- In Kansas City, a study by a university economist found that, far from curing blight, TIFs there were mainly used to subsidize development in affluent areas.
- Aberdeen South Dakota voters have demanded the right to approve a TIF subsidy being offered to a meat-packing plant. The argument for the TIF is not that the area is blighted but that Aberdeen has to offer subsidies to compete with other cities that want to subsidize a new plant.
- The school district in a St. Louis suburb is opposing TIF subsidies for a new residential area because the development “would put more children in district schools without a corresponding increase in tax revenues.”
Archive for December, 2008
Tax Subsidies to New and Old Urbanists - From Antiplanner.com
The subsidies mentioned in yesterday’s post about Denver were in the form of tax-increment financing (TIF). For those unfamiliar with the term, tax-increment financing is the principal method of funding urban renewal. An urban-renewal agency draws a line around an area to be renewed, and for the next twenty or so years all property taxes collected on any new improvements in that district — the “incremental” taxes — are used to subsidize the renewal program.
Usually, the agency estimates future tax revenues and then sells bonds to be repaid by those revenues. The bond revenues might be used for infrastructure such as streets, improvements such as parking garages and parks, or they might simply be given to the developer as seed money for the project.
There are all sorts of variations. In Colorado, a property-improvement fee (PIF) is a sales-tax version of TIF: some or all sales taxes from a retail development are diverted to subsidize the development. Some states use EAT, which allows new businesses to avoid sales, income, and other economic activity taxes. Texas has tax-increment reinvestment zones in which developers are simply rebated the property taxes paid on the new development.
Some planners are arrogant, or ignorant, enough to claim that TIF is not a subsidy because the development pays for itself. Yes, and if I got to keep twenty years’ worth of property taxes on my home, I could build a bigger house and claim it paid for itself. But someone else would have to pay for the sewer, fire, police, schools, and other services that my family uses. Make no mistake about it: TIF is a subsidy.
Like so many other questionable ideas, TIF originated in California in the 1950s. Today, every state but Arizona allows cities to use TIF. Go to Google news and search for tax increment and you will find TIF controversies all over the country.
In many, if not all, of these cases, the reason for the TIF is not that the neighborhood in question is blighted but that the city wants to see some new development that may eventually add tax revenues to its coffers. In some cases, the city would collect sales taxes on retail, thus covering its costs, while schools, fire, and other programs that rely on property taxes would suffer.
Many of the opinion columns I read about TIF say something like, “When properly used, TIFs can do good things.” Then they go on to say that a particular TIF that they find objectionable is not proper. Perhaps they don’t want to see TIF money going to Wal-Mart but wouldn’t mind TIF being used to attract a Trader Joes. Or perhaps they want TIF to redevelop someone else’s neighborhood but not their own. Often they debate about whether a particular area is really “blighted.”
But the problem with TIF is not that it is sometimes abused but that it is an open invitation for abuse. Even if you believe that government can and should do something about blighted areas, you cannot define blight narrowly enough to prevent government agencies from defining just about anything they want as blighted. In one famous case, San Jose declared a neighborhood blighted partly because the homeowners, one of whom was the local U.S. representative in Congress, failed to rake the leaves in their backyard tennis courts.
When you give cities the power to divert taxes from their usual recipients and into special slush funds for developers, you create a whole cascading series of moral hazards.
- The redevelopment agencies that manage TIF have little incentive to consider the impact on other programs. Screw the schools! We need TIF to enhance our budgets and justify our existence.
- Instead of simply curing blight, urban planners are tempted to use TIF to subsidize their visions of New Urbanism or whatever. Hey, we don’t have to worry about market feasibility anymore — we’ll just use TIF to bribe developers into building what we want.
- Corporations seeking to locate facilities being to shop for TIFs and other subsidies. If every city offers such subsidies, then the corporations simply locate where they want, and the taxpayers lose.
- Once local developers get a taste of TIF, they lose interest in doing any developments that are not subsidized. Why build an unsubsidized shopping mall or residential area that has to compete against others that are subsidized?
As one Kansas City mayoral candidate observed, cities and developers get addicted to TIF the same way that medical patients get addicted to painkilling drugs. “In economic development, we’ve come to completely rely on drugs,” he noted.
Moreover, there is growing evidence that TIF actually reduces long-run economic development and, in turn, tax revenues. One recent study found “evidence that cities that adopt TIF grow more slowly than those that do not.”
This could happen because, to the extent that TIF-subsidized projects compete against other businesses, they may harm those businesses and reduce the incentive for them to expand. As a recent study of TIF in New Orleans observes, “To the extent that other areas and businesses are negatively impacted, the existing revenue base of the local government is reduced.” For this reason, says the study, “it is exceedingly dangerous to view TIF as free money.”
Judged against all of these problems, the potential benefits of using TIF to recover blighted areas seem miniscule. Frankly, I don’t believe subsidies are needed to recover blighted areas. We’ve seen enough gentrification without subsidies to know that urban areas are dynamic and any blight is only temporary.
TIF often goes hand-in-hand with eminent domain, which is much more controversial partly because it is so much easier to understand. In most states, when an urban-renewal agency declares a neighborhood blighted, it can use eminent domain to force the sale of properties in the neighborhood. When it buys such properties, it probably uses TIF to finance the purchases.
Since the Supreme Court decision on Kelo v. New London, at least thirty states have passed laws restricting the use of eminent domain. But if we really want to stop urban-renewal abuses, we also need to repeal TIF laws.
Rare funding method sets Rio Nuevo tax area apart
Tucson officials want the Legislature to extend the special Rio Nuevo taxing district from 10 years to 40 to be like other tax-increment-financing districts around the country.What city leaders don’t tell lawmakers is, the Rio Nuevo district is unlike virtually any other district in the country.While the vast majority of tax-increment-financing (TIF) districts live off the increased property taxes from new development, Rio Nuevo is funded from sales taxes.Also, Tucson is one of the rare cases where state sales taxes are used. Those state taxes must be matched by the city with money or public projects.The district’s shape, with its Downtown core, where the money will be spent, and a tentacle stretching out to El Con and Park Place malls, where most of the money will be collected, is also a significant departure from other districts.“That’s very unique,” said Toby Rittner, the executive director of the Council of Development Finance Agencies. “Most are a single piece of property or are contiguous properties.”Rittner said it’s rare to attach tax-increment financing to an existing retail use that isn’t directly involved in the redevelopment project.Lifespan of tax districtsThe central argument behind the city’s push to extend the life of the Rio Nuevo district is most such districts last between 30 and 50 years, and the 10-year lifespan pitched to voters in 1999 is inadequate.Extending the district another 30 years will capture another $1.2 billion in state sales-tax money, the city estimates.But some experts on TIF districts said a 30- to 50-year life-span is stretching the truth. Most last in the range of 15 to 25 years, they said.Alex Iams, director of research and technical assistance for the Council of Development and Finance Agencies, said, “The typical length is 23 to 25 years” for TIF districts funded by property taxes.He said 25-year districts are typically for millions in TIF money, while 15-year districts are more for projects in the hundreds of thousands of dollars. Tucson’s sales-tax district is projected to bring in $124 million over 10 years.Professor Norman Tyler, director of the Urban and Regional Planning Program at Eastern Michigan University, said most districts start out in the 15- to 20-year range.He said many get extended because they are doing well, but he added that 30 to 50 years is an unusual length of time for a TIF commitment because the districts divert money from other parts of local governments into the redevelopment area.Sales-tax districts rareTIF districts funded by sales taxes are relatively rare, Iams said, noting they are allowed in only eight states and the District of Columbia. Of those, “only a handful allow for the diversion of state sales taxes.”Tucson was forced by state statute to create a sales-tax and not a property-tax district.“The reason a lot of states have shied away is because sales tax is a less reliable source of revenue” than property taxes, Iams said.He said a sales-tax TIF district that has been successful is in Denver, where a mix of sales and property taxes have been used to redevelop the former Stapleton International Airport site into retail and housing.A city fact sheet distributed to state lawmakers touts successes in Denver; San Diego; Fort Worth, Texas; and Memphis, Tenn., as areas with longer-life districts Tucson should emulate. But the fact sheet fails to mention those districts use property taxes heavily.Mary Okoye, the city’s lobbyist, said she didn’t see a problem with comparing Tucson to those other cities, despite the sales-tax-versus-property-tax differential.“I think it’s fair. It’s the same concept and the same mechanism. It’s just the funding that’s different,” Okoye said.City Manager Mike Hein said the city is bound by the state law to use sales taxes. If it were legal the city would have used property taxes for the TIF district, he said.Tyler said he understands why a city would want to expand the district into sales-tax-rich areas like El Con and Park Place, to capture the extra sales-tax increment, but said that’s not the intent of the TIF law.Rittner, who is also the head of the pro-TIF Tax Increment Finance Coalition, agreed it’s extremely rare to use the tax-increment financing from an existing retail use, instead of from the area that’s being developed by TIF money — especially if those malls lie miles away from the main improvement district.City officials don’t see the shape of the district as an issue.Okoye said Downtown Tucson doesn’t have a mass of retail from which to draw funding.“There’s no point in having a TIF district if you don’t get any TIF,” Okoye said.Rio Nuevo Director Greg Shelko said the malls were included by design so the city could capture as much sales tax as possible. If it was just Downtown, “there wouldn’t be a whole lot to capture,” he said.
Downtownan Rio Nuevo has taken a lot of flack recently, much of it deserved. But let’s start 2009 on a positive Rio Nuevo foot. Downtown Tucson Partnership is putting on a family friendly New Years Eve celebration with events all over downtown. USA Today picked up the story – HERE. First Night is an event we’ve borrowed from other downtown’s including Boston.
Join my family and me downtown tonight. Support the local businesses down there, see for yourself what is there and get a sense of what could be.
HERE is the link to the official web site and below is the schedule of events:
Tickets for FIRST NIGHT are colorful event buttons that are to be worn during the festival.
$12 for adults, $6 for children 6-12 and free for little ones 5 and younger. Paid admission allows entry into all venues. Purchase your button at Bookmans, Food City, TCC Box Office, Fox Theatre Box Office or purchase your button online now.
FIRST NIGHT is alcohol-free to maintain a family-friendly atmosphere. Hot and cold beverages and food will be for sale in the lobby of the Leo Rich Theatre and at La Placita.
FREE party favors courtesy of Cox Communications, while supplies last.
Need assistance at the festival? Volunteers will be stationed throughout downtown to answer questions and offer directions. Look for them in FIRST NIGHT t-shirts with blinking lighted pins.
Parking is available in the La Placita parking garage and the TCC parking lots. Also, FREE on-street parking starts at 3pm, courtesy of ParkWise.
TCC LEO RICH THEATER
260 S. Church Ave. Sponsored by Cox Communications. Featuring a program of Hispanic Roots entertainment.
4-4:45pm: Tucson Symphony Orchestra’s String Quartet – Josefina the Javelina (a musical adventure)
5-5:45pm: Mariachi Aguilitas de Davis
6-6:45pm:Nelly y Javier (Las canciones del amor)
7-7:45pm: Ballet Folklorico Tapatio (traditional Mexican dance)
8-8:45pm:Los Cuatros Vientos (mariachi quartet)
9-9:45pm: La Mezcla (Latin salsa & fusion)
10-10:45pm & 11-11:45pm: Santa Cruz River Band (Southwestern folk music)
LEO RICH THEATRE PLAZA
260 S. Church Ave. Sponsored by Tucson Pima Arts Council.
Ongoing: Art installation by Mat Bevel
3:30-6pm: The Physics Factory
6:30-7:30pm: The Mission Creeps
7:30-8:30pm: Beatnik Dream Vacation
9:30-11:30pm:El Camino Royales
12-midnight: GRAND FINALE
SCOTTISH RITE CATHEDRAL
Sponsored by Ward VI City Council Member Nina Trasoff.
160 S. Scott Ave.
4-4:45pm & 5-5:30pm: Rodney Housley Children’s Magic Show
6-6:45pm: Mirror Image (twin sister jazz duo)
7-7:45pm:Degrazia Spanish Band (Spanish guitar)
8-8:45pm: Silver Thread Trio (folk/jazz/world music)
9-9:45pm: Leila Lopez (folk fusion)
10-10:45pm & 11-11:45 pm:Tim Wiedenkeller (bluegrass)
TUCSON CHILDREN’S MUSEUM
200 S. Sixth Ave. Sponsored by Tucson Mayor Bob Walkup. All outside entertainment is FREE. A festival badge gets you inside to enjoy the hands-on activities.
4-4:45pm:Thorton Willoughby, the Southwestern Wizard (magic)
5-5:45pm: Human Project New Era (hip hop dance)
6-6:45pm: Sticks and Fingers (percussion group)
7-7:45pm:Puppet Muzik (puppet show)
BEOWULF ALLEY THEATRE
11 S. Sixth Ave. Sponsored by Tucson Newspapers, Inc.,
4-4:45pm: Stories that Soar!
5-5:45pm:Lisa Otey and Diane Van Deurzen (singalong)
6-6:45pm: Stories that Soar!
7-7:45pm:Lisa Otey and Diane Van Deurzen (blues)
8-8:45pm:LaughingStock Comedy Company (improv)
9-9:45pm: Angel and the Blues Disciples
10-10:45pm:LaughingStock Comedy Company
11-11:45pm: Angels and the Blues Disciples
LA PLACITA VILLAGE COURTYARD
110 S. Church Ave. Sponsored by Tucson Pima Arts Council. Free children’s programming early in the festival moving on to family-friendly singers and bands later in the evening.
4pm-4:45pm: The Dusty Buskers
5pm-5:45pm:The Rosano Bros
6pm-6:45pm: Beatnik Dream Vacation
7pm-7:45pm: Kate Becker Project
8pm-8:45pm: Stefan George
9pm-9:45pm: The Tryst
10pm-10:45pm: The Evolution
11pm-11:45pm: The Dusty Buskers
17 W. Congress St.
4-5:30pm & 6-7:30pm: Spongebob Squarepants: The Movie
8-11:30pm: Family Guy episodes
LEO RICH THEATRE PLAZA
260 S. Church Ave. Sponsored by the Downtown Tucson Development Company. Don’t miss the spectacular Leo Rich Plaza grand finale at midnight, including the energetic sounds of music and dance ensemble Batucaxé and a thrilling countdown laser show.
JUST ADDED: FIREWORKS AT MIDNIGHT!
Download and Print Your Own Schedule
First Night Festival Program (584KB, pdf)
Call us at 520.547.3338
Remember back to the 2006 legislative session to extend the Tax Incremental Financing (TIF) funding for Rio Nuevo? The debate was whether or not to extend the TIF funding.
The idea behind TIF financing is to focus money from existing retail sales in a geographic area and use those funds to bolster tax collections in a new area. Tucson has spent $78 million so far and it’s questionable how much new economic activity has actually occurred. The City politicians point to ’laying the groundwork for future development’. That story is starting to wear thin.
The state legislature is coming into some tough times and balancing budgets is becoming a very big issue. If you take a look at the the current make up of the AZ Senate, no one in the current Republican Caucus voted for the extension and only four or 5 Republicans actually voted for it.
Let me paint the picture for you;
1. Rio Nuevo was a grand idea thought up by City Manager Keene as a way to make Tucson more Berkley like.
2. A fat legislature lead by Southern Arizona golden boy, Tim Bee and a governor that wanted to reward Tucson for supporting her in to office, authorized the TIF funding to jump start downtown Tucson.
3. City mangers changed, elected officials changed, downtown business associations changed, Rio Nuevo offices were opened and closed. Downtown Alliance came and went Downtown Partnership came and went, Glenn Lyons was hired and a new Downtown Partnership was created.
4. Lots of money was spent on lots of consultants and plans that never came to fruition.
5. Enter the current City Manager, Mike Hein. He worked to get the TIF extension in 2006. The extension was a tough one to get and a few caveats were implemented regarding restrictions on eminent domain and using the funds to build police or fire facilities.
6. All total $78m has been spent and people question how much has actually been done. The officials in charge point to ‘infrastructure’ projects that ‘lay the groundwork’ for future Rio Nuevo growth.
7. 2009 will usher in a new slate of legislators that are under the gun to balance a huge budget deficit. The State will be looking high and low to capture all the dollars it can. Couple that with the fact that all but one of the state legislators taking office in this session were not involved in the 2006 extension negotiations and Rio Nuevo is looking at a tough, up hill battle.
From this weekend AZ Star: – HERE
A devastating blowLosing a half-billion dollars in Downtown redevelopment money would be a “devastating blow” for Tucson, said Si Schorr, a local lawyer and active Democrat. “One doesn’t have to hold an MBA from Harvard to figure out that,” he said.George Larsen, co-owner of Larsen Baker Commercial Realty, said losing the money would be a setback for Downtown, adding that the Legislature should be able to mandate changes like accounting reform, but should not be able to suspend or cancel Rio Nuevo.But Cotlow Co. President Dean Cotlow, a commercial real estate broker, said the city doesn’t deserve any more money for Rio Nuevo, given how badly it has misspent the first $100 million. It would be understandable for the Legislature to take the money, given how it has been spent so far, he said.Losing the money would be a blow to the community, Cotlow said, but it would force the city to own up to its mistakes and learn an important lesson.Tucson Mayor Bob Walkup said he’s concerned about the Legislature taking the money, but that he doesn’t think it will happen because the city will make a convincing argument to the Legislature for keeping it.“I think we’ve got a story to tell that a lot of good things are starting to happen,” Walkup said. “We owe them that story.”
Words of cautionSome Republicans are discussing a suspension of Rio Nuevo’s ability to draw on state taxes until the state’s budget crisis passes, said local businessman Bruce Ash, a party leader who has had a long-standing interest in Rio Nuevo.Ash said the city is “playing with fire” with its recent sale of $80 million in Rio Nuevo bonds, since the Legislature may suspend Rio Nuevo state sales-tax deliveries to Tucson. That would leave the city paying for the bonds out of its own general fund, meaning substantial cuts to other city services to pay off the bonds.Antenori also questioned the city floating Rio Nuevo bonds. “They’ve got to realize they could be on the hook for that,” he said.Hein downplayed the potential the Legislature would take the money pledged to the bonds. He said all of Rio Nuevo’s cash flow for the next several years is pledged to the $80 million in bonds sold in mid-December.If the Legislature were to repeal or suspend Rio Nuevo, Hein said it is likely to trigger complex legal action involving the city, the state and bondholders.It would also set precedent statewide that any specially dedicated funding source, such as water or sewer bonds, could be pulled by the Legislature, making it impossible for any Arizona jurisdiction to float those bonds because of that risk, Hein said.Assistant House Minority Leader Kyrsten Sinema, D-Phoenix, said she knows of no specific plans for Rio Nuevo this legislative session, but added that “you can bet on” someone trying to get rid of Rio Nuevo at some point.Sinema said the Tucson City Council asked the Democratic leadership to try to protect Rio Nuevo funding, something it will try to honor.“What kind of power we have to do that is another story,” she said.
A little history on the original set up of Rio Nuevo and the 2006 legislative extension from Blog for Arizona:
Rio Nuevo is a multi-use redevelopment district which diverts a portion of the tax revenues collected in the district, in this case Sales Taxes, and places them in a fund for redevelopement projects. A TIF district like Rio Nuevo must be authorized by a public vote. In 1999, voters approved Prop 400 which authorized the Rio Nuevo TIF for a period of 10 years.
Or did it?
Many in support of reauthorizing Rio Nuevo (disclosure: I personally support it), felt that it would be unwise to ask Tucson’s voters to reauthorize the Rio Nuevo TIF. The most honest accounting of that concern I have yet heard was from LD 28 state legislature candidate Steve Farley, who opined that if Rio Nuevo went back to the voters, it wouldn’t win. The dithering, incompetence, lack of visible progress, and repeated redrawing of the plan with new and better boondoggles, has left many Tucsonans with an impression, not entirely unjustified, that Rio Nuevo is a failed experiment.
So how could those who support it avoid sending it back to voters? Just have the legislature reauthorize it. There’s just one pesky little detail: the law. ARS 48-4237, which authorizes multi-use TIF districts has a requirement: Section D states “The board shall state on the ballot the purpose of the tax, the maximum rate of the tax and the maximum number of years for which the tax will be authorized.” Well, that’s a pickle; Rio Nuevo expired after 10 years.
Supporters of the ‘legislative only’ reauthorization approach found a solution. They proclaimed far and wide that Rio Nuevo could be extended without refering it to the voters because, though the voter pamphet distributed to voters, and all the press coverge leading up to the vote, specified a period of 10 years, that limit wasn’t actually on the ballot. Thus the Rio Nuevo TIF was not technically limited to 10 years and could be extended indefinitely. Only problem is, then that ballot violated state law.
Hair-spitting gone wild. But water under the bridge. But it leaves those advocating for the ‘legislative only’ approach without any real, good-faith basis for their argument. Well, actually, there isone. Back to Steve Farley’s honest assessment. We won’t have a vote, because it won’t pass. So, no vote. If you really think Rio Nuevo is nifty and you don’t care much about those pesky rules we call the law, there’s no problem.
Unfortunately for Downing, he did care about the law. And he cared about the right of taxpayers to decide how their money is spent.
You see, the hundreds of millions that ‘would just go to Phoenix’ if not devoted to Rio Nuevo is only half the story: literally, half. Every dollar of Sales Tax that get diverted to Rio Nuevo by the TIF, must be matched with revenues by the local government. So, reauthorizing Rio Nuevo wasn’t just keeping Tucson dollars in Tucson, it was also a decision to spend hundreds of millions of local tax dollars to match those funds, all of it tagged only for use on Rio Nuevo projects. So a handful of state legislators, no matter how well intentioned, took it upon themselves to decide how hundreds of millions of Tucsonans’ general fund tax dollars would be spent: on Rio Nuevo. And we don’t get any say about it.
Foraker ran a great timeline of events for Rio Nuevo on his blog – HERE. One of the highlights of the blog post worth a read;
November 26, 2007: Marketing Exec sees a lack of ‘wow’ factor in Rio Neuvo(Teya Vitu – Tucson Citizen) Margaret Pulles, deputy director of the Smithsonian’s Affiliations Program, looks at what is going on and declares, “You’re going to have a ghost town if you don’t change your frame of thinking.”
After landing the city contract to brand Rio Nuevo, Margaret declares that she didn’t see much to brand, i.e. where are the clothes on this emperor? (Remember Bablove Ridgewood Workgroup? Lack of clothing didn’t stop them from taking a quarter mill or so to make a yellow streak.) Margaret’s “Where’s the beef?” remark infuriated Rio Neuvo Director Greg Shelko. He declared, “I don’t think she knows what we’ve been doing the past two years.”
I’ve never met Greg or Hecker, but the cloth alarm is screaming. I have met Snell. I speak with confidence that if you asked these three to team up and bake a pizza, they’d drop fifty grand on an oven study, twelve grand to fly to Greece and watch them, $40 grand to consultants to study 1) dough, 2) sauce, 3) ingredients, 4) cheese, 5) baking temps, 6) pizza size, and 7) crust thickness policies. After extensive meetings and interviews, Snell would drop 75 grand for glossy pamphlets no one will read because everyone’s already left for Pizza Hut, where it takes 20 minutes and costs about twelve bucks.
January 10, 2008: Glen Lyons, the new director of the Downtown Tucson Partnership, arrives. Salary $100-$120K. Now things will really start to happen.
Councilman Steve Leal announced that he will not be seeking another term of office. An open seat on City council will surely make for fun blogging in 09′. Will the business community field a candidate? Will the discussion change from plastic bags, rain water harvesting and Kidco/Jobpath to, I don’t know, IMPORTANT STUFF?
From an earlier blog post regarding Leal:
This story goes right up there with Leal locking himself in Pima County jail over night.
This is better than Barney Fife and an episode of The Andy Griffith Show.
Some of the AZ Star comments worth a look:
8. Comment by Max M. (20YearResident) — December 22,2008 @ 1:17PMRatings: -9 +22 Steve Leal had all the makings to be a great city councilman.However, he chose to pander those qualities away and as the writer above said became an empty suit.Mr. Leal when you try to stand for all things your message is that you stand for nothing.The rest of your city council will follow suit as the public sentiment to transparent crooks is become worn and frayed.
Perhaps if you had taken your actual constituents to heart rather than businesses money to pocket you would’ve become someone great in this town.
Yet, I am sure you have built love with Jim Click and friends and perhpas one of them can find you a job selling cars or insurance.
But history will only look at you as another crook in a city full of crooks and you will be soon forgotten.
Merry Christmas Tucson.
When the environmental consulting business renewed its credit line last month, the interest rate nearly doubled to 10% from 5.25%. Fuel costs for the company’s vans and trucks had risen. Customers were taking longer to pay bills.
Chief Executive Deb Peters says she didn’t want layoffs, so she asked some of her 33 employees to mow the company’s lawn and do other yard work, saving $7,000. Another $7,000 in savings came from switching the ink on Quality’s letterhead to black from color.
Then the operations manager tried to halt delivery of $130 worth of doughnuts, bottled water and vanilla coffee creamer for a monthly staff meeting. No way, Ms. Peters said. Employees who work billable hours agreed to work one or two more per week to pay for the treats.
“It’s like riding a roller coaster,” she says of running her business these days.
Across the U.S., companies are looking for cuts in every budgetary nook and cranny in an economy dragged down by slowing consumption, an imploding stock market and tight credit. They’re cutting payrolls and scrimping on everything from photocopying to free coffee, from sales trips to shampoo. Some are having to reluctantly turn away business because they can’t borrow enough money to accommodate it.
Louis Licari, founder of the tony Louis Licari salons in New York and Beverly Hills, Calif., recently installed new weight scales so hair-color solution could be more precisely measured. Hair-washers who use too much shampoo and conditioner will be scolded, he says. “There’s no more by-the-eye measuring — too much waste goes down the sink,” says Mr. Licari, whose salons employ about 120.
Still, to keep customers coming, he says he can’t afford to cut some costly perks, like the “major arrangement” of flowers at the front desk that is replaced every week. “We’ll still do coffees, teas, cookies and brownies,” he says. “Even if I have to bake them myself.”
At 2nd Wind Exercise Equipment Inc. of Minneapolis, “We’re analyzing things with a magnifying glass,” says Chief Executive Dick Enrico. Sales managers traveling to the company’s fitness-machine stores have been ordered to compare the cost of renting a car versus expensing the use of their own vehicle at federal mileage rates.
At Shooters Restaurant & Sports Bar in Wareham, Mass., food sales have dropped almost 80% in the last month, prompting a new menu of “recession specials,” says Jim Hoban, an owner. Spaghetti and meatballs has been cut to $4.99 from $8.99. The fried clam plate is $7.99, down from $9.99.
“No one has got any money to eat out,” Mr. Hoban says of his largely blue-collar clientele. “We are basically giving the food away, hoping that they’ll buy a beer” or something else extra.
The Mashantucket Pequot Tribal Nation, which operates two big casino complexes in Connecticut, plans to lay off 700 employees, or about 6% of its work force, as revenue falls. Among the first to go was the nation’s chief executive, Patricia Irvin, whose position was eliminated. “Although it has taken a few months, the recession’s impact can now be clearly seen in our industry,” Michael Thomas, tribal council chairman, said in a statement.
And construction by a different tribe, the Mohegan Tribal Gaming Authority, of a 39-story, 919-room hotel in Uncasville, Conn., recently was stopped because of the economy. The Mohegans had planned to spend $734 million on the hotel, a restaurant, a retail center and concert venue.
Hinckley Co., a storied Portsmouth, R.I., yacht builder, last week said it was shedding 49 workers, or about 9% of its work force, citing a sudden slowdown. The company was hitting its sales targets through the year’s first two quarters. “The tipping point really was the last 30 days,” says Edward A. Roberts, vice president of marketing and product development, “when we saw a fairly abrupt change in the demeanor in people getting to the last step” of the buying process. People who negotiated contracts to buy boats were suddenly unwilling to sign, he says.
Instead of sending the usual four boats to a major show in Annapolis, Md., next week, Hinckley will send two, and two salespeople instead of five. “We’ll still open a bottle of champagne in the afternoon,” Mr. Roberts says. “We won’t switch to beer.”
The Greyhound Lines Inc. bus depot in Montpelier, Vt., will shut its doors next week because of a ridership drop, says station manager Michael Coffin. Starting Tuesday, Greyhound plans to cut one of its four daily round trips between Vermont and New York City. That means Mr. Coffin may lose 25% of his customers and ticket-sales commissions. “I’m pretty much going to be forced to close, and get myself back out in the work force,” says the 50-year-old Mr. Coffin.
Others are missing opportunities. Three weeks ago, Vista Window Co. of Warren, Ohio, received a surge in orders for its vinyl replacement windows after a competitor shut its doors. Vista sought a $1.75 million loan to hire workers, buy machinery and raw materials and secure more warehouse space, says Ed Kalaher, vice president of corporate affairs. Its bank refused, saying it was no longer comfortable with Vista’s debt-to-assets ratio. Vista turned away the business and will delay further expansion plans for at least another year, Mr. Kalaher says.
The company’s sales have grown by at least 40% a year since it opened seven years ago and this year are expected to hit more than $20 million. “In years past, there was a certain amount of value that momentum, growth, opportunity brought with lenders,” Mr. Kalaher says. “That doesn’t hold any weight anymore.”
Lifeline Program, an insurance-settlement company in Atlanta, saw its revenue grow 20% annually for six years while relying on loans of up to $250 million every 18 months to finance its operations. But its usual lender, part of a multinational bank, shut the door on the company’s most recent request for money, forcing it to lay off half its 50 employees. “This has been a shocking blow to me as a business owner,” says Scott Page, the company’s president and chief executive.
Bonnie Ulman, president and founder of Haystack Group Inc., an Atlanta public relations firm, noticed earlier this year that clients were taking longer to finalize contracts and pay bills. Rather than replace several employees who left, she asked her 15-member staff to take on additional tasks. To save on magazine subscriptions, Ms. Ulman asked workers to find cheaper online options. Employees started to make two-sided photocopies and favor the U.S. Postal Service over FedEx.
“We used to give $10 Starbucks gift cards [to top performers] every week, but that’s cut to every month,” Ms. Ulman says. Rather than celebrate the holidays this year with dinner at a fancy restaurant, employees and clients will volunteer for Habitat for Humanity, then eat at Ms. Ulman’s home.
“You’ve got to batten down the hatches to stay focused on the firm and your clients,” says Ms. Ulman.
—Timothy Aeppel, Paulo Prada, Philip Shishkin and Sara Silver contributed to this article.
Issue date: 5/8/06 Section: Forum
It should be obvious to anyone living in the State of Oregon that we have traveled down a bumpy and often turbulent path recently in both state and local government. With high taxes, an often unfriendly business environment and a fledgling school/higher education system, it quickly becomes apparent to most people that the old way just isn’t working anymore.
So let’s go ahead and start at the beginning. One often hears the cries of legislators claiming we need more money for Oregon public schools in an attempt to build momentum for a tax increase. What these same legislators don’t tell you is that per capita, we are near the top of the 50 states in education spending. Monetarily, this means that state spending for education has almost doubled in approximately the last 50 years. Oregon teachers still earn more than the national average even while, according to the Cascade Policy Institute, other Oregonians earn less. Furthermore, we have one of the most lavish Public Employee Retirement Systems (PERS) in the country. While teachers often deserve a higher rate of pay, higher than the national average, in this case we simply can’t afford it.
And what has this done for the State of Oregon? In terms of national averages, not a whole lot. High school juniors and seniors only rank around average in comparison with their peers throughout the country.
And our problems don’t end here. Oregon, most notably Multnomah County, has often been seen as an anti-business and unfriendly place for companies to locate. Much of this is a direct result of our high taxes, especially Multnomah County’s Business Income Tax, which often creates incentives for business to locate in surrounding areas such as Clackamas or Washington County. According to a study done in 2003 by the Small Business Survival Index, Oregon ranked near the bottom while our neighbor to the north was ranked near the top.
The problem with this should be obvious. Where is the incentive for a small business to come to Portland when they can locate in Washington?
Oregon doesn’t have a monetary problem. On the contrary, what they have can be described as none other than a spending problem. Consequently, if Oregon continues on this path, it may not have much left. Businesses will have an incentive to relocate elsewhere around the country, and the economy will continue to decline as we have seen in recent years.
I think it’s time for not only a change but a big change in this state. We have had the leadership of Democratic governors for almost two decades. While some of our current woes may not be entirely their fault, like anything else, success or failure resides in the person in charge.
Likewise, it’s not just the Republicans who are becoming increasingly frustrated. In a poll recently published in the Oregonian, 48 percent of Democrats feel that Oregon is on the wrong track, compared with 41 percent who feel we are moving in the right direction. The margin for the Republicans was naturally higher, with 66 percent expressing their dissatisfaction versus 22 percent who feel we are moving in the right direction.
The democratic leadership in this state has failed to control spending and put caps on the PERS system. If we continue on this same path we may in fact be setting ourselves up for failure.
With a majority of both Democrats and Republicans in agreement with the direction our state is headed, it should seem obvious to anyone that we need a new voice in government. I think the best person for this job is Republican gubernatorial candidate Ron Saxton.
Apart from his fiscally conservative policies, Saxton has chosen to take on the tough issues that are currently affecting Oregonians head on. He pledges to reform the PERS and education system, lower taxes to encourage business and strengthen the economy as well as eliminating government waste.
With the current challenges that currently lie ahead of us, we have a choice to either continue with the status quo, which so far, has given dismal results, or enact a fresh change in leadership. Unless we make change now we are left with a system that is not only inefficient but ineffective.
Eric Wilson is a junior in political science. The opinions expressed in his columns, which appear every Monday, do not necessarily represent those of The Daily Barometer staff. Wilson can be reached at firstname.lastname@example.org.
Here is a great commentary from today’s Arizona Republic. For those in our community that get a weekly paycheck, thank your lucky stars! For those of us that are self employed you realize just how scary it can be. Many small businesses will not be able to survive these next few months. There day is filled with fear. The news outlets talk about how bad it is at every turn. Small business owners have no idea of that lies around the corner? How long can we hold out? Will fuel go through the roof again? When will my customers start spending money with me?
From E.J. Montini – Arizona Republic – Dec. 21, 2008
The businessman’s message ran for 1 minute and 36 seconds on my answering machine. He was trying to set me straight about the problems being faced by people like him, which he thought were ignored by people like me. And he was right.
I didn’t have the brains or the guts to go into business for myself.
I grew up in a mill town, come from a family of millworkers and spent several summers working in a steel mill outside of Pittsburgh to help pay for college. Professionally, I drifted into a less physically demanding form of assembly-line work and have spent many happy years toiling away in what I call the Paragraph Factory.
I feel close to the working people who are bearing the brunt of the economic downturn, like a Phoenix couple I wrote about last week, both of whom had been laid off from their jobs.
The anonymous local businessman was responding to that article when he left his message on my voice mail.
He chose not to leave his name or telephone number, or even to tell me what business he was in. I doubt that he had rehearsed all that he was going to tell me.
There is a raw, emotional quality to his voice. His sentences start and stop. He sounds a bit disjointed. A little frustrated. A little sad.
All for good reason.
“Who has more to lose, Ed?
“The common person that gets laid off from their job making $50 or $60,000 a year, you know, has a small savings. And they just lose their job. And they get unemployment or severance. And they can go six months and hopefully survive and keep their house.
“Or the business owner that had to lay them off? Who had been working for 25 or 35 years. Has bought their own property. Has some kind of a liquid income, so finally they can get above their heads. And pay their bills. And pay all their taxes. And pay all their employees’ health insurance and all that.
“And finally get to an area where maybe they can start giving bonuses. See that light on the corner. And being 48 years old and possibly you’re going to turn that corner and see retirement on the horizon. And then to all of a sudden, in two years, lose all of that and begin where you started back in 1985.
“You tell me, which is worse?
“That you’ve already made all that money, and you bought the property, and your kids are going to college, and you’re doing all that, and then after 25 years of working hard, you lose all that?
“Or just to lose your job and have to go look for another job? Maybe have to deal with it for six months or something.
“Look on both sides.
“Business owners may be callous or whatever, but they are losing worse because we have a lot more to lose. Twenty-five years after buying a property and you just lose it all in two years.
“Isn’t that amazing?”
Then he hung up.
There probably won’t be any federal bailout money for guys like him. In the meantime, some of his taxes already may have gone to assist big-time bankers and types and might wind up helping some of the working stiffs who were behind on their mortgages and about to lose their homes.
The small-business man didn’t ask for help, however. Or for sympathy.
Imagine that. Even after losing everything and having to start anew, as he had “back in 1985,” all that he asked is that I take a moment to “look on both sides.”
At a time when so many others are looking for a handout, that is amazing.
Reach Montini at 602-444-8978 or email@example.com.
But an Arizona Daily Star news story on the bill two weeks later showed most of our six Democratic councilmembers have been thinking about Paton’s idea for Tucson to join the rest of Arizona’s municipal governments, which already hold nonpartisan votes.
They don’t like it. Southside Councilman Steve Leal said Paton and others “want nonpartisan elections for partisan reasons.”
Partisanship was apparently all right earlier in Leal’s 19-year council career when he opposed annexations of urban areas immediately north or east of Tucson.
Democrats lead in city registrations, with independents second and Republicans third. Leal warned fellow Democrats that annexations in the foothills or the far eastside would strengthen Republican numbers in the city.
His registration argument hasn’t surfaced recently because hardly anyone to the north or east of the city limits wants to be governed by this mayor and council.
They’d rather spend August pulling a steamboat upstream in the sand of the “navigable” Santa Cruz River.
Nevertheless, switching to nonpartisan government might lead to the eventual annexation of some of our neighbors’ children or grandchildren.
Future generations might forget today’s countless council schemes to toughen city development regulations when no one can afford to develop anyway.
Democratic Council members Rodney Glassman of eastside Ward 2, Karin Uhlich of the north-central Ward 3 and Nina Trasoff of university-area’s Ward 6 told the Star they want city voters to approve any proposal to adopt nonpartisan elections.
“It is something city voters should decide rather than Phoenix dictating how we operate,” Uhlich said, suggesting the council could refer the idea to a citizens committee looking at city charter changes.
Oh boy! We all know how helpful city committees are in Tucson.
Where would our downtown be if we hadn’t referred Rio Nuevo, the Barraza-Aviation Parkway, a new convention center and the proposed Nimbus Brewery to committees and neighborhood groups?
Nevertheless, council Democrats are right when they say Tucson voters should decide on city charter amendments.
The charter says it very specifically, but that isn’t the issue. I doubt that Paton’s bill will mention our city at all.
It probably will say that all Arizona cities and towns, plus those that haven’t been incorporated or even thought of, must have nonpartisan elections. That’s a statewide issue and therefore a suitable topic for the legislature.
If Tucson’s Democratic council members and their allies lead a fight against that kind of bill, they will surely lose. The Arizona House and Senate are dominated by Republicans, most of whom represent Maricopa County.
And Democratic Gov. Janet Napolitano, who will resign early next year to become the Obama administration’s director of Homeland Security, won’t be here to consider vetoing the bill.
Republican Secretary of State Jan Brewer, who will succeed Napolitano, is already upset with Tucson Democrats whose vote-tabulating dispute with Pima County indirectly challenged her authority as Arizona’s chief election officer.
Brewer probably will sign Paton’s bill if the Legislature adopts it.
Nonpartisan elections would attract more business and professional candidates who have leadership skills and good, practical ideas for running a city.
Their campaigns probably would deal more with what’s best for Tucson, business growth and good-paying jobs and less with abortion, guns, the Iraq war, stopping growth near the Grand Canyon or plastic grocery bags.
For five decades, Tucsonans have elected a number of pleasant or well-meaning folks with little business or administrative experience, plus a few who may not have meant so well.
Given the shape of our city, it’s time to try something new.
Read Chuck Huckleberry’s opinion letter to The Explorer newspaper HERE.
There has been an ongoing dispute over control of the Arroyo Grande development. Arroyo Grande will ultimately be filled with 6000 houses. The border of Arroyo Grande go from north Oro Valley all the way past Catalina to the Pinal County line. At issue is how much open space will be set aside in the development.
Pima County was pushing for control and OV ultimately wanted to control the development. Having future growth occur in a city makes more sense than expanding unincorporated Pima County.
From the opinion;
I apologize if any of my remarks may have been interpreted to cast blame on any entity or individual. They were not intended to do so. In the present circumstance it is nobody’s fault, but really everybody’s fault. It will be a tragedy if we all went through the difficult and trying process to develop consensus on Arroyo Grande and the end result is our complete failure to produce the open space the public was promised.
Chuck Huckelberry is the Pima County administrator.
ADOT is looking at volume on I-10 through Tucson and projecting that we are going to be in trouble. Read the study HERE. Data shows that by 2030 between 150-200k cars per day will be using the freeway. Options to expand or build a second deck are too expensive and an equally expensive light rail option would alleviate enough volume.
From Fox News – HERE.
What ADOT is proposing is a bypass from Casa Grande west of Avra Valley then past I-19 then connecting back to i-10 past Vail. The bypass would separate local traffic from travelers and truckers passing through.
Of course the NIMBY factions and the environmental groups are lining up in opposition. Supervisor Bronson who’s district encompasses much of the area came out in The Explorer this past week quoted her as;
“Everybody is opposing,” said Pima County Supervisor Sharon Bronson. “I don’t know what ADOT is proposing.”
For more than a year, county officials have made known their staunch opposition to the proposed western bypass.
The county, and some federal officials, worry that the roadway would infringe on a 4.25-square-mile mitigation corridor that the Bureau of Reclamation purchased to help preserve mule deer. The animals use the area when crossing between the Tucson and Roskruge mountains.
In its study, ADOT has acknowledged the conflict there and suggested that a land swap would be needed to build the bypass.
“It goes through critical habitat,” Bronson said.
The supervisor said that on Friday and in the coming weeks, state officials should expect to get an “earful” from her on the plan.
Where it gets interesting is that the one shiny spot in our regions economic development future is around transportation logistics and handling freight by rail and truck coming from new deep sea ports in Guymas and from crowded Long Beach.
The recent ULI Town Hall presentation on the coming Arizona Megaopolis pointed out that a number of the western states will enjoy NAFTA trucking transportation booms for years to come. The transportation corridors can originate in central Texas, El Paso, through Tucson or from the Yuma valley. The winner of the economic boom will be the community that plans ahead and gets their act together quickest. The freeway bypass would be a huge step forward on getting us ready. Read more HERE.
Read about the Canamex corridor – HERE.
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