Saturday, May 30, 2015

Can Anyone Spare a Dime, and Maybe a Few Million Extra?

Chris Papst. Capitol Murder: An Investigative Reporter's Hunt for Anders on a Collapsing City: Mechanicsburg, Pa.: Sunbury Press, 2015.

Harisburg offered in the 1970s as the shell mill and mills closed or significantly downsized. Many middle class residents left Harrisburg in the 1970s.

The highway destroyed Harrisburg and other cities. Many people who could afford to move then used the highway to move out f cities into suburbs. Lower income people tended to remain behind in cities. Harrisburg's downtown hotel went from 95% occupancy to 17% occupancy. Downtown businesses that accounted for 70% of the region's businesses then accounted for 11%. Theaters and art houses closed, giving people even fewer reasons to travel downtown.

Steve Reed was elected Mayor in 1981. In the decade before Reed was elected Mayor, the city's population declined 22%. In the decade after Reed became Mayor, the city's popilaiton declined 1.7%. Population then began increasing yet then later decreased.

In 1981, Harrisburg was considered by the U.S.Housing and Urban Development as one of the most distressed cities in the nation, Reed reduced property taxes and created a Land Value Taxation where vacant land was taxed at a higher rate in order to encourage its being development.  Reed claims while he was Mayor the city attracted over $4 billion in private investments.

While Reed was Mayor, the city took out many bonds to hide debt. Bond agencies received many fees. Harrisburg grew economically yet the city government took on debt it could not pay, The city slashed spending, let its infrastructure crumbled, and there still was not enough money to pay the debt. he Governor appointed a Receiver for Harrisburg who took away some powers of elected officials.

Harrisburg's 49,000 residents have an an average household income of $25,0000. 44% of its children live in poverty.

Harrisburg issued $300 million in debt for a hydroelectric dam that was never built. The technology the city chose was unproven, The contractor was inexperienced. The bonds, which reached $360 million in deb,t were meant to be paid from dam revenues which never materialized as the dam was never built. Investors, underwriters, and consultants gained finically from these bonds. $15 million in fees were paid to lawyers engineers and other professionals.

Steve Reed he had planned to lease Parking Authority assets for $250 million to pay off the bonds. Once operational, the incinerator was to have been sold for $125 million. At that time, the bond holders would have been allowed to take a tender offer of 82 cents to 85 cents on the dollar. To pay those bond owners who did not accept the tender offer, a tipping fee would have paid off that debt for ten years,

Harrisburg attempted to file for bankruptcy. Yet bond insurers wanted to be paid. The Governor's Chief of Staff had worked in a law firm that represented bond insurers. The bond insurers did not want to pay for what they had insured. A little noticed amendment to the budget that the Governor, Tom Corbett, signed created a law prohibiting Harrisburg from filing for bankruptcy. The bond insurers did not have to pay their insurance.

The U.S. Environmental Protection Agency closed an incinerator that was harming the Susquehanna River. If the city did not upgrade the treatment plant, the city would have to pay for pollution credits. Harrisburg guaranteed $125 million to update the incinerator. City Council, including Council member Linda Thompson, voted 6 to 1 to approve the loan.

Millions of dollars in fees were paid for the incinerator's retrofit. The bonds paying for these never should have been issued, according to the author. These bonds were exempt from Federal and state taxes, Municipal bonds were not registered with the Securities and Exchange Commission. Buying these bonds was a financial windfall for bond purchasers, some of whom were politically connected.

It was later discovered Steve Reed has a secret $7 million account deposited without Council authorization in a bank 55 miles outside of Harrisburg. Many people who had contributed to Mayor Reed's campaign were paid fees from city government with this account Contributors were thus receiving city contracts.

The $7 million deposited in this account was from water blond sales. District Attorney Richard Lewis investigation this and concluded Reed wa acting in the city's interest and there was no criminality.

Reed knew how to get press coverage. He was on the scene at every murder or fire. He handled public relations. The Harrisburg Police Department's Public Information Officer was the only public info ration person the author ever saw who refused to be interviewed on camera Reed handled the interviews. Reed was also rumored to have been sexually involved with some reporters.

Harrisburg's debt reached $310 million., or six times its budget. (Note: Many municipal debt advisors observe that few local governments can emerge from that high a debt.)

Harrisburg, in a 2008 study, was found to owe $184 million in Other Post-Employment Benefits. The city should have been depositing $18 ill ion a year to fund these future payments yet it was putting on around $4.5 million

In 2011, the city's revenues were $50 million annually That was the cost of the city's operating budget,

When the ity could not make its bond payments, the bond insurers, instead of paying this insurance, reissued making any patents, They hired a law firm formerly led by Governor Corbett's main attorney to lobby the legislators. They passed a law preventing Harrisburg from filing for bankruptcy.

In 2011, the state;s Department of Community and Economic Development issued a recovery plan for Harrisburg It called for selling city assets, increasing property taxes, layoffs, and wage and benefit cuts. City Council rejected the plan by 4 to 3. Linda Thompson, who was then Mayor having defeated Steve Reed, got some concessions from the county and state and proposed essentially the same plan Council had earlier rejected. Council rejected the plan again by the same 4 to 3 vote. The "Gang of Four" who voted against the plans wanted the bond insurers, the state government, and the county government to share in the recovery.

After Council rejected a third plan, the legislature creed a new law and a Receiver was named by Governor Tom Corbett to take over the city's finances. City Council rejected a fourth plan.

Harrisburg filed for bankruptcy. This newly enacted law prohibited Harrisburg from filing for bankruptcy. It also prevented Harrisburg from creating a commuter tax to increase its revenues,

The city attempted to file for bankruptcy with the signatures of each member of Council, the City Controller, the City Treasurer (who would later resign for stealing funds from a non-profit and from a political organization) signed the bankruptcy, Mayor Linda Thompson reused to sign the bankruptcy papers.

The Receiver, David Unkovic, had worked with three firms that had connections to Harrisburg's creditors. Unkovic allowed debt payments to be skipped so that city could use the funds for fire and police. Criminals noticed this and crime increased.

The Midtown Improvement District collected residential fees of $60 for residents with businesses paying more. These funds were used to hire eight police patrols for Midtwon Harrisburg at night. Eric Papenfuss, who founded this District, would defeat Thompson for Mayor,

Harrisburg's loan payments on its Harristown economic development project rose from $75,000 annually to what will become $95 million due in 2016.]

Unkovic resigned as Receiver. He encouraged Federal and state prosecutors to investigate the debt. He suspected some incinerator transactions may have been illegal. District Attorney Ed Marsico stated this was outside his jurisdiction.

Fred Clark was the incinterat'rs Authority Chairman. He contributed $22,781 to Reed's campaigns from 2000 ti 2010. Clark worked for Reynonds, which was a conflict of interest as Reynolds received $850,000 in incinerator retrofit contract fees.

The Authority issued bet because Harrisburg had reached its legal debt limit. The payment lacked a performance bond.

William Lynch was hired as the next Receiver. Lynch in 1979 tried to get the state to buy land for theNational Guard. The purchase was not approved yet the land owner was allowed to keep a $325,000 deposit. The land owner, Alan Walker, contributed money to the Corbett campaign and he was named Secretary of Community and Economic Development Lynch and Walker would work together again in attempting to solve Harrisburg's legal problems.

Lynch recommended selling the incinerator to Lancaster Country for $125 million while Harrisburg retained its $363 million debt. Parking lots, garages, and metered spaces would be sold for 40 years for $260 million. Union agreed to $4 million in concessions. The state government promised $5 million annually for public safety, Artifacts were sold and auctioned providing for $4.5 million

The author beliefs Harrisburg is headed towards Chapter 9 bankruptcy.

Sunday, May 24, 2015

A Democrat Who Cares About Small Businesses? That's OK, Republicans Will Defend Big Businesses

Joe Sestak with Jake Sternberger. Walking in Your Shoes to Restore the American Dream. New York, N.Y.: Infinity Publishing, 2015.

The authors believe people do not trust their government leaders. They seek to have their truest restored. Government is designed to protect liberties against too much government power. Faith in government will be restored when government limits its own powers.

Sestak, while serving his 31 years in the Navy , directed over $70 billion in operations. While serving in Congress for four ears, he became Vice Chairman of the Small Business Committee as he sees the key is how entitles are led.

The author write “the biggest barrier to an innovator with an idea is a lack of access to capital-not tax cuts-that is the mother’s milk for a start up.” The authors propose a 50% tax credit for small business investments, with a $1 million annual limit, on half of such investments over the business’s first five years.

The author advocate increasing the Rural Lender Advantage Loan that guarantees 85% of a maximum of $350000 financing to a new maximum of $500,000.

The authors are concerned about the amount of paperwork businesses have to file for reports, especially as this impact more the smaller businesses. They argue for a tier system of regulations and regulatory paperwork where fees and costs would be less for smaller businesses.

The authors note the Export Import Band helps over 250 Pennsylvania businesses supporting 35,000 jobs.

98% of manufacturing firms have under 50 employees. Over a quarter of these are in the green energy filed.

There are tax credits for natural gas extraction. This is known as the “Halliburton exemption.

The authors argue that the Research and Development Tax Credit, which has been extended 15 times since 1981, should be made permanent.

The authors support infrastructure investment. Highway Trust Fund solvency is key. This could be done with a gas tax hike or with innovation taxation such a a milage based tax instead of a gallon based tax. This makes sense as fewer cars use gas. The tax could be assessed according to odometer readings at inspections. Public-private partnerships, the author argue, more attract more infrastructure investments.

Rural areas need high speed Internet, the authors note. This is key in Pennsylvania which was 2.7 million rural residents. This makes Pennsylvania the state with the thrid largest rural population.

The authors believe the minimum wage should be half the average hourly wage. Studies show wages below that do not create job losses. Low wage employers will continue hiring employees as long as they earn profits doing so.

Many companies create a shell corporation in a tax haven such as Bermuda or Holland, create a presence in Ireland where there are large subsidies, an then sell licensing fees to their Dutch or Bermudan company to avoid paying taxes. The author calls for incentives to bring back these funds back to America.

The authors agree with lower corporate tax rates et argue there would then have to be an end to tax loopholes.

The authors argue for investments in training employees. There should be more human capital training programs.

The ACA health program has reduce per capita health care costs, increased insurance rate competition, and has provided new insurance to the 60% of enrollees who previously did not have health care insurance This has reduced the costs of Medicare such that the Trust Fund as 13 more years of projected solvency.

There needs to be more quality health care rather than more quantity of health care, the authors argue.

The “pay for delay” where brand name pharmaceuticals pay generic brand pharmaceuticals not to produce should be ended, the author propose. This cost customers.

Immigrants who receive diplomas should be green cards, not be sent home, the authors  recommend. We need their skills here.

The U.S. has incarceration rates higher than Russia or China. We need to create better second chance opportunities for people reentering society.

The authors argue for more research and clinical trials on Alzheimer disease.

There need to be student-centric testing that guide learning instead of having teachers test towards tests to avoid funding penalties, the authors propose.

The authors support national service. They see this as a great return to the public at low costs.

There are growing economies worldwide. It ins noted Brazil has brought 40 million people out of poverty.

China has not respected intellectual property rights, denies its labor protections, and they discriminate against American companies, the authors note.

Tuesday, May 19, 2015

What to Do When a Democrat Gets 81% of the Vote

George J. Mitchell. The Negotiator: Reflections on an American Life. New York: Simon & Schuster. 2015.

Mitchell represented Maine in the U.S. Senate. Maine has historically been a strong textile state, It has many cotton and woolen mills. As Maine is 90% forest land, it has a large timber industry.

Mitchell grew up in Maine, He attended Bowdoin College, graduating in 1959. He then served in the Army. He worked on a team interviewing people fleeing East Germany. He was to help determine who may be a spy, He found he was “hopelessly inexperienced.” He learned to think “long and hard about the people whose lives would be irrevocable changed by decisions, about my duties and responsibilities, and about my fallibility and weaknesses.” He would continues this way of thinking as a Senator and as a Federal Judge.

Mitchell attended Georgetown Law School. He worked as an insurance adjuster by day while going to law school at night.

Mitchell received a phone call from the Administrative Assistant to Maine Senator Edmund Muskie. He was told Muskie was looking for someone with a law degree who knew Maine. Mitchell was asked if he was interested in working for Muskie. Mitchell interviewed and has hired. He became the Executive Assistant to Muskie At Mitchell writes, “I had gotten a taste of politics, and I liked it.”

Mitchell left Muskie’s staff to practice law in Maine in 1965. In 1966, he was asked to run for Chairman of the Maine Democratic Party, He wa elected and served for two years When Muskie was nominated to run for Vice President, Mitchell was asked to be Muskie’s Deputy Campaign Manager.

Mitchell served on the committee that made the Democratic Party’s nominating process more democratic;. In 1972, Mitchell was one of three candidates for Democratic National Chair. He came in second.

Mitchell ran for Governor, He found it difficult running in a primary against a friend, District Attorney Joe Brennan. Mitchell won the primary. An independent candidate, James Longley, won the general election with Mitchell finishing second, three percentage points behind Longley.

Mitchell became U.S. Attorney. He then became a Federal Judge.

In 1980, Muskie resigned from the Senate to become Secretary of State Joe Brennan, who was then Governor, chose Mitchell for the Senate vacancy. Muskie had wanted former Governor Ken Curtis appointed. Curtis would have been a stronger candidate Yet Mitchell believes that Brennan saw something in Mitchell even when they were running against each other. Brennan asked Mitchell to vote his conscience and use his best judgement. Brennan never asked anyting else from Mitchell.

Mitchell’s first entry in the Senate involved sleeping on cots during a fillibuster.

Mitchell was elected to a full Senate term in 1982. He overcame a poll that had Republican U.S. Rep. David Emery ahead by 36 percentage points.

Mitchell realized a Senator had to do a lot of fundraising. Mitchell ran TV ads early in the campaign. This improved his fund raising. Mitchell was boosted by doing well in debates with Emery.

Emery’s campaign put out a publication claiming Mitchell had a 0% legislative vote on veterans issues. Mitchell was puzzled as he was on he Veterans Affairs Committee supporting veterans. It turned out the publication considered votes before Mitchell was even in the Senate, thus his zero rating. Emery did not correct this error Still, Mitchel won with 61% of the vote.

The Iran Contra secret trade of arms for hostages upset Mitchell and others.. He realized there had been massive false testimonies that exceeded anything he has seen before.

In 1984, Senate Majority Leader Robert Byrd appointed Mitchell to chair the Senate Democratic Campaign Committee. Mitchell chose Nancy Pelosi to lead the fund raising efforts. Pelosi was later elected to Congress and became Speaker.As Chairman, 11 new Democratic Senators were elected and Democrats became the majority in the Senate. Byrd named Mitchell to the honorary post of Deputy President Pro Tem of the Senate.

In 1988, a Democratic state legislator Jasper Wyman changed parties and became the Republican Senate nominee against Mitchell. Mitchell won with 81% of the vote, winning by the largest margin in a contested Senate election in Maine history.

Maine’s Republican Sen. William Cohen suggested he and Mitchell write a bipartisan book on the Iran Contra hearings. Mitchell agreed. They wrote the book “Men of Zeal”.

Senators Max Baucus and Bill Bradley urged Mitchell to ron for Majority Leader. Sen. John Glenn agreed to nominate Mitchell.

Mitchell was elected Majority Leader. He also decided he did not want to make the Senate his career and decided that would be his last term.

Mitchell met with Senate Minority Leader Bob Dole. Mitchell promised he would notify Dole of his intentions and to never be critical of Dole in public or in private. Mitchell stated he would be available to meet with Dole. They worked well together even while disagreeing on policies.

Mitchell fought for clean air legislation. Newly elected President George Bush reversed President Reagan’s opposition to clean air legislation. Environmentalists demanded a strong bill, yet there were only 45 votes for that bill. Some environmental groups claimed the strong bill had the support of 60 Senators including Sen. John Heinz. Mitchell went to Heinz who declared his opposition to the bill due to Pennsylvania’s coal industry. Mitchell realized the environmentalists thought they had 15 votes they did not have.

Sen Byrd supported an amendment that added $500 million in costs to the bill. President Bush stated he would veto the bill if it included the Byrd amendment. Senator Joe Biden delivered a speech warning of this.

A clean air bill passed over the objections of Senator Byrd/ Byrd hung the roll call of the vote on his door and for years afterwards reminded visiting Senators who voted in opposition to him of their vote. Mitchell was proud of his own work on the bill and in getting it into law.

Mitchell observed that Rep. Bud Shuster was a mastermind of getting earmarks for his district.

Mitchell observed when President Bush pledged there would be no “new taxes”. Mitchell knew Bush could not keep that promise.

Mitchell was surprised when key Republican Senators agreed taxes had to be raised, Republican Sen. DIck Barman told Mitchell that a tax increase would “just emerge”. Bush later agreed to what he called “tax revenue increases” which he tried to show what not what he meant when he made the pledge.

When Bill Clinton, Senator Mitchell introduced Clinton’s health care bill. Mitchell turned down an appointment to the Supreme Court in order to work on the health care bill. The bill ultimately did not pass.

Mitchell chose not to run for reelection. He then became a negotiator between conflicting violent parties in Northern Ireland He took a job for five months that lasted five years. The parties eventually wrote out agreements each could uphold.

Michael Eisner asked Mitchell to be President of Disney. Mitchell declined Mitchell later agreed to be on the Board of Directors. Mitchell notes Eisner was a good innovator and that Bob Iger brought much improved profits to Disney.

Mitchell undertook a study of performance enhancement drugs for the Major League Baseball Commissioner.

Mitchell was a negotiator between Israel and Hama. He noes the hostility and distrust runs deep and has existed for a long term. Internals divisions within both prevent each from reaching agreements Mitchell believes that a solution can be found, He believes both sides will someday tire over the violence.