Michigan Town Woos Hollywood, but Ends Up With a Bit Part

 By LOUISE STORY
The New York Times

Published: December 3, 2012 293 Comments

PONTIAC, Mich. — Even the great and powerful Oz could not save the film studio that was supposed to save this town. 

The studio, a state-of-the-art facility fit for Hollywood blockbusters, had risen from the ruins of a General Motors complex here. It was the brainchild of a small group of investors with big plans: the studio would attract prestigious filmmakers, and the movie productions would create jobs and pump money into the local economy. A glamorous sheen would rub off on this down-on-its-luck town....

 

Pontiac desperately needed them. In March of that year, roughly one of every two residents was without work, according to federal data. Food pantries had record requests. Pontiac was consistently listed among the top 10 most dangerous cities by the F.B.I. The city had made national news when a group of teenagers approached homeless people on the street and beat them to death. 

Ms. Granholm declared the city in a financial crisis in February 2009 and appointed an emergency manager, Fred Leeb. The city’s budget was $54 million a year, but it was overspending by an estimated $7 million to $12 million. Pontiac was also still weighted down by old incentives it had given to businesses like G.M. 

The movie studio was an added challenge, since it was seeking financial incentives from the city — not to mention from other branches of the government. It won redevelopment tax credits from the federal government and separate aid from the state that included incentives for technology companies that hire residents. 

Job creation became a point of contention with beleaguered Pontiac, which was being asked to waive virtually all property taxes for the studio. The investors claimed that thousands of people would be employed, but Mr. Leeb said that when he asked for job numbers to be written into the contract, the investors refused. “We started seeing some backpedaling,” said Mr. Leeb, who added that the negotiations featured “knock-down, drag-out fights.” 

Mr. Nelson said he did not recall that request, but added that his company could not have guaranteed jobs anyway, since they were mainly supposed to be created by filmmakers renting out the studio.

Under pressure from the governor’s office, Mr. Leeb said he had little choice but to approve the investors’ requests....

 

http://www.nytimes.com/2012/12/04/us/when-hollywood-comes-to-town.html?pagewanted=all&_r=0

Manufacturing and metros are recipe for success, says guru on cities | Bridge Michigan

Manufacturing and metros are recipe for success, says guru on cities | Bridge Michigan

  20 November 2012

By Derek Melot/Bridge Magazine

Bruce Katz has pushed a consistent message for Michigan: M&M&E.
That’s short for manufacturing, metros and exports. A vice president at the Brookings Institution, Katz has worked in recent years with Business Leaders for Michigan in developing ideas for improving Michigan’s economy.

Bridge Magazine spoke with Katz by phone recently to get his sense of how Michigan’s recovery is doing – and what policy decisions are still lacking to bolster the state’s economy.

Bridge: In your testimony before the House Commerce Committee in May, you noted that Detroit and Grand Rapids ranked highly for export intensity. What is export intensity and why is it important in economic policy considerations?

A: Export intensity is a measure of the share of total output in the metropolitan area that is exported. Nationally, exports are around 11 percent of total gross domestic product, but in strong manufacturing metros, it’s higher. Detroit is about 14.9 percent and in Grand Rapids, it’s 15.3 percent. So there is just greater export intensity in the manufacturing metros and what we found is that 13-14 metros in Michigan are actually more exporting intense than the U.S. economy as a whole.

You know that matters because you know global demand is raising the U.S. economy, which has been underperforming because we have such a large domestic market. So with the Great Recession, the recovery that we have had to date is still not sufficient. What we have had today has mostly been fueled by global demands, particularly in countries like China, Brazil and elsewhere. … As the century unfolds, we are going to find ourselves doing more business abroad and for cities and metropolitan areas, they are going need to understand what they trade and who they trade with.

Bridge: Is it fair to say, based on these export intensity figures, that Michigan is actually further along than the rest of the country?

A: What it shows is that you are a production powerhouse, both in the large metros and smaller metros. For a long time, we have treated manufacturing differently with the old economy; actually manufacturing is completely fueled by technology innovation. … There is a future for manufacturing in the United States for a lot of different reasons and those places that are manufacturing hubs obviously have a jump on everyone else. The question is whether they understand it and are doing what is necessary to continue to move forward.

Bridge: In 10 to 20 years, how big a share will manufacturing carry in the economy and how many jobs will it provide?

A: Well these are the numbers I think are important to start the conversation: Manufacturing in the United States is 9 percent of jobs; it’s about 11 percent of GDP and employs about 30 percent of all engineers in the country. It accounts for about 68 percent of all private research and development and it generates 90 percent of the patents in the United States.

I just came from a tech-economy conference in Detroit, which is a conference on technology innovation. A large portion of the conference was about manufacturing and, again, I think we had almost a cartoon conversation about manufacturing where we talked about the old economy is manufacturing and the new economy is Facebook. This is a completely absurd conversation.
Manufacturing is still very productive in the United States. We are the third largest exporter in the world behind China and Germany and that is without any policy at the national scale that frankly is even remotely coherent.

 Bruce J. Katz is a vice president at the Brookings Institution and founding director of the Brookings Metropolitan Policy Program which aims to provide decision makers in the public, corporate and civic sectors with policy ideas for improving the health and prosperity of cities and metropolitan areas.

Mini Debate Between Fred Leeb and the Attorney for the Opposition

Debate Over Proposal #1  The Emergency Manager Law   Spotlight on the News-Channel 7 WXYZ

Please Click on the Picture Above to See the Debate Video Proposal #1, the Michigan Emergency Manager Referendum, is on the ballot in Michigan for the November 6th election.  If the referendum passes (by voting "Yes", Public Act 4 (which was passed by the Michigan legislature in 2011 as the Local Government and School District Fiscal Accountability Act) will be adopted but if the proposal is defeated (by voting "No"), the law will not take effect.  I strongly recommend that you vote YES on Proposal #1. A mini-debate on Proposal #1 was held and aired Sunday, October 28, 2012 on WXYZ Channel 7's Spotlight on the News program hosted by Chuck Stokes.  The participants were Herb Sanders, attorney for Stand Up for Democracy (the coalition that sought to place the referendum on the ballot) and me (the former Emergency Financial Manager of the City of Pontiac).  The video of this debate can be seen by clicking on the picture above.  [The portion related to Proposition #1 is from the beginning of the clip until 13:16, sorry about the initial advertisement.] I believe that there are many reasons to vote yes on Proposal #1, as follows: The law has been used very rarely and only when it has been absolutely necessary to try to save a local governmental unit from a financial disaster.  I do not believe the State has any desire to take over the responsibility for managing many governmental entities.  There are currently only 5 cities (Flint, Pontiac, Ecorse, Benton Harbor and Allen Park) out of about 2,900 local governmental units in Michigan and 3 school districts (Muskegon Heights, Detroit and Highland Park) out of 579 school districts that have an Emergency Financial Manager.  In addition, there are three cities working with a consent agreement (Detroit, River Rouge and Inkster). If the law is defeated, it is likely to cause additional lengthy delays in the process of helping cities to get back on track financially as the parties argue about what should be done instead.  The biggest loser is likely to be the City of Detroit because it already has "hit the wall" and is only able to operate with the State providing managerial assistance and financial resources.  On December 21, 2011, Andy Dillon, the State Treasurer, said that Detroit had total liabilities estimated at more than $12 billion and that the deficits in the General Fund  have fluctuated between over $155 million and over $300 million each year from 2005 through 2011.  Total General Fund debt and other liability proceeds have been over $600 million for 2005 through 2010. Under Public Act 4, the local governmental entity has many opportunities to avoid the need for an Emergency Manager, even after what may be decades of poor financial management.   There also are a number of checks and balances.  First, the State has to conduct a preliminary review of the level of financial stress.  Second, if necessary, there must be a more formal review including representatives or nominees from the State Treasurer, the State House, the State Senate, the State budget office and others appointed by the Governor.  Third, there is an opportunity for a consent agreement for continuing operations.  There also is the potential for a recovery plan in which additional powers can be granted to the local officials to help them in their efforts to correct the situation.  Fourth, if the Governor decides an Emergency Manager is necessary, the local unit can request a hearing.  Fifth and finally. the local governmental unit can appeal the decision to the Ingham County Court. Public Act 4 requires communication and disclosure of the Emergency Manager's decisions to the State and to the public.  For example, the Emergency Manager must have a financial plan in 45 days and conduct a public information meeting.  The Emergency Manager also must report all details of expenditures, hiring, transactions, etc. every three months.  In addition, the Emergency Manager may retain a local inspector or auditor (from an approved list provided by the State Treasurer) to oversee and report on the local governmental unit. Property tax revenues will not increase significantly and help local governments for many years even if the economy experiences an economic boom.  Michigan's Proposal A already limits increases in property taxes per year to the lesser of 5% or the rate of inflation (which has been recently at only 2-3%/year). Chapter 9 municipal bankruptcy (one of the alternatives) has been used very rarely by local governmental units anywhere in the country.  Its provisions are very different from Chapter 7 or Chapter 11 bankruptcy.  Chapter 9 generally leaves the local administration in place running the local governmental unit without a trustee and without court oversight.  It is unclear to me how any major operating changes would be considered or implemented.  Even if there was a plan approved by the bankruptcy court to reduce the local government's liabilities, it is likely that new deficits would continue to be generated since the underlying operating structure and processes wouldn't necessarily change.  Chapter 9 is a debt adjustment plan without a reorganization function.  A couple of the cities in California, however, have used it primarily to reject collective bargaining agreements quickly and to significantly reduce or try to eliminate retiree healthcare.   I strongly believe it is time to get past arguing about who is in charge and get into developing and implementing good ideas for sorely needed major changes.  There are many other cities that already have had great success for years in working to improve their communities.  We should spend our time examining places like New York City (with one-eighth the murders per capita of Detroit), Colorado Springs, Turin, Italy, downtown Las Vegas, Atlantic City and many others.  Let's get on with making Detroit's turnaround a huge success.    [Please note that, contrary to current TV ads from Stand Up for Democracy regarding Prop #1, I have never been a partner of the person who bought the Silverdome.  Two years after the sale I did begin to supply limited consulting services to him to help improve the property to try to again encourage business growth in Pontiac.]

 


http://myemail.constantcontact.com/Interesting-Mini-Debate-Between-Fred-Leeb-and-the-Attorney-for-the-Opposition.html?soid=1101086242761&aid=cp3gkeA8YVU

Campaign 2012: Meet the Candidates, Audio On Demand « CBS Detroit

Audio On Demand « CBS Detroit

Recorded Live, Talk Radio 1270 WXYT afternoon host Doc Thompson and WWJ Tech Editor Matt Roush hosted this special election forum at Lawrence Technological University. Those in attendance had a chance to ask local candidates questions and learn more about the six statewide ballot proposals.

I participated in a very interesting discussion in presenting the case in support of Proposal #1, the Emergency Manager Law. Please vote Yes on this proposal in the November 6th election.  My comments start at about 5:20 into the audio recording.

Rolling the Dice with Taxpayer Money

Rolling the Dice with Taxpayer Money

Posted In Governing By Charles Chieppo | October 25, 2012

The recent bankruptcy filing by A123 Systems, a maker of batteries for electric and hybrid cars, once again shines a spotlight on the use of government subsidies to aid individual companies. In A123's case, it was the federal government that awarded the company nearly $250 million in stimulus money, but states don't exactly have an admirable track record when it comes to this issue.

Massachusetts loaned money--$5 million--to A123, but that's just the tip of the states-as-venture-capitalist iceberg. State investments in private companies generally come in two forms. The first is grants or loan guarantees, such as the $75 million that Rhode Island taxpayers lost when the state invested in former star pitcher Curt Schilling's failed video-game company, 38 Studios. The other is tax breaks and other tax incentives. Massachusetts provided a combination of grants and tax breaks that added up to more than $30 million for Evergreen Solar, a clean-energy company that declared bankruptcy last year.

Either way, it's a bad deal for taxpayers. States aren't very good at venture capitalism because it's a skill very few public officials have. For them to roll the dice on a specific company is like me joining a high-stakes Las Vegas poker game. The difference is that I'd lose my own money in Vegas. When states play venture capitalist, they play with taxpayer money.

States don't do much better when they use tax breaks to try to lure specific companies. In the wake of the Evergreen fiasco, Massachusetts officials formed a Tax Expenditure Commission to review the Bay State's web of tax breaks, also known as "tax expenditures."

The commission pegged overall foregone state revenue from tax breaks (not just those for businesses and economic development) at an estimated $26 billion this year, more than the total amount of tax revenue the commonwealth expects to collect during the fiscal year. And a 2011 analysis by the state auditor of 91 business tax breaks offered that year found that only a few came with mechanisms for reviewing their effectiveness or recovering lost revenue if the breaks failed to produce the hoped-for economic benefits.

In addition to being ill-suited to investing in individual companies, states also shouldn't subsidize specific industries, as with the federal oil-industry subsidies that, along with investments in companies like A123, have become an issue in the presidential campaign. What state governments can do is create opportunities by funding research through public universities or other outlets. Companies can then compete to put the fruits of that research to the most lucrative use.

A123 reminds us that the federal government isn't so good at picking winners and losers. But the evidence is clear that states are no better. Both taxpayers and state revenues would be best-served if state officials realize their limitations, focus on creating an environment of economic opportunity and let the market sort out the details.

******************************************

Fred Leeb: I agree that it makes a lot more sense for government to support research rather than trying to pick a specific business or individual company to subsidize to guarantee its success.

Fate of emergency manager law now up to voters | City of Detroit | Detroit Free Press | freep.com

Fate of emergency manager law now up to voters | City of Detroit | Detroit Free Press | freep.com

 "Eventually, there comes a point where the city is going to go over the cliff, and something has to be done," said Fred Leeb, a financial consultant based in Oakland County who was the emergency manager of Pontiac in 2009-10 under Public Act 72. "You can't go on spending more money than you take in ... using smoke and mirrors to pretend the problem will go away."

Local governments cut costs via efficiency; steps include computers that shut themselves off - The Washington Post

Local governments cut costs via efficiency; steps include computers that shut themselves off - The Washington Post

By Associated Press, Published: September 24

"Around the country, governments big and small are embracing cooperation, consolidation and efficiency to wring a few more dollars out of the budget as the effects of the Great Recession linger....

During the worst of the downturn, many local governments resorted to layoffs and other blunt means of cutting spending. Now, with the economy still shaky, they are looking in less obvious places for ways to save money."

Support For Emergency Manager Law - AM 1590 WTVB The Voice of Branch County

Support For Emergency Manager Law - AM 1590 WTVB The Voice of Branch County

News

Support For Emergency Manager Law

Saturday, August 25, 2012 6:54 a.m. EDT

Filling out a survey

(DETROIT) - A new survey shows that Michigan voters support the state's emergency manager law. According to a survey conducted by Detroit television station WDIV and the Detroit News, 53% of Michigan voters support keeping the law while just 33% do not.  The emergency manager law, Public Act 4, allows Governor Rick Snyder the ability to intervene with financially strapped cities and appoint an emergency manager with the power to break collective bargaining agreements, fire elected officials and privatize or sell public assets.

Taming the OPEB Beast

Taming the OPEB Beast

Originally posted by Charles Chieppo on 8/8/12

In "California's Neglected Promise," author Adam Tatum estimates that the besieged Golden State is facing more than $62 billion in unfunded liabilities for "other post-employment benefits" (OPEB), which mostly consist of health-care costs for retired public workers.

California's OPEB burden is just a small part of the picture. In 2004, the Governmental Accounting Standards Board (GASB) announced that beginning in 2008 cities and states would be required to calculate and make public their OPEB liabilities. Now, one estimate puts unfunded state and local OPEB liabilities at more than $2 trillion, while a survey of 126 state and local pension plans (representing 85 percent of public-pension assets) found unfunded pension liabilities of roughly $700 billion — and that was two years ago.

While many of us would like to change the way public pensions work, those systems do deduct money from current employee salaries to fund at least a portion of future costs. OPEB expenses, on the other hand, are generally funded on a pay-as-you-go basis from operating budgets.

Capitol Weekly: City bankruptcies target retirees' health costs

Capitol Weekly: City bankruptcies target retirees' health costs

City bankruptcies target retirees' health costs

By Ed Mendel | 08/06/12 1:00 AM PST

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The cost of retiree health care promised state and local government employees, growing at a faster pace than more-publicized public pensions, has become a common target for cuts in a string of California city bankruptcies.

San Bernardino, which filed for bankruptcy last week, lists a $2.2 million savings from a deferred retiree health payment in a three-month fiscal emergency plan said to be needed to allow the city to make payroll.

In a lengthy bankruptcy that began in May 2008 and ended last November, Vallejo cut monthly retiree health care payments to $300 from as much as $1,500, saving an estimated $100 million over time.

Stockton, in a June bankruptcy, would end all retiree health care payments, citing overly generous and costly benefits: immediate eligibility, uncapped payments, less than half of retirees covered, and a cost equal to 31 percent of payroll for proper pre-funding.

Unlike pensions, there is no widely held view that promised retiree health care is a “vested right,” protected by contract law, under a long series of court decisions. Some think promised retiree health care can be cut, depending on circumstances.

NY state officials eye automatic control boards | Reuters

NY state officials eye automatic control boards | Reuters
By Joan Gralla

The latest discussion of control boards in New York follows a report last week by DiNapoli that noted eight municipalities were so close to hitting the maximum level of property tax allowed by the state that they were at risk of losing state aid.

The concepts that policy makers now are analyzing would sidestep the political process by devising a list of fiscal indicators, according to the source, who requested anonymity. If a municipality was in the danger zone on a minimum number of them, an advisory board might be created, or the localities' finances might be handed over to a control board.

Tests might include whether the fund balance was in deficit, whether reserves had been exhausted, or whether the municipality had exceeded the maximum property tax level.
Some policy makers are concerned that automatically creating a control board to run a localities' finances would give the state too much power, the source said.

Pontiac awarded $25,000 judgment after Silverdome lawsuit - theoaklandpress.com

Wallace Parker painted himself as Pontiac's hero saying he would buy the Silverdome for close to $20 million. The truth has now come out. It is a sad story.

*******************

Pontiac awarded $25,000 judgment after Silverdome lawsuit

Published: Wednesday, July 25, 2012

By DUSTIN BLITCHOK
dustin.blitchok@oakpress.com; Twitter: http://bit.ly/LGMFSH”>@SincerelyDustin

PONTIAC — A $25,000 judgment owed to the city of Pontiac has been entered by Oakland County Circuit Judge James Alexander against attorney H. Wallace Parker’s company, Silver Stallion Development Corp.

Parker sought to buy the Pontiac Silverdome from the city in 2008, but the deal was never closed. Then-Emergency Manager Fred Leeb auctioned the stadium in 2009 for $583,000 to Canadian developer Andreas Apostolopoulos.

The day the stadium went to auction, Nov. 19, 2009, Silver Stallion filed suit against Leeb, the city of Pontiac, then-Mayor Clarence Phillips and auction firm Williams & Williams Marketing, Inc. Parker wanted an injunction halting the sale of the Silverdome and claimed racial discrimination as a factor in why the stadium was not sold to his company. He said the auctioning of the stadium amounted to a breach of contract relating to Silver Stallion’s purchase agreement signed with the city.



Pontiac awarded $25,000 judgment after Silverdome lawsuit - theoaklandpress.com

How to Reform Pensions at the Ballot Box

How to Reform Pensions at the Ballot Box

Posted By Stephen Goldsmith | June 27, 2012 in Governing the States and Localities

Please explain the budget and service context that led you to pursue the recently enacted pension reforms in San Jose.

San Jose Mayor Chuck Reed

Leading up to the passage of Measure B earlier this month, the city had been forced to deal with quickly growing budget shortfalls for 10 years in a row. By 2011, the gap had reached $115 million, with much of the increase coming from increases in pension costs. For example, the city's annual pension contribution grew from $73 million in 2001 to $245 million this year. The reductions in basic services the city could provide were dramatic, and the consequences of corresponding cuts were falling on the backs of the very workers that pensions are intended to serve. In the years leading up to this month's ballot measure, for instance, we cut our workforce from 7,400 to 5,400 workers.

With independent analysis showing another 12 years of increases in pension costs, we feared we were driving the city toward essential-service insolvency. We knew we needed to take action both on behalf of taxpayers, as well as that of the city's public servants.

Survey: Cities with emergency managers hate oversight, think not having one would be worse | Crain's Detroit Business

Survey: Cities with emergency managers hate oversight, think not having one would be worse | Crain's Detroit Business

The majority of voters in Michigan cities with emergency managers said they disapprove of that oversight but think their municipalities would be worse off without them, according to a survey commissioned by Business Leaders for Michigan.

Voters in Benton Harbor, Ecorse and Pontiac think their communities would be worse without the appointment of a financial manager, while the majority of Flint voters think the situation would not have changed.

“While the residents of the four cities with emergency managers may not like having an emergency manager, the majority of residents in every case are optimistic about their city’s future and strongly prefer an emergency manager to bankruptcy courts,”

2 big cities OK cuts to worker pension costs - Los Angeles Times

2 big cities OK cuts to worker pension costs - Los Angeles Times

2 big cities OK cuts to worker pension costs

ELECTIONS 2012

Reform advocates predict others will follow example of San Jose and San Diego.

June 07, 2012| 

Catherine Saillant and Tony Perry

Landslide victories on ballot measures to cut pension costs in two major California cities emboldened reform advocates, who said they expect a flurry of copycat initiatives and increased support for Gov. Jerry Brown's long-stalled push to curb the state's obligations to its employees.

In San Jose, nearly 70% of voters Tuesday approved a plan that gives workers the choice between increasing their pension contribution to 13% of their pay, currently 5% to 11%, or switching to a lower-cost plan with reduced benefits. It also steeply cuts benefits for new hires and tightens rules for disability retirements.

In San Diego, where pension cuts already have been implemented, voters opted to eliminate pensions for new workers. By a 66% to 34% margin, voters Tuesday endorsed Proposition B, which provides newly hired city employees with a 401(k) program, but preserves traditional pensions for new police officers.

The San Diego measure also calls for a five-year freeze on "pensionable" pay levels and removes elected leaders' ability to improve retirement packages without a popular vote. Leaders in both cities say voters were echoing a point that reform advocates have made for years.

"They understand the direct connection between skyrocketing pensions and the cuts in services we've suffered," said San Jose Mayor Chuck Reed, the primary mover behind his city's push for reform. "They recognize that the system is simply not sustainable."

All Hail the Generalist - Vikram Mansharamani - Harvard Business Review

All Hail the Generalist - Vikram Mansharamani - Harvard Business Review

HBR Blog Network

All Hail the Generalist

by Vikram Mansharamani  |  10:53 AM June 4, 2012

• Comments (183)
•        

We have become a society of specialists. Business thinkers point to "domain expertise" as an enduring source of advantage in today's competitive environment. The logic is straightforward: learn more about your function, acquire "expert" status, and you'll go further in your career.

But what if this approach is no longer valid? Corporations around the world have come to value expertise, and in so doing, have created a collection of individuals studying bark. There are many who have deeply studied its nooks, grooves, coloration, and texture. Few have developed the understanding that the bark is merely the outermost layer of a tree. Fewer still understand the tree is embedded in a forest....

For various reasons, though, the specialist era is waning. The future may belong to the generalist. Why's that? To begin, our highly interconnected and global economy means that seemingly unrelated developments can affect each other. Consider the Miami condo market, which has rebounded quite nicely since 2008 on the back of strong demand from Latin American buyers. But perhaps a slowdown in China, which can take away the "bid" for certain industrial commodities, might adversely affect many of the Latin American extraction-based companies, countries, and economies. How many real estate professionals in Miami are closely watching Chinese economic developments?

Governments Belatedly Put Pension Deficits on Their Books - Bloomberg

Governments Belatedly Put Pension Deficits on Their Books - Bloomberg
By Darrell Preston - May 9, 2012 12:01 AM ET

The Governmental Accounting Standards Board, which decides how states and municipalities must keep their books, is set to issue the new rules next month. Any decisions made so far are “tentative and subject to change,” John Pappas, a spokesman for the Norwalk, Connecticut-based organization, said by e-mail. Pensions would begin using the rules for fiscal years starting after June 15, 2013, and employers such as school districts would follow a year later.
As currently set up, the changes would force pensions and municipalities to report the portion of current and future retiree obligations that exceed projected assets as a liability on balance sheets for the first time.

Widening Gaps

The new method also may widen the gap between assets and promised benefits by applying a lower discount to the uncovered portion. The rules would tie the measure to a 30-year, AA rated municipal bond, rather than a typically higher expected investment return.
The average AA+ municipal bond yields about 4.2 percent for 30-year maturities, according to a Bloomberg Fair Value index. The Teachers’ Retirement System of Illinois has an assumed rate of annual return on assets of 8.5 percent, which is lower than its average of 9.3 percent each year during the past three decades, Dave Urbanek, a fund spokesman, said by telephone.
Under the new rules, the so-called funded ratio would fall to 53 percent from 77 percent for 126 plans, taken as a group, according to a November 2011 study from the Boston College center. The measure gauges assets as a proportion of obligations and was applied to both state and local pensions.

May Surprise Officials

“The liability will appear to be larger than it has in the past,” Cathie Eitelberg, national public-sector market director for New York-based Segal Co., a pension consultant, said in a telephone interview. “There could be some very surprised elected officials.”

Budgets: Get a Unique Second Opinion Now

http://myemail.constantcontact.com/Budgets--Get-a-Unique-Second-Opinion-Now.html?soid=1101086242761&aid=UjRAbAilfTI
 

By Fred Leeb

We help to 'tee-up' tough decisions by providing analyses and ideas for their review and approval.  We provide second opinions so they can be sure that they have gone the extra mile and obtained ideas from some of the best in the business.

   

We are turnaround specialists and our job for the last 25 years has been to:

• Use our unique perspectives and experiences as highly successful turnaround experts in government, private industry and nonprofits to generate solutions that are both creative and practical    

• Wring out more dollars even when everyone else says it's impossible and they already have cut to the bone

• Find significant new resources or refocus existing spending to generate a surplus even when it seems like there is no money

• Bring fresh and time-tested opinions from work in over 50 industries

 Please click on the link above to read the rest of the article.
 

Evidence Counts--Evaluating State Tax Incentives for Jobs and Growth by The Pew Center on the States, April 2012

015_12_RI Tax Incentives Report_web.pdf (application/pdf Object)

Conclusion:

Every year, states invest billions of
taxpayer dollars in tax incentives
designed to promote economic
development, but few know whether
they are getting a strong return on their
investment. Some states do not carefully
measure the economic impact of their
incentives; others do not examine them
at all. Some have conducted rigorous
evaluations of individual tax incentives
and others have systems for regularly
reviewing all major tax incentives—
but no state has put the two together.
As a result, when lawmakers consider
whether to offer or continue such
incentives, how much to spend, and who
should get them, they often are relying
on incomplete, conflicting, or unreliable
information.
Closing this knowledge gap should be a
top priority for policy makers, especially
as states continue their efforts to emerge
from the Great Recession. The good news
is that a number are striving to do so,
creating a blueprint for others to follow.

Public Pensions Under Stress : Shining Light on a Dark Corner, Federal Reserve Bank of Cleveland, April 13, 2012

Public Pensions Under Stress :: :: <img src="/Forefront/images/forefront_w.jpg" alt="Forefront" /><br />Spring 2012 :: 04.13.2012 :: Federal Reserve Bank of Cleveland

Public Finances: Shining Light on a Dark Corner

The financial crisis has made it all too clear that regulators failed to see into the dark corners of the financial system. With that in mind, the Federal Reserve Banks of Cleveland and Atlanta have formed a Financial Monitoring Team to study pension funds and municipal finance with an eye toward implications for the wider economy and financial system. What concerns should we have? In this article and other articles from this spring issue of Forefront, we explain where risks could be building and how reforms might help forestall their impact on the broader economy and financial system.

The Widely Ranging Estimates of Pension Underfunding

Just how underfunded are America’s public pension plans? It depends who you ask.
In the language of economics, a pension plan’s promised benefits are liabilities. They will have to be paid for someday with funds from the asset side of the fund’s balance sheet. These future liabilities should be “discounted” so that they are expressed in present-value terms. That way, you can compare the present value of the pension obligations to the current level of plan assets—essentially, a way to measure whether today’s funds on hand will be sufficient to pay for all those retiree benefits when they come due in the future. Often this comparison is expressed as the ratio of the present value of assets over the present value of obligations.
Which method to use in discounting future liabilities—that’s the crux of the issue. Public pension plans follow Government Accounting Standards Board (GASB) guidelines. This allows those plans to use the expected return on their portfolio for deter­mining the present value of their promised payments.
Following GASB guidelines, public pension funds are allowed to discount their future pension obligations by their expected rate of return, which has been in the neighborhood of 8 percent—approximately the average return of their portfolio over the past 30 years.
According to that formula, the nation’s largest 126 public pensions have liabilities with a present value (meaning they were discounted at their assumed rate) in 2010 of $3.5 trillion. The amount of assets they held was $2.7 trillion in 2010, leaving a shortfall of $800 billion.
Some economists, however, have come up with a $4 trillion shortfall. They have pointed out that for most state and local plans, promised pension benefits are protected by constitutional, statutory, or common law guarantees. (See related article, “Navigating the Legal Landscape for Public Pension Reform.”) By definition, this ought to make them riskless obligations to the pensioners. Thus, the appropriate valuation methodology should discount promised benefits using the risk-free interest rate, usually calculated as the yield on long-term U.S. Treasuries.
This method, argued cogently by Jeffrey Brown and David Wilcox in “Discounting State and Local Pension Liabilities” (2009), has the virtue of being supported by both economic and legal principles. It also produces substantially higher estimates of the present value of pension liabilities. Given the currently low yields on Treasury bonds, this approach implies a present value of accrued obligations as high as $6.7 trillion, leaving an unfunded liability of $4 trillion.
—John Carlson