64 billion, about 75 percent of the sale, was the most ever for a municipal issue, Lockyer’s office said, citing underwriters’ data.
California paid as much as 1.5 percent on the debt, more than twice New Jersey’s cost for similar securities in August. The yield was in the low range of what had been advertised beforehand, and individual demand allowed the state to turn away $430 million in orders from institutions.
“Investors clearly know a good deal when they see one, and California taxpayers will benefit as a result,” Lockyer said after the sale.
That same day, Citigroup told Lockyer that the state would get a “vigorous pre-sale marketing effort” to “the broadest possible audience of potential investors” and “greater retail participation” for October’s long-term debt sale if he agreed to a negotiated deal, according to a letter from Chris Mukai, a director for the bank in Los Angeles.
‘Very Little Incentive’
When banks have to bid for bonds, they “have very little incentive” to find investors beforehand because they don’t know if they’ll “have the bonds to sell,” Mukai said. Underwriters in negotiated offerings “market the state’s transaction for at least a week in advance,” his letter said. “As a result of these efforts, Citi and the other underwriters will acquire accurate information as to the depth of buying interest, which is invaluable in the pricing of the issue and in securing the lowest possible borrowing costs.”
Mukai reminded Lockyer that Citigroup had helped JPMorgan sell September’s short-term debt to individuals, “saving the state millions of dollars,” and had implemented California’s “Enhanced Retail Marketing Plan” in June 2007.
“We believe all the retail marketing efforts in these past few negotiated sales have achieved tremendous success for the state,” leading to more than $8.1 billion in general-obligation bond sales to individuals, or 46 percent of new issues, Mukai wrote.
‘Buzz’ Memo
Goldman and JPMorgan offered Lockyer similar assurances in a joint Oct. 6 memo outlining how they would help draft an offering document, design a sales presentation and perform “pre-marketing and price-discovery activities” to help structure the issue at the cheapest yield.
“This process will generate a ‘buzz’ around the transaction, ultimately generating maximum investor participation in the sale, which we believe will translate into lower borrowing costs,” wrote Tim Romer, a Goldman managing director in Los Angeles, and JPMorgan’s Fernandez, who had been the state’s finance director from 2002 to 2006.
The two firms “strongly believe that proceeding with a negotiated sale” of the bonds “will result in a more cost- effective sale than a competitively bid transaction,” they wrote.
Lowest Since ‘67
Investors, including Envision Capital’s Cohen, predicted the October sale would go well, given the popularity of Build America Bonds, securities created by President Barack Obama’s economic stimulus package, which covers 35 percent of their interest costs.
As of Oct. 1, state and local governments had sold at least $36.9 billion of the debt, about 14 percent of year-to-date borrowing. The bonds attracted buyers to the municipal market and reduced tax-exempt supply, helping drive down average yields to 3.94 percent, the lowest since 1967, from 4.92 percent on April 2, the Bond Buyer’s index shows.
“There seems to be a voracious appetite for the BABs bonds no matter who the issuer is,” Cohen said in an interview the day before the sale. As for the $1.3 billion tax-exempt portion, “they should have a relatively easy time selling it because it’s not so huge,” she said.
Increasing Supply
In the weeks before the bond sale, Lockyer’s staff watched yields slide as state and local authorities kept issuing more debt to lock in low rates. Borrowers were benefiting from the recovery following the financial meltdown that had spurred a rush to the perceived safety of Treasuries after the collapse of Lehman Brothers Holdings Inc. a year earlier.
About $270 billion in new municipal bonds had been issued from Jan. 1 to early October, 16 percent more than at that point in 2008. California’s 2009 tax-backed bond and note sales totaled $23.4 billion by Sept. 30, up from $4.6 billion and $10.6 billion in the first three quarters of 2008 and 2007, respectively.
Demand might wane “because we are at lows in terms of absolute yield levels,” said Peter Hayes, who oversees $106 billion in municipal bonds for BlackRock Inc., on Oct. 6.
California officials said they knew the bonds would be a harder sell than the September notes. To keep debt payments low, Lockyer loaded the tax-exempt portion with maturities longer than what individual investors typically buy.
‘We Got Spoiled’
“We are so used to getting 50 percent, 60-plus percent, 80 percent retail,” said Dresslar, the Lockyer spokesman, referring to how much individuals bought of an offering. “We got spoiled,” he said. “We were fully cognizant that this was not going to be a walk in the park.”
Deputy Treasurer Katie Carroll and Public Finance Director Blake Fowler flew to New York to monitor the sale, accompanied by Dresslar.
Fowler, 43, has spent most of his career in municipal bonds. A year ago, Carroll, 53, gave a talk on “ways to maximize demand” from individuals to the National Association of State Treasurers. Then in Fowler’s job, Carroll emphasized the value of advertising on radio and giving retail buyers a two-day “priority period” for placing orders.
Day One
The bankers went into the sale telling investors California would pay tax-exempt yields from 2.87 percent for the 2015 maturity to 4.63 percent for bonds due in 2029. The 20-year was 23 basis points lower than indicated at the time by a Bloomberg index designed to gauge the fair value of similar bonds. The estimate for yields on taxable securities available to individuals ranged from 3.5 percent to 3.75 percent.
On Oct. 6, the first day of retail sales, the three California officials sat in a conference room in Barclays Capital’s New York headquarters on Seventh Avenue. As they talked to credit-rating companies about another bond issue, they monitored orders for the current one, which the London-based bank helped sell.
They phoned in updates to Lockyer. With Municipal Market Advisors data showing yields already starting to rise, individuals bought 28 percent of the tax-exempt bonds and 25 percent of the taxable debt, less than half the demand seen on the first day of the September sale.
The underwriters “told us before the deal not to expect the level of retail that we had been getting,” Dresslar said. By the time of the sale, they painted an even gloomier picture of concessions that investors wanted “to get the deal done at least close to the size” California wanted, he said. “Some of the numbers that were coming out were startling.”
Day Two
The following morning, the three officials and their financial advisers were ushered into a conference room in Goldman’s 85 Broad St. headquarters. Fueled by coffee, pastries and sandwiches over a 10-hour day, they decided to raise yields by as much as 4 basis points on tax-exempt bonds to attract more orders.
The market’s response “may reflect some anxieties with the retail investors in buying anything that’s longer” than one- year notes, Lockyer said on Bloomberg Television that day. “It may be pricing. It’s hard to tell.”
By the end of the second day, retail buyers had placed orders for $427.7 million, or 33 percent, of the $1.31 billion tax-exempt portion and $77.5 million of the $250 million of taxable bonds available to individuals. All together, retail sales amounted to 11 percent of the $4.5 billion the state wanted to borrow.
Day Three
The next morning, the California officials moved to Citigroup’s offices to finish the offering with sales to pension plans, hedge funds, nonprofit groups and other professional buyers.
“We’re depending on the institutional investors to make this work,” Lockyer had said on TV.
In a room off the trading floor, the officials decided to cut the sale to $4.14 billion -- $1.31 billion in tax-exempts, $1.75 billion in Build America Bonds and $1.07 billion in other taxable bonds.
They also increased some yields again as institutions grew more wary of the state’s finances. Tax-exempt rates ended up 8 to 37 basis points higher than estimated, including the 20-year, which was boosted to 5 percent from 4.66 percent. Debt due in 2025 went to 4.69 percent from 4.42 percent. Four taxable issues, including the Build America Bonds, cost the state 12.5 to 25 basis points more than the low end of estimated ranges. Two priced at the high end, and two were above it.
Extra Interest
The yields, averaging almost a quarter-point more than estimated, will result in California paying $8.1 million a year more in interest than it would have at the lower rates. If the bonds all are outstanding at maturity, the extra interest would total $123.5 million, data compiled by Bloomberg show.
“It’s justified for Cal to be paying a little higher price in order to sell its debt, given its credit issues,” Deutsche Bank’s Pollack said in an interview that day. “Their budget was not as tight and strong as I think a lot of people would have liked it to be.”
The sale’s biggest maturity, $1.75 billion of 30-year Build America Bonds, was priced to yield 7.23 percent, 95 basis points more than comparable corporate bonds and 325 basis points more than Treasuries with similar maturities. With the subsidy, California’s net cost is about 4.7 percent. Ten-year Burlington Northern Santa Fe Corp. bonds with the same Moody’s ratings as California traded at 122 basis points more than Treasuries that same week.
‘Best Shot’
“They just got a little aggressive in where they wanted to price it,” said David Blair, a Pimco analyst in Newport Beach, California, the day after the sale. “Most people still recognize that there’s budget deficits the state is trying to deal with,” said Blair, whose company oversees $20 billion in municipal bonds.
Lockyer’s spokesman portrayed the sale as a success.
“To say that the market conditions were not as favorable as they had been doesn’t mean that you go in conceding hundreds of millions of dollars; you go in and give it your best shot because there’s a lot at stake,” Dresslar said.
“Given the cold market and the inhospitable attitude of investors, to pull off a $4.1 billion deal, we believe, is an impressive achievement,” Dresslar said. “We would have been derelict in our duty to taxpayers if we sold a bond of this size through a competitive sale. We would have gotten hosed.”
Highest Rate
By Oct. 15, 20-year yields had risen 0.38 percentage point to 4.32 percent from its previous low, the biggest two-week increase in 10 months, the Bond Buyer index shows. California has since sold $7.3 billion in debt. On Oct. 22, it paid 8.361 percent on $250 million of lower-rated Build America Bonds -- then the highest coupon rate for a $100 million-plus issue since the program began.
A week later, the state was able to cut estimated yields as much as 0.15 percentage point on $3.5 billion in better-rated tax-exempt bonds when individuals placed orders for almost 72 percent, including debt due in 2022 that cost the state 4.85 percent, up from 4.47 percent in the early October sale.
California sold $908 million in Build America Bonds on Nov. 3, pricing the 30-year securities to yield 7.26 percent, or 3 percentage points more than Treasuries, down from October’s 3.25-point spread.
Lockyer has said the state may issue more debt before the fiscal year ends on June 30 without specifying how much.
“Everybody thinks there’s still an appetite for California bonds,” the treasurer said in the Oct. 9 interview. “If the market is inhospitable, we won’t go,” he said. “We’ll just have to wait and see how the feelings are when we get ready to think about it again.”
Tom Dalpiaz, who helps Advisors Asset Management oversee $3.3 billion in Melville, New York, said California and its bankers had flooded a glutted municipal bond market with too much supply.
The sale gave investors “sticker-shock syndrome,” said Dalpiaz. “It was a very large bond issue to digest.”
Dec. 17 (Bloomberg) -- For California Treasurer Bill Lockyer, the offer from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. was too good to refuse.
If California was willing to forgo competitive bidding for a $4.5 billion bond offering, the banks promised more orders from individuals and a lower bill to the taxpayers. The firms insisted that by negotiating with them, the state would benefit from its special relationship with the Wall Street troika and wind up with what two underwriters called a salutary “buzz” to boost demand for the debt.
When the October offering failed to sell as planned, California was forced to accept 8 percent less money than it needed and to pay as much as $123 million more in interest than the banks said was sufficient for the market. And the threesome made $12.4 million on the deal, contributing to record bonuses in the securities industry a year after getting a total of $80 billion in a federal bailout.
“Just because someone earns a big wad of money doesn’t mean that they can do what they say they can do,” said Marilyn Cohen, who watched the sale unfold from Los Angeles as president of Envision Capital Management, which oversees $250 million in bonds for individuals. “And shame on the state if they were drinking that Kool-Aid.”
The California sale helped send the municipal-bond market to its worst month in a year. It ended a rally that had pushed borrowing costs for cities and states to a 42-year low, as measured by the Bond Buyer’s index of 20-year general obligation bonds.
Familiarity Over Price
California, with a bigger economy than Russia’s, seeks bids for everything from building roads and schools to buying portable toilets and fire extinguishers. When the state with the worst credit rating sells municipal bonds, it usually chooses bankers through a negotiation process that lets experience and familiarity trump price.
For the October deal, state Treasurer Lockyer picked the world’s most profitable investment bank and the nation’s two biggest bond underwriters, which together have sold $31 billion of debt for California since he took office in 2007. The U.S. municipal bond market’s largest borrower has sold tax-backed debt nine times this year, for a total of about $37 billion, more than four times second-place New York’s total, data compiled by Bloomberg show.
‘Conflicts’
The state’s former public finance director, Juan Fernandez, worked on the sale as JPMorgan’s executive director in San Francisco. Goldman’s bankers included Kathleen Brown, a former state treasurer. She’s the daughter of one past governor, Pat Brown, and the sister of another, current Attorney General Jerry Brown.
“The whole business is full of conflicts, and that’s a gigantic problem,” Cohen said.
Goldman, JPMorgan and Citigroup declined to comment, as did Fernandez. Kathleen Brown didn’t respond to phone and e-mail messages.
The $2.8 trillion market for state and local government bonds used to be more competitive. In 1970, 73 percent of municipal offerings were sold at auctions, the General Accounting Office said in a 1983 report. In such deals, the bank that offers the lowest interest cost via the highest bid, or price, buys the securities and tries to sell them for more.
This year, 16 percent of $368 billion in new fixed-rate issues were sold that way, Bloomberg data show. The rest were negotiated offerings, in which underwriters are selected before the sale based on assurances they’ll deliver cheaper rates by lining up investors.
‘Bad Week’
When the New York banks’ promises to California proved unreliable, Lockyer, 68, not his underwriters, tried to explain the miscalculation to taxpayers.
“It turned into a bad week for bonds,” the treasurer said in an Oct. 9 interview. “This seemed to be a very hard week with some headwinds for issuers.”
The underwriters left Lockyer “standing on the platform alone,” said Christopher Taylor, former executive director of the Municipal Securities Rulemaking Board in Alexandria, Virginia, a self-regulatory organization. Taxpayers “probably didn’t get their money’s worth because California only got someone taking orders,” he said. “They didn’t get somebody out there that had any really strong incentive to sell.”
Banks don’t want “any unsold bonds hanging around,” so they prefer to help states set rates and see if the bonds sell, as happens in negotiated deals, Taylor said. If demand falls short, the dealers say, “Listen, we can’t sell this” without higher yields, he said. “It’s a wonderful world that the dealer community has created -- just fees, no risk.”
Saving a ‘Boatload’
Lockyer has no regrets about using a no-bid process because an auction would have led to even higher interest costs, said Tom Dresslar, his spokesman. While auctions may be effective for smaller issues, multibillion-dollar sales of both taxable and tax-exempt bonds like this one require advance marketing that banks will deliver only if they are hired beforehand, he said.
“We have saved taxpayers a boatload of money through negotiated bond sales,” Dresslar said, citing an analysis in the winter 2008 issue of the Municipal Finance Journal that was funded by the Securities Industry and Financial Markets Association.
The authors concluded that competitive sales have “no general advantage” and criticized past studies that found interest costs on negotiated sales were as much as 70 basis points, or 0.7 percentage point, higher.
True Interest Cost
California’s estimate of the so-called true interest cost on the tax-exempt portion of the October sale indicates it spent more the last time it sold competitively.
Including fees, the $1.3 billion negotiated sale cost 33 basis points less than the national average for 20-year general- obligation bonds at the time, excluding a risk premium of almost 1 percentage point the state paid after approaching insolvency, Bloomberg data show. When the state sold $1.1 billion in tax- free securities at auction on Feb. 14, 2007, the cost was 13 basis points over the average.
“Even though they couldn’t sell as much as they wanted, and even though they sold at yields at higher levels than what they wanted,” the deal “went well from California’s point of view,” said Gary Pollack, who oversees $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “They were able to borrow $4.1 billion at relatively historically low yields.”
After the sale, several states scaled back borrowing plans as municipal bond yields climbed the most in two weeks since December.
‘Litmus Test’
Maryland sold $200 million of debt on Oct. 21, about 25 percent of what it had wanted to offer, Bloomberg data show. Minnesota issued $576 million of bonds, or 64 percent of its planned total. Hawaii and Washington took similar steps after rising yields erased projected savings from refinancing.
“California’s large offering proved to be a litmus test for investors’ tolerance for new supply at relatively low yields,” said Chris Holmes, a fixed-income strategist at JPMorgan in New York, in a note to clients after the sale. It “set a tepid tone for subsequent large offerings by other issuers,” he said.
Municipal yields rose almost half a percentage point from their 3.94 percent low following the sale and were a quarter- point above that mark as of Dec. 10, the weekly Bond Buyer index shows.
Unemployment
California is strapped for cash amid the worst global recession since World War II. The most-populous state’s personal income tax revenue fell 33.4 percent in the second quarter, compared with a 27.5 percent national average, according to the Nelson A. Rockefeller Institute of Government in Albany, New York. Unemployment in California was 12.5 percent in October, the worst since at least 1976. Nationwide joblessness was 10.2 percent in October, a 26-year high, and 10 percent in November.
The October sale was California’s first long-term debt offering since Republican Governor Arnold Schwarzenegger and the Democratic Legislature settled a three-month impasse over how to erase a $24 billion deficit in July.
The stalemate, which put the state on the brink of insolvency for the second time this year, ended with the approval of an $85 billion budget. California has cut spending by $32 billion, raised taxes by $12.5 billion and papered over $6 billion in shortages with borrowing and what Pacific Investment Management Co.’s Bill Gross has called “accounting tricks that couldn’t fool a grade-schooler.”
Imminent Downgrade
The July compromise prompted credit-rating companies to remove California from lists of borrowers facing imminent downgrades. The state’s general obligation bonds are graded BBB by Fitch Ratings, Baa1 by Moody’s Investors Service and A by Standard & Poor’s.
Public Resources Advisory Group, a financial consultant for the state since 1991, recommended a negotiated sale instead of a competitive one, a memo obtained through California’s Public Records Act shows. In past auctions, winning underwriters couldn’t line up enough buyers ahead of time, so “they bear more risk and the price they are willing to pay the state for the bonds will likely be lower,” increasing taxpayers’ interest costs, the New York firm wrote.
If the consultant “had not recommended a negotiated sale, had they recommended a competitive sale to get the best deal for taxpayers, that’s what we would have done,” said Dresslar, the treasurer’s spokesman.
Taylor, the former MSRB official, said financial advisers rarely recommend auctions.
‘Blackballed’
“The FA has no incentive to irritate the underwriter community by pushing the risk on them,” he said. “Any FA that pushes a competitive sale is going to get ‘blackballed.’”
Lockyer’s staff advised him on Aug. 24 to hire Goldman and JPMorgan to manage a $3.2 billion mix of taxable debt, including federally subsidized Build America Bonds, and Citigroup to lead the simultaneous sale $1.3 billion of tax-exempt securities.
Goldman, which accepted $10 billion in bailout money last year and repaid it eight months later, produced a $3.44 billion profit in the second quarter, a record for a U.S. investment bank. Its shares have almost doubled this year. JPMorgan, which has repaid its $25 billion bailout, is this year’s top U.S. bond underwriter, according to Bloomberg data that excludes municipal issues. Its shares are up 31 percent.
JPMorgan’s investment bank and Goldman will set aside an unprecedented $32.1 billion for compensation this year, according to an estimate by David Trone, a Macquarie Securities Group analyst. That will produce record bonuses totaling $19.3 billion, based on New York pay consultant Options Group’s estimate that year-end awards usually account for 60 percent of compensation costs.
‘Lowest Borrowing Costs’
Second-ranked underwriter Citigroup is repaying $20 billion of its $45 billion bailout to escape U.S. Treasury Department- imposed pay restrictions as the government prepares to sell its remaining stake in the company to recover the rest. The shares are down 49 percent this year.
The three banks were told by California in Sept. 21 engagement letters that they were expected to “perform at the highest level to assist this office in achieving a successful sale at the lowest borrowing costs.” The sales syndicate also included Bank of America Corp.’s Merrill Lynch & Co., Siebert Brandford Shank & Co., Wells Fargo & Co. and about 30 other banks and brokers that made $13.4 million on the deal, for a total of $25.8 million in fees.
Before selling the long-term bonds, Lockyer shored up the state’s finances by borrowing $8.8 billion through one-year cash-flow notes, a routine move used to pay expenses while awaiting anticipated tax revenue.
Record Demand
That Sept. 23 offering, run by JPMorgan, attracted twice as much demand from individual investors as from mutual funds and other institutions. So-called retail orders totaling $6.64 billion, about 75 percent of the sale, was the most ever for a municipal issue, Lockyer’s office said, citing underwriters’ data.
California paid as much as 1.5 percent on the debt, more than twice New Jersey’s cost for similar securities in August. The yield was in the low range of what had been advertised beforehand, and individual demand allowed the state to turn away $430 million in orders from institutions.
“Investors clearly know a good deal when they see one, and California taxpayers will benefit as a result,” Lockyer said after the sale.
That same day, Citigroup told Lockyer that the state would get a “vigorous pre-sale marketing effort” to “the broadest possible audience of potential investors” and “greater retail participation” for October’s long-term debt sale if he agreed to a negotiated deal, according to a letter from Chris Mukai, a director for the bank in Los Angeles.
‘Very Little Incentive’
When banks have to bid for bonds, they “have very little incentive” to find investors beforehand because they don’t know if they’ll “have the bonds to sell,” Mukai said. Underwriters in negotiated offerings “market the state’s transaction for at least a week in advance,” his letter said. “As a result of these efforts, Citi and the other underwriters will acquire accurate information as to the depth of buying interest, which is invaluable in the pricing of the issue and in securing the lowest possible borrowing costs.”
Mukai reminded Lockyer that Citigroup had helped JPMorgan sell September’s short-term debt to individuals, “saving the state millions of dollars,” and had implemented California’s “Enhanced Retail Marketing Plan” in June 2007.
“We believe all the retail marketing efforts in these past few negotiated sales have achieved tremendous success for the state,” leading to more than $8.1 billion in general-obligation bond sales to individuals, or 46 percent of new issues, Mukai wrote.
‘Buzz’ Memo
Goldman and JPMorgan offered Lockyer similar assurances in a joint Oct. 6 memo outlining how they would help draft an offering document, design a sales presentation and perform “pre-marketing and price-discovery activities” to help structure the issue at the cheapest yield.
“This process will generate a ‘buzz’ around the transaction, ultimately generating maximum investor participation in the sale, which we believe will translate into lower borrowing costs,” wrote Tim Romer, a Goldman managing director in Los Angeles, and JPMorgan’s Fernandez, who had been the state’s finance director from 2002 to 2006.
The two firms “strongly believe that proceeding with a negotiated sale” of the bonds “will result in a more cost- effective sale than a competitively bid transaction,” they wrote.
Lowest Since ‘67
Investors, including Envision Capital’s Cohen, predicted the October sale would go well, given the popularity of Build America Bonds, securities created by President Barack Obama’s economic stimulus package, which covers 35 percent of their interest costs.
As of Oct. 1, state and local governments had sold at least $36.9 billion of the debt, about 14 percent of year-to-date borrowing. The bonds attracted buyers to the municipal market and reduced tax-exempt supply, helping drive down average yields to 3.94 percent, the lowest since 1967, from 4.92 percent on April 2, the Bond Buyer’s index shows.
“There seems to be a voracious appetite for the BABs bonds no matter who the issuer is,” Cohen said in an interview the day before the sale. As for the $1.3 billion tax-exempt portion, “they should have a relatively easy time selling it because it’s not so huge,” she said.
Increasing Supply
In the weeks before the bond sale, Lockyer’s staff watched yields slide as state and local authorities kept issuing more debt to lock in low rates. Borrowers were benefiting from the recovery following the financial meltdown that had spurred a rush to the perceived safety of Treasuries after the collapse of Lehman Brothers Holdings Inc. a year earlier.
About $270 billion in new municipal bonds had been issued from Jan. 1 to early October, 16 percent more than at that point in 2008. California’s 2009 tax-backed bond and note sales totaled $23.4 billion by Sept. 30, up from $4.6 billion and $10.6 billion in the first three quarters of 2008 and 2007, respectively.
Demand might wane “because we are at lows in terms of absolute yield levels,” said Peter Hayes, who oversees $106 billion in municipal bonds for BlackRock Inc., on Oct. 6.
California officials said they knew the bonds would be a harder sell than the September notes. To keep debt payments low, Lockyer loaded the tax-exempt portion with maturities longer than what individual investors typically buy.
‘We Got Spoiled’
“We are so used to getting 50 percent, 60-plus percent, 80 percent retail,” said Dresslar, the Lockyer spokesman, referring to how much individuals bought of an offering. “We got spoiled,” he said. “We were fully cognizant that this was not going to be a walk in the park.”
Deputy Treasurer Katie Carroll and Public Finance Director Blake Fowler flew to New York to monitor the sale, accompanied by Dresslar.
Fowler, 43, has spent most of his career in municipal bonds. A year ago, Carroll, 53, gave a talk on “ways to maximize demand” from individuals to the National Association of State Treasurers. Then in Fowler’s job, Carroll emphasized the value of advertising on radio and giving retail buyers a two-day “priority period” for placing orders.
Day One
The bankers went into the sale telling investors California would pay tax-exempt yields from 2.87 percent for the 2015 maturity to 4.63 percent for bonds due in 2029. The 20-year was 23 basis points lower than indicated at the time by a Bloomberg index designed to gauge the fair value of similar bonds. The estimate for yields on taxable securities available to individuals ranged from 3.5 percent to 3.75 percent.
On Oct. 6, the first day of retail sales, the three California officials sat in a conference room in Barclays Capital’s New York headquarters on Seventh Avenue. As they talked to credit-rating companies about another bond issue, they monitored orders for the current one, which the London-based bank helped sell.
They phoned in updates to Lockyer. With Municipal Market Advisors data showing yields already starting to rise, individuals bought 28 percent of the tax-exempt bonds and 25 percent of the taxable debt, less than half the demand seen on the first day of the September sale.
The underwriters “told us before the deal not to expect the level of retail that we had been getting,” Dresslar said. By the time of the sale, they painted an even gloomier picture of concessions that investors wanted “to get the deal done at least close to the size” California wanted, he said. “Some of the numbers that were coming out were startling.”
Day Two
The following morning, the three officials and their financial advisers were ushered into a conference room in Goldman’s 85 Broad St. headquarters. Fueled by coffee, pastries and sandwiches over a 10-hour day, they decided to raise yields by as much as 4 basis points on tax-exempt bonds to attract more orders.
The market’s response “may reflect some anxieties with the retail investors in buying anything that’s longer” than one- year notes, Lockyer said on Bloomberg Television that day. “It may be pricing. It’s hard to tell.”
By the end of the second day, retail buyers had placed orders for $427.7 million, or 33 percent, of the $1.31 billion tax-exempt portion and $77.5 million of the $250 million of taxable bonds available to individuals. All together, retail sales amounted to 11 percent of the $4.5 billion the state wanted to borrow.
Day Three
The next morning, the California officials moved to Citigroup’s offices to finish the offering with sales to pension plans, hedge funds, nonprofit groups and other professional buyers.
“We’re depending on the institutional investors to make this work,” Lockyer had said on TV.
In a room off the trading floor, the officials decided to cut the sale to $4.14 billion -- $1.31 billion in tax-exempts, $1.75 billion in Build America Bonds and $1.07 billion in other taxable bonds.
They also increased some yields again as institutions grew more wary of the state’s finances. Tax-exempt rates ended up 8 to 37 basis points higher than estimated, including the 20-year, which was boosted to 5 percent from 4.66 percent. Debt due in 2025 went to 4.69 percent from 4.42 percent. Four taxable issues, including the Build America Bonds, cost the state 12.5 to 25 basis points more than the low end of estimated ranges. Two priced at the high end, and two were above it.
Extra Interest
The yields, averaging almost a quarter-point more than estimated, will result in California paying $8.1 million a year more in interest than it would have at the lower rates. If the bonds all are outstanding at maturity, the extra interest would total $123.5 million, data compiled by Bloomberg show.
“It’s justified for Cal to be paying a little higher price in order to sell its debt, given its credit issues,” Deutsche Bank’s Pollack said in an interview that day. “Their budget was not as tight and strong as I think a lot of people would have liked it to be.”
The sale’s biggest maturity, $1.75 billion of 30-year Build America Bonds, was priced to yield 7.23 percent, 95 basis points more than comparable corporate bonds and 325 basis points more than Treasuries with similar maturities. With the subsidy, California’s net cost is about 4.7 percent. Ten-year Burlington Northern Santa Fe Corp. bonds with the same Moody’s ratings as California traded at 122 basis points more than Treasuries that same week.
‘Best Shot’
“They just got a little aggressive in where they wanted to price it,” said David Blair, a Pimco analyst in Newport Beach, California, the day after the sale. “Most people still recognize that there’s budget deficits the state is trying to deal with,” said Blair, whose company oversees $20 billion in municipal bonds.
Lockyer’s spokesman portrayed the sale as a success.
“To say that the market conditions were not as favorable as they had been doesn’t mean that you go in conceding hundreds of millions of dollars; you go in and give it your best shot because there’s a lot at stake,” Dresslar said.
“Given the cold market and the inhospitable attitude of investors, to pull off a $4.1 billion deal, we believe, is an impressive achievement,” Dresslar said. “We would have been derelict in our duty to taxpayers if we sold a bond of this size through a competitive sale. We would have gotten hosed.”
Highest Rate
By Oct. 15, 20-year yields had risen 0.38 percentage point to 4.32 percent from its previous low, the biggest two-week increase in 10 months, the Bond Buyer index shows. California has since sold $7.3 billion in debt. On Oct. 22, it paid 8.361 percent on $250 million of lower-rated Build America Bonds -- then the highest coupon rate for a $100 million-plus issue since the program began.
A week later, the state was able to cut estimated yields as much as 0.15 percentage point on $3.5 billion in better-rated tax-exempt bonds when individuals placed orders for almost 72 percent, including debt due in 2022 that cost the state 4.85 percent, up from 4.47 percent in the early October sale.
California sold $908 million in Build America Bonds on Nov. 3, pricing the 30-year securities to yield 7.26 percent, or 3 percentage points more than Treasuries, down from October’s 3.25-point spread.
Lockyer has said the state may issue more debt before the fiscal year ends on June 30 without specifying how much.
“Everybody thinks there’s still an appetite for California bonds,” the treasurer said in the Oct. 9 interview. “If the market is inhospitable, we won’t go,” he said. “We’ll just have to wait and see how the feelings are when we get ready to think about it again.”
Tom Dalpiaz, who helps Advisors Asset Management oversee $3.3 billion in Melville, New York, said California and its bankers had flooded a glutted municipal bond market with too much supply.
The sale gave investors “sticker-shock syndrome,” said Dalpiaz. “It was a very large bond issue to digest.”
Copenhagen Framework Demands Huge Amounts of Spending, But Allows Enron-Style Accounting Tricks to Thwart Real Change
By George Washington
opednews.com
For OpEdNews: George Washington - Writer
The UN and other agencies calling for a war on global warming say the price tag will be trillions.
But - according to top experts on climate and cap and trade - the regulatory framework being rammed through in America and internationally won't actually reduce carbon to any meaningful degree.
Now, the Independent notes that the Copenhagen framework uses Enron-style accounting tricks to give the impression of cutting carbon, without really doing so:
The first week of this summit is being dominated by the representatives of the rich countries trying to lace the deal with Enron-style accounting tricks that will give the impression of cuts, without the reality. It's essential to understand these shenanigans this week, so we can understand the reality of the deal that will be announced with great razzmatazz next week ...
A study by the University of Stanford found that most of the projects that are being funded as "cuts" either don't exist, don't work, or would have happened anyway. Yet this isn't a small side-dish to the deal: it's the main course ...
Trick one: hot air. The nations of the world were allocated permits to release greenhouse gases back in 1990, when the Soviet Union was still a vast industrial power – so it was given a huge allocation. But the following year, it collapsed, and its industrial base went into freefall – along with its carbon emissions. It was never going to release those gases after all. But Russia and the eastern European countries have held on to them in all negotiations as "theirs". Now, they are selling them to rich countries who want to purchase "cuts". Under the current system, the US can buy them from Romania and say they have cut emissions – even though they are nothing but a legal fiction.
We aren't talking about climatic small change. This hot air represents 10 gigatonnes of CO2. By comparison, if the entire developed world cuts its emissions by 40 per cent by 2020, that will only take six gigatonnes out of the atmosphere.
Trick two: double-counting. This is best understood through an example. If Britain pays China to abandon a coal power station and construct a hydro-electric dam instead, Britain pockets the reduction in carbon emissions as part of our overall national cuts. In return, we are allowed to keep a coal power station open at home. But at the same time, China also counts this change as part of its overall cuts. So one tonne of carbon cuts is counted twice. This means the whole system is riddled with exaggeration – and the figure for overall global cuts is a con.
Trick three: the fake forests ... the Canadian, Swedish and Finnish logging companies have successfully pressured their governments into inserting an absurd clause into the rules. The new rules say you can, in the name of "sustainable forest management", cut down almost all the trees – without losing credits. It's Kafkaesque: a felled forest doesn't increase your official emissions... even though it increases your actual emissions.
There are dozens more examples like this, but you and I would lapse into a coma if I listed them. This is deliberate. This system has been made incomprehensible because if we understood, ordinary citizens would be outraged. If these were good faith negotiations, such loopholes would be dismissed in seconds. And the rich countries are flatly refusing to make even these enfeebled, leaky cuts legally binding. You can toss them in the bin the moment you leave the conference centre, and nobody will have any comeback.
opednews.com
For OpEdNews: George Washington - Writer
The UN and other agencies calling for a war on global warming say the price tag will be trillions.
But - according to top experts on climate and cap and trade - the regulatory framework being rammed through in America and internationally won't actually reduce carbon to any meaningful degree.
Now, the Independent notes that the Copenhagen framework uses Enron-style accounting tricks to give the impression of cutting carbon, without really doing so:
The first week of this summit is being dominated by the representatives of the rich countries trying to lace the deal with Enron-style accounting tricks that will give the impression of cuts, without the reality. It's essential to understand these shenanigans this week, so we can understand the reality of the deal that will be announced with great razzmatazz next week ...
A study by the University of Stanford found that most of the projects that are being funded as "cuts" either don't exist, don't work, or would have happened anyway. Yet this isn't a small side-dish to the deal: it's the main course ...
Trick one: hot air. The nations of the world were allocated permits to release greenhouse gases back in 1990, when the Soviet Union was still a vast industrial power – so it was given a huge allocation. But the following year, it collapsed, and its industrial base went into freefall – along with its carbon emissions. It was never going to release those gases after all. But Russia and the eastern European countries have held on to them in all negotiations as "theirs". Now, they are selling them to rich countries who want to purchase "cuts". Under the current system, the US can buy them from Romania and say they have cut emissions – even though they are nothing but a legal fiction.
We aren't talking about climatic small change. This hot air represents 10 gigatonnes of CO2. By comparison, if the entire developed world cuts its emissions by 40 per cent by 2020, that will only take six gigatonnes out of the atmosphere.
Trick two: double-counting. This is best understood through an example. If Britain pays China to abandon a coal power station and construct a hydro-electric dam instead, Britain pockets the reduction in carbon emissions as part of our overall national cuts. In return, we are allowed to keep a coal power station open at home. But at the same time, China also counts this change as part of its overall cuts. So one tonne of carbon cuts is counted twice. This means the whole system is riddled with exaggeration – and the figure for overall global cuts is a con.
Trick three: the fake forests ... the Canadian, Swedish and Finnish logging companies have successfully pressured their governments into inserting an absurd clause into the rules. The new rules say you can, in the name of "sustainable forest management", cut down almost all the trees – without losing credits. It's Kafkaesque: a felled forest doesn't increase your official emissions... even though it increases your actual emissions.
There are dozens more examples like this, but you and I would lapse into a coma if I listed them. This is deliberate. This system has been made incomprehensible because if we understood, ordinary citizens would be outraged. If these were good faith negotiations, such loopholes would be dismissed in seconds. And the rich countries are flatly refusing to make even these enfeebled, leaky cuts legally binding. You can toss them in the bin the moment you leave the conference centre, and nobody will have any comeback.
Sunday, October 18, 2009
Well This IS interesting...
Refund of Danish VAT to tourists in Denmark
| Sprog | Engelsk |
| Kommentar | Vejledningen har tidligere været optaget i P-serien under selvstændigt serienummer 48. |
| Resumé | . |
| Hvad er nyt? | General review of leaflet content. |
| Hvor fås vejledningen? | Vejledningen findes kun på SKATs hjemmeside |
| Pdf-udgave | Pnr_14_ver_2_0_GB.pdf |
Who is entitled to a VAT refund?
| If you are resident or have your normal residence outside the EU, you are entitled as a private person to a refund of the Danish VAT on goods you have purchased in Denmark. To be eligible for VAT refund:
The refund rules vary, depending on whether you are resident in:
Shops are not obliged to assist you in obtaining a VAT refund. The Danish Customs and Tax Administration (ToldSkat) does not reimburse the VAT, and if the shop is not willing to assist you, you will not be able to receive a refund. |
What are considered EU-countries
EU countries are besides Denmark: Belgium, Finland, France, Greece, the Netherlands, Ireland, Italy, Luxembourg, Portugal, Spain, the UK, Sweden, Germany, Austria, Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Cyprus and Malta. Monaco and the Isle of Man are considered to be part of the EU. The following areas, however, are considered to be countries outside the EU:
|
If you are resident in Norway or the Åland Islands
| You are entitled to a refund of Danish VAT if the sales price of each goods item exceeds DKK 1,200 including VAT. This amount is a minimum amount. It is a condition that VAT has been paid in Norway/on the Åland Islands. A group of items normally constituting a unit is considered to be one goods item. Examples include cutlery sets and coffee and dinner services. Note that the goods must be taken out of Denmark before the end of the third month following the month of the purchase. |
If you carry the goods yourself
| If you carry the goods in your personal luggage on leaving EU territory, there is no need to contact the Danish customs authority. However, you must report to the customs authorities in Norway/the Åland Islands, who will levy VAT on arrival. The authorities issue a receipt for any VAT levied and may be able to sign the invoice. |
If you send the goods
| If you have bought the goods in a shop in Denmark but then send the goods yourself, e.g. by mail, rail or carrier, you must make sure that you get an import certificate from the customs authorities or other VAT collection authority in Norway or the Åland Islands. This certificate documents that the goods have been imported and that VAT will be collected in Norway or the Åland Islands. |
How to receive a VAT refund
In connection with the purchase, the shop must issue an invoice with details of:
You must document your residence in Norway/the Åland Islands to the shop by showing your passport, ID card or other identification. On your arrival in Norway/the Åland Islands, the invoice and the authorities' receipt (possibly a copy) for any VAT paid must be sent to the shop in which you bought the goods. The shop needs these certificate to be able to send you the VAT amount. |
If you are resident in a country outside the EU
| If you carry the goods yourself, the sales price (the total purchase) in the shop must exceed DKK 300 including VAT for you to be entitled to a refund of the Danish VAT. You may add together several different purchases made in the same shop, e.g. a department store, to ensure the total purchase exceeds DKK 300, but not purchases made in different shops. The goods must be transported to a location outside the EU before the end of the third month after the month of delivery. |
If you carry the goods yourself
| If you carry the goods in your personal luggage on leaving the EU, you must contact the last customs authority in the EU country from which you departed. This applies irrespective of whether you travel by plane, car, train or ferry. If you pass through customs several times, you must contact the last customs authority. If you travel via several airports, you must contact the customs authority in the last airport within the EU, unless the goods were checked in at the beginning of your trip to the final destination outside the EU. If you depart from other points in Denmark than the points mentioned below, please contact the Regional Customs and Tax Administration office for details of where to apply to have your invoice stamped. |
If you send the goods
| If you have bought the goods in a shop in Denmark but then send the goods yourself, e.g. by mail, rail or carrier, you must make sure that you get an import certificate from the customs authorities or other competent authority in your own country. |
Documents to present
| When contacting the regional customs and tax authority office or the customs authority in another EU country, you must present the goods and the invoice. The customs authority will certify the invoice for export of the goods. The invoice will then be returned to you for future reference. |
How to receive a VAT refund
On purchase, the shop must issue an invoice with details of:
On your arrival in your home country, the invoice or certificate must be sent to the shop in which you bought the goods. The shop will then send you the VAT amount. |
Special scheme for non-EU resident tourists
Global Refund
If you are a non-EU resident, you are entitled to a VAT refund through a special scheme with Global Refund DK A/S. For further information, see the section Further information. Nature of the scheme:
|
Alternative documentation for residents of a country outside the EU
| If by mistake or on other grounds your invoice has not been stamped, the customs and tax authority office in the region in which the shop is located may accept that you send alternative documentation to the shop. This may be a declaration from your customs authority that the goods have been imported to your home country, or a customs receipt, which may be a certified copy. If the customs authority in your home country cannot provide a certificate, alternative documentation may be a declaration from a Danish diplomatic mission that the goods have arrived in your home country. The Danish mission will charge a fee for issuing such a declaration. |
Finally a Sumptuary (or sin) Tax NOT directed towards me.
   |
Taxes and Fees to Rise $4 Billion in New York Budget
ALBANY — Gov. David A. Paterson will propose a $4 billion package of taxes and fees on a range of items, from sugary soft drinks made by Coca-Cola and Pepsi to luxury items like furs and boats, when he unveils his plan to close a deficit that has ballooned to $15 billion, people with knowledge of the plan said on Sunday.
Higher taxes will also be imposed on health insurers and a sales tax exemption on clothing and footwear under $115 will be eliminated, though the administration will propose a two-week holiday for goods under $500, under the budget the governor will introduce on Tuesday.
A number of fees will be increased, with users of the Department of Motor Vehicles and the state parks bearing much of the burden, people with knowledge of the plan said. Tuition at the State University of New York and the City University of New York will also be increased.
The governor’s executive budget, which is subject to approval by the Legislature, is sure to touch off months of protests from an array of interest groups, as well as battles with lawmakers.
One element that Mr. Paterson left out of his budget was any broad-based tax increase affecting people in higher income brackets, a measure that some in Albany believed would be part of the plan. But ever since taking over as the state’s chief executive in March, Mr. Paterson has steadfastly opposed raising income taxes as a way to prop up the state’s worsening finances.
Mr. Paterson said his plan is meant to fill a budget gap totaling $15 billion for the rest of the current fiscal year, which ends March 31, and the following fiscal year. State law requires that the budget be balanced.
Mr. Paterson’s plan relies most heavily on cuts — roughly $9 billion, with the largest amounts aimed at state aid to education and Medicaid. The governor will also propose rollbacks of benefits for state workers, a measure that will almost certainly lead to a standoff with powerful public-employee unions.
The administration is also expected to propose eliminating the controversial Empire Zone program, which offers tax incentives for business development across the state, but has often been criticized for failing to deliver promised job growth.
“It is just prohibitive and it’s painful to have to make some of these decisions,” Mr. Paterson said at an appearance on Sunday night in Manhattan. “I’ve been forced to veto legislation that I’ve sponsored.”
He called tuition increases at state schools “a very hard step to take.”
“We’re going to try to remediate that with some other services to the colleges and universities, but when a person whose whole career has basically been for the advocacy of higher education, such as myself, has to take that kind of step, it gives you an idea of what kind of a number $15 billion is.”
Trying to put the best face on what will be a bleak budget year, the Paterson administration gave a limited budget briefing on Sunday in which administration officials discussed a small number of social initiatives whose financing would be increased. Several of the initiatives were aimed at helping the poor through what is certain to be a trying economic future. “The nation and the state are in midst of the greatest economic crisis we have endured since the Great Depression, and there are families struggling to provide basic needs for their loved ones,” the governor said in a statement on Sunday.
The most significant move was a proposed increase to welfare grants for the first time in 18 years, though more money would not be made available until the beginning of 2010. The administration plans to seek a 30 percent increase over three years, with the eventual cost of the increase exceeding $100 million a year.
The basic welfare grant would eventually rise to $387 a month from $291 for a family of three, or $3,492 per year, where it has remained since 1990.
That the administration was pushing the measure foretold how little money was available this year; the increased welfare grants will have little impact on the budget for the coming fiscal year, which ends in March 2010.
The administration also said it would expand a state-financed health insurance program, Family Health Plus, to cover 19- and 20-year-olds who no longer live with their parents. Enrolling in such programs would also be made easier by, among other things, ending requirements for face-to-face interviews.
Those who provided details about Mr. Paterson’s plan did so on condition of anonymity because the plan has yet to be made public. In describing the fees on nondiet soft drinks, those familiar with Mr. Paterson’s plan called them an “obesity tax.”
Expecting a protracted battle with lawmakers and interest groups, the governor is introducing his budget more than a month earlier than is traditional. Assembly leaders were expected to push for broader-based tax increases to offset cuts to social programs, and spent much of last year advocating tax increases for the richest New Yorkers.
One of the biggest obstacles Mr. Paterson will have to overcome is a Senate narrowly divided between Democrats and Republicans that has yet to settle on a leader for next year, amid continued wrangling among Democrats.
Hospitals, nursing homes and other health care centers, already pinched by the first round of budget cuts earlier this year, are bracing for a fight.
“I expect it to be an unmitigated disaster for health care institutions in New York,” Kenneth E. Raske, president of the Greater New York Hospital Association, said in an interview on Friday. “I expect we will see a significant downsizing of the health care delivery system, and it’s at a time when people can least afford the cutbacks.”
Layoffs among health care workers are seen as likely. A recent survey by the Health Care Association of New York State found that 18 percent of hospitals are considering letting employees go to cope with their financial problems, 30 percent are weighing service cuts and 68 percent are contemplating scaling back improvement projects.
“Our hospital system is already short nurses, lab technicians and physicians,” said Dan Sisto, president of the health care association, a hospital advocacy group. “So it’s very difficult to cut back on a labor force that is already complaining about being shorthanded.”
Education advocates offered a similarly bleak view.
“We understand there will be cuts,” Randi Weingarten, president of the United Federation of Teachers, said on Friday. “The real question is, will there be cuts, not just cuts against growth, but real cuts that will turn back the clock?”
Billy Easton, executive director of the Alliance for Quality Education, an advocacy group, agreed. “School districts now have to plan that they’re not going to get the money that’s due to them.”
Education advocates are particularly concerned that the depth of the expected cuts will risk core educational programs and not just extracurricular activities, which are often the first to be slashed when budgets tighten.
“It takes a lot to help make sure there’s programs for kids,” Ms. Weingarten said, “but it takes very little to have this whole thing collapse.”
Higher taxes will also be imposed on health insurers and a sales tax exemption on clothing and footwear under $115 will be eliminated, though the administration will propose a two-week holiday for goods under $500, under the budget the governor will introduce on Tuesday.
A number of fees will be increased, with users of the Department of Motor Vehicles and the state parks bearing much of the burden, people with knowledge of the plan said. Tuition at the State University of New York and the City University of New York will also be increased.
The governor’s executive budget, which is subject to approval by the Legislature, is sure to touch off months of protests from an array of interest groups, as well as battles with lawmakers.
One element that Mr. Paterson left out of his budget was any broad-based tax increase affecting people in higher income brackets, a measure that some in Albany believed would be part of the plan. But ever since taking over as the state’s chief executive in March, Mr. Paterson has steadfastly opposed raising income taxes as a way to prop up the state’s worsening finances.
Mr. Paterson said his plan is meant to fill a budget gap totaling $15 billion for the rest of the current fiscal year, which ends March 31, and the following fiscal year. State law requires that the budget be balanced.
Mr. Paterson’s plan relies most heavily on cuts — roughly $9 billion, with the largest amounts aimed at state aid to education and Medicaid. The governor will also propose rollbacks of benefits for state workers, a measure that will almost certainly lead to a standoff with powerful public-employee unions.
The administration is also expected to propose eliminating the controversial Empire Zone program, which offers tax incentives for business development across the state, but has often been criticized for failing to deliver promised job growth.
“It is just prohibitive and it’s painful to have to make some of these decisions,” Mr. Paterson said at an appearance on Sunday night in Manhattan. “I’ve been forced to veto legislation that I’ve sponsored.”
He called tuition increases at state schools “a very hard step to take.”
“We’re going to try to remediate that with some other services to the colleges and universities, but when a person whose whole career has basically been for the advocacy of higher education, such as myself, has to take that kind of step, it gives you an idea of what kind of a number $15 billion is.”
Trying to put the best face on what will be a bleak budget year, the Paterson administration gave a limited budget briefing on Sunday in which administration officials discussed a small number of social initiatives whose financing would be increased. Several of the initiatives were aimed at helping the poor through what is certain to be a trying economic future. “The nation and the state are in midst of the greatest economic crisis we have endured since the Great Depression, and there are families struggling to provide basic needs for their loved ones,” the governor said in a statement on Sunday.
The most significant move was a proposed increase to welfare grants for the first time in 18 years, though more money would not be made available until the beginning of 2010. The administration plans to seek a 30 percent increase over three years, with the eventual cost of the increase exceeding $100 million a year.
The basic welfare grant would eventually rise to $387 a month from $291 for a family of three, or $3,492 per year, where it has remained since 1990.
That the administration was pushing the measure foretold how little money was available this year; the increased welfare grants will have little impact on the budget for the coming fiscal year, which ends in March 2010.
The administration also said it would expand a state-financed health insurance program, Family Health Plus, to cover 19- and 20-year-olds who no longer live with their parents. Enrolling in such programs would also be made easier by, among other things, ending requirements for face-to-face interviews.
Those who provided details about Mr. Paterson’s plan did so on condition of anonymity because the plan has yet to be made public. In describing the fees on nondiet soft drinks, those familiar with Mr. Paterson’s plan called them an “obesity tax.”
Expecting a protracted battle with lawmakers and interest groups, the governor is introducing his budget more than a month earlier than is traditional. Assembly leaders were expected to push for broader-based tax increases to offset cuts to social programs, and spent much of last year advocating tax increases for the richest New Yorkers.
One of the biggest obstacles Mr. Paterson will have to overcome is a Senate narrowly divided between Democrats and Republicans that has yet to settle on a leader for next year, amid continued wrangling among Democrats.
Hospitals, nursing homes and other health care centers, already pinched by the first round of budget cuts earlier this year, are bracing for a fight.
“I expect it to be an unmitigated disaster for health care institutions in New York,” Kenneth E. Raske, president of the Greater New York Hospital Association, said in an interview on Friday. “I expect we will see a significant downsizing of the health care delivery system, and it’s at a time when people can least afford the cutbacks.”
Layoffs among health care workers are seen as likely. A recent survey by the Health Care Association of New York State found that 18 percent of hospitals are considering letting employees go to cope with their financial problems, 30 percent are weighing service cuts and 68 percent are contemplating scaling back improvement projects.
“Our hospital system is already short nurses, lab technicians and physicians,” said Dan Sisto, president of the health care association, a hospital advocacy group. “So it’s very difficult to cut back on a labor force that is already complaining about being shorthanded.”
Education advocates offered a similarly bleak view.
“We understand there will be cuts,” Randi Weingarten, president of the United Federation of Teachers, said on Friday. “The real question is, will there be cuts, not just cuts against growth, but real cuts that will turn back the clock?”
Billy Easton, executive director of the Alliance for Quality Education, an advocacy group, agreed. “School districts now have to plan that they’re not going to get the money that’s due to them.”
Education advocates are particularly concerned that the depth of the expected cuts will risk core educational programs and not just extracurricular activities, which are often the first to be slashed when budgets tighten.
“It takes a lot to help make sure there’s programs for kids,” Ms. Weingarten said, “but it takes very little to have this whole thing collapse.”
Tuesday, October 6, 2009
Just a word of advice....
Avoid debt to the extent possible. Student loans and mortgages can be "good debt", but even then, make paying them off a priority.
EU Cigarette Price & Tax Breakdown - July 2008
RRP | Tax Burden | Tax Incidence | |
£ per 20 | % | ||
| Ireland | 5.89 | 4.62 | 78 |
| UK | 5.66 | 4.33 | 77 |
| France | 4.19 | 3.37 | 80 |
| Sweden | 3.97 | 2.87 | 72 |
| Germany | 3.72 | 2.82 | 76 |
| Netherlands | 3.66 | 2.73 | 75 |
| Finland | 3.40 | 2.55 | 75 |
| Denmark | 3.39 | 2.49 | 73 |
| Belgium | 3.29 | 2.55 | 77 |
| Malta | 2.86 | 2.17 | 76 |
| Italy | 2.77 | 2.08 | 75 |
| Austria | 2.77 | 2.07 | 75 |
| Portugal | 2.61 | 2.08 | 80 |
| Luxembourg | 2.53 | 1.77 | 70 |
| Greece | 2.37 | 1.74 | 74 |
| Cyprus | 2.23 | 1.61 | 72 |
| Spain | 1.90 | 1.47 | 78 |
| Czech Republic | 1.88 | 1.51 | 80 |
| Hungary | 1.80 | 1.33 | 74 |
| Slovenia | 1.74 | 1.30 | 75 |
| Slovak Republic | 1.38 | 1.29 | 94 |
| Poland | 1.38 | 1.20 | 87 |
| Romania | 1.20 | 0.89 | 74 |
| Lithuania | 1.15 | 0.77 | 67 |
| Estonia | 1.12 | 1.02 | 92 |
| Bulgaria | 1.00 | 0.82 | 82 |
| Latvia | 0.94 | 0.85 | 90 |
The price and tax burden shown is based on information contained in the European Commission's publication Excise Duty Tables. Part III - Manufactured Tobacco, July 2008 and the exchange rates published in the Official Journal C Series for the start of July 2008.
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