Archive for the ‘Expenditures’ Category

The Great OPEB Dump

Tuesday, May 26th, 2015

May 26, 2015

The Great OPEB Dump

OPEB (other post employment benefits), basically retirement health care benefits, are much in the news. Retirees are acting like it is a great surprise that their health care plans are being cut and possibly it is a surprise. They made the mistake of believing political promises.

But look at the facts. Funding for the school systems (the old Memphis City Schools and the old Shelby County Schools) was always the responsibility of the Shelby County Government. The City of Memphis kicked in some money over the years and then when things got tight at the City, they cut that funding and the Courts said NO, they had to continue the funding on the basis of the principle of MAINTENANCE OF EFFORT.

For years the old City of Memphis Board of Education had a free hand and they loaded up the budget and the teachers and other unions participated in the loading. In particular look at the OPEB provisions of the old City School Board versus the old Shelby County School Board.

Here is a statement from the 2010 Shelby County audited financial document. Their unfunded OPEB liability went from $787 million in 2008 to $242 million in 2009. Look at the reason.

“The Board began recognition of OPEB on July 1, 2007. Limited trend information may be discerned from the three valuations made to date. The change in AAL for OPEB from the June 30, 2008 to the June 30, 2009 valuation date was due to actuarial assumption changes related to reduction in claim costs for post-65 retirees. Effective January 1, 2011, post-65 retirees formerly covered under the self-insured plan will be covered under an insured Medicare Supplement plan   which is estimated to reduce claim cost by 63% to 72% depending on age. Additional reductions are anticipated due to census changes, changes in retiree contributions, and any retirements or terminations that did not occur as expected in the prior valuation.”

Then look at the old City of Memphis School Board OPEB condition and lack of action from their 2010 CAFR (Comprehensive Annual Financial Report).

AS OF JUNE 30, 2010, THE ACTUARIAL ACCURED LIABILITY FOR BENEFITS WAS $1,534,912,045 (that is $1.5 billion), ALL OF WHICH WAS UNFUNDED.

They failed to take the actions that the old Shelby County School Board took. They eventually dumped this unfunded liability on the new Shelby County School Board and the County and City taxpayers.

Again this is the result of failure of the old City School Board to recognize the huge unfunded promise and like the City of Memphis they will be forced to make the retirees pay for their past poor decisions.

 

Are Smart Meters A Smart Purchase?

Monday, May 18th, 2015

May 18, 2015

Are Smart Meters A Smart Purchase?

Tomorrow there will be a City of Memphis committee meeting and in that meeting will be the subject of further purchase of smart meters as shown below.

MLGW COMMITTEE (Chairman Berlin Boyd)

  1. Resolution approving the purchase of a Mobile Energy Efficiency Educational Unit (vehicle) for an amount not to exceed $250,000
  2. Discussion of opting-out of Smart Meters
  3. Resolution awarding Contract No. 11776, Smart Meter Solution Full Deployment, to Elster Solutions, LLC, in the funded amount of $240,000,000 for work to be done over a period of approximately five years.

I have received the following email from a friend and a very active citizen in various local public policies.

  • 240 million dollars over five years is an astronomical amount of money. The rate payers in Shelby County will be stuck with the bill.
  • Firing meter readers and using their salaries to pay for smart meters does not add up. They are not paid that much!
  • Please share this with Shelby county friends. I know several people there who spoke out and opted out of smart meters without paying a monthly fee to mlgw. If they had not spoken out, refusing a smart meter would have resulted in a monthly fee.
  • The biggest reason for smart meters will be time-of-day-rates. While you will be sold on these rates because they are cheaper at certain hours, those rates will be much higher at other hours (example: summer rates in the afternoon hours 3-8 pm will double).
  • Smart meters take usage readings every fifteen minutes and send that information directly to mlgw. Many people consider that an invasion of privacy because your usage patterns are kept by mlgw. Anyone with access can know your routine by those usage patterns. There is also concern that these meters can be hacked.

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More Money Sources For Government

Tuesday, May 12th, 2015

May 12, 2015

More Money Sources For Government

The question on my mind during these budget days for the City, County and the School System is where can we go to find more money other than just cutting expenses and raising property taxes on homeowners and businesses that are already paying their full mandated share. I am not against cutting unnecessary public expenses and there are plenty examples I could point out. (Excessive sick days and vacations, line of duty disability approval at the City, dumb capital projects, etc). But let me point out two major questions that I have concerning pilots (payment in lieu of taxes).

???? When a Pilot expires does the named property actually pay the full tax load that was abated (reduced) for the following years after the expiration date ????

???? Why are pilots given for abated personalty taxes for some companies but not others? What is the policy on personalty taxes ????

I have attached a pilot file from 2007 when Bob Patterson was trustee. Part of that file shows pilots with expiration dates (pages 71 to 109). I have been asking Reid Dulberger (EDGE-Economic Development Growth Engine) for some time to show a report on those pilots that have expired and to show the pre-expiration abated tax and the post expiration tax actually paid. He has done nothing. This is not easy to do and remember that this report by the Trustee is only for County taxes and if the property is in the City, there is a similar but somewhat lesser amount owed the City. As an example I checked just recently on Hershey at 975 Kansas St. I found that their abated real estate tax was $294,065.74 and was due to expire on 12/19/2009. I looked at what they paid in 2011 and it was about $72,000. But then I looked at their personalty tax and they paid a very large tax even during the period of their real estate tax abatement. Then I look at other abated taxes in the 2014 Lenoir report and there are companies listed with personalty tax abatements. What are personalty taxes? Personalty taxes are levied on business furnishings and equipment that you report to the Shelby County Assessor each year. My question is what is the policy concerning real estate tax abatements and personalty tax abatements? Why do some get an abatement and some do not? What is the policy difference concerning real estate taxes and personalty tax abatement?

The public needs to know if when a pilot expires does the property pay the full abatement tax or do they get some kind of reduction or get a further extension of the deadline or do they just leave town? There needs to be an audit of the before and after numbers of the Pilot expiration subject and let the public see the numbers.

 

 

Memphis Urban Development In Action

Tuesday, April 28th, 2015

April 28, 2015

Memphis Urban Development In Action

Memphis Bass Pro is set to open tomorrow and I for one hope that it is successful and pays off the millions that the City of Memphis has put into it. But I would like to point out a past example of big government and their programs for downtown. Take a look at the Peabody Place Project.

Peabody Place was a 300,000-square-foot shopping and entertainment mall intended to aid Downtown’s revival. The mall opened with a Muvico cinema complex, retail and restaurants in June 2001 but started to empty as the recession deepened in 2008. When the theater closed in July 2008, the Belzes announced plans to renovate part of the mall into a suites hotel, but lack of financing kept the project from going forward. Now look at the funding sources and amounts that financed the original project. UDAG, CDBG, Section 108 and City CIP to the tune of $41.8 million. What are UDAG, CDBG, Section108 and City CIP?

UDAG (Urban Development Action Grant)

The Secretary is authorized to make urban development action grants to cities and urban counties which are experiencing severe economic distress to help stimulate economic development activity needed to aid in economic recovery.

CDBG (Community Development Block Grants)

The Community Development Block Grant (CDBG) program was enacted in 1974 by president Gerald Ford through the Housing and Community Development Act of 1974 and took effect in January 1975. It had the goal of extinguishing poverty and urban blight.

Section 108

Section 108 is a loan guarantee program administered by the Department of Housing and Urban Development (HUD), which, since 1978, has committed more than $6 billion to almost 1,500 capital projects aimed at ameliorating housing conditions and creating economic opportunities, particularly for the benefit of low- and moderate-income persons.

City CIP (City of Memphis Capital Improvement Program)

This is City of Memphis capital money.

Now I ask the question, does any of this investment of our federal tax money or our City of Memphis tax money fit these definitions or objectives?

Then more recently there was this information in a Commercial Appeal article from 2014. The Belz family plans to refinance Peabody Place in a move that Downtown officials say is unrelated to talk of converting the vacant complex into a convention-related facility.

The Center City Revenue Finance Corp. on Tuesday approved a refinancing request from Hotel Peabody L.P., the Belz unit that owns The Peabody hotel and adjoining retail and entertainment site.

Refinancing required the board’s approval as a condition of a 25-year property tax abatement that was granted to the project in 1997.

This and other projects and questionable financing and use of federal tax money need a public discussion and open record information on how this money is to be repaid and who benefits.

 

Happy Tax Day!!!

Thursday, April 16th, 2015

April 16, 2015

Happy Tax Day!!!

Yesterday was April 15th and your taxes hopefully were paid or your check was in the mail. Most working people and retirees are tax payers and pay more in taxes than they receive in government benefits.

One huge item most of us do not understand is nonprofits. One definition of non profits is “A business entity that is granted tax-exempt status by the Internal Revenue Service. Donations to a nonprofit organization are often tax deductible to the individuals and businesses making the contributions.” Donations to non profits also come from Federal, State and local governments from taxpayer funds.

Information about nonprofits is available from Guidestar. Guidestar is a 501(c)(3) public charity that collects, organizes, and presents the information you want in an easy-to-understand format while remaining neutral. Guidestar provides nonprofit information to a broad audience at no cost to the users.

Why Should You Care about Nonprofit Information?

Because the nonprofit sector is incredibly powerful. According to the Center for Civil Society Studies at Johns Hopkins University, more than 70 million people work and volunteer in the nonprofit sector. Nonprofit employees make up the third-largest workforce among U.S. industries, behind only retail and manufacturing, and nonprofits create total revenue of more than 1.9 trillion annually, exceeding the total GDP of Canada, Australia, Russia, or India

Locally, according to Guidestar, we have 3705 non profit organizations just in the City of Memphis. I am in the process of trying to gather information of Memphis nonprofits. It is not easy. I have attached a spreadsheet on just 413 local nonprofits and I am up to $3.5 billion dollars of income. At the top of the list are well known and respected medical organizations like St. Jude and Baptist Hospital and charitable organizations like Autozone.

But then you get organizations like Global Ministries Foundation and take a look at their Form 990. You probably read the recent CA article about Global and the Rev Richard Hamlet who is paid a salary $485,000. Read the article and make your own decision as to the benefits of such a nonprofit. I am reaching out to the public to send me information on local non profits, where their money comes from, where their money goes and the cost of administration. Many people have called for better coordination of local non profits so that those that work on housing for the homeless (for example) could work together and reduce the cost of administration and get more of the money to those in need. The real question about any non profit is this. What is the percentage of benefits out versus money in? Hopefully the cost does not get above 15% with the benefits at 85%. Is that reasonable?

Subsidized Housing, MHA, HCD, HUD, HEHF, Say What?

Tuesday, April 14th, 2015

April 14, 2015

Subsidized Housing, MHA, HCD, HUD, HEHF, Say What?

Recently I attended a MHA board meeting and at the end of the session I asked the board in the future to post all recent financial statements. Until recently they had not posted 2013 and 2014 statements. I also asked that in the future that they post the board agenda and all supporting documents at least two days in advance of the monthly board meetings. We will see in the future whether they do this.

They did in fact post the financial statements for 2013 and 2014 so that now we have posted 2009 through 2014 posted online.

At this point I do not pretend to understand this organization which is headed by Robert Lipscomb as well as the City of Memphis department of Housing and Community Development which is also headed by the same Robert Lipscomb. Then you add in HUD (Housing and Urban Development), HEHF (Health, Education and Housing Facilities Board) and then all the non profits like Global Ministries Foundation which was recently written about in the Commercial Appeal and you have a real witches brew brought on by big government spending in an attempt to solve social problems and garner votes. The real question is what is the most efficient way to help those truly in need? Is big government the answer or should rent money be given to those truly in need and let them make their own housing decisions? What do you think?

In order to get a better understanding of the financial structure and purpose of the MHA and HCD a friend asked for a meeting with MHA accounting (Ms. Vickie Aldridge) and here is the answer he got.

“I am not available to meet however if you submit your questions in writing, I will respond at my earliest convenience.” My friend will no doubt respond but here are my thoughts on these posted financial statements.”

I have attached one page out of each of the last six financial reports (2009 thru 2014). These pages list the notes, loans and mortgages receivable for various local housing projects. If you read on through the following pages of the reports you will see the following statement for each of the projects.

No payments were received on this note during 2014, 2013, 2012, 2011, 2010 and 2009.

My request to the MHA would be that I want to see these financial documents on the loans and mortgages to understand the terms and conditions and who is benefiting from these finances. You will note that the long term notes receivable has gone from $92 million in 2009 to $155 million in 2014. The public should be made aware of these finances, the cost to the taxpayers and the benefits to the tenants of this housing.

What’s another $13.5 million among friends or taxpayers?

Wednesday, March 4th, 2015

March 4, 2015

 

In a recent CA article, it was pointed out that the cash strapped City of Memphis will have to come up with another $13.5 million to cover the underestimated cost of City of Memphis retirees OPEB cost. This is because of the City’s liberal policy differences versus the County concerning what health care policies are available to retirees.

I have attached a resolution dated June 18, 2007 entitled “RESOLUTION TO PROVIDE FOR OPEB BENEFITS AND APPROVE CHANGES TO HEALTH INSURANCE BENEFITS PROVIDED TO EMPLOYEES AND RETIREES”

It is signed by none other than A C Wharton, then County Mayor.

The main difference is that County retirees over age 65 that are eligible for Medicare (either the retiree or spouse) will only be eligible for a Medicare supplemental plan, not the regular county plan. Also the retiree’s share of the premium will be based on years of service. This saved the county millions of dollars since 2007.

Meanwhile the City of Memphis did none of this even after County Mayor Wharton became City Mayor Wharton. It took a city pension and OPEB financial crisis to get the City to change and then they got the numbers wrong to the tune of $13.5 million. Then add to that the millions they could have saved between 2007 and 2015 had they followed the County example, but they did nothing.

More Scoop And Toss

Tuesday, February 24th, 2015

Last Tuesday I braved the ice (black and otherwise) and went to the City Council committee meetings at City Hall. There were two particular subjects in which I had an interest and they were the Pension Funding Policy chaired by Jim Strickland and the Executive session on Debt Restructuring chaired by Myron Lowery.

These two subjects are related because due to the 2010 scoop and toss bond refinancing and the State of Tennessee demanding that the City of Memphis increases its pension ARC (annual required contribution). It turns out that the 2010 refinancing created a bubble starting in 2016 making it difficult to pay both the increased ARC and the bond payments at the same time. The answer, scoop and toss again. The City (Brian Collins) claims that this is reasonable due to low interest rates. Jim Strickland, Harold Collins, Wanda Halbert and Shea Flinn raised questions as did the Commercial Appeal. Here is the presentation given at the meeting.

I decided to investigate some past bond financing so I asked the City of Memphis for some bond information on recent bonds such as the stadium project and the Pyramid and Pinch District redevelopment. All I got from them was a computerized reply with answers to follow SOME DAY. So I went online and got the following Moodys financial analysis report.

https://www.moodys.com/research/Moodys-assigns-Aa3-to-Memphis-Center-City-Revenue-Finance-Corporation–PR_288005

Here are some of the things that the report says about Memphis.

  • The current issue is ultimately secured by all non-tax revenue that is legally available other than ad valorem revenues in the city’s general fund.
  • The Series 2011B and 2011 C subordinate are secured by a second lien on TDZ revenues with a pledge from the city to replenish the debt service reserve in the event of a draw on non-ad valorem tax revenues.

 

The negative outlook on the Series 2013A&B and 2011B&C reflects Moody’s expectation that the city’s financial position will remain challenged as fixed costs, including debt service, pension and other post-employment benefits represents 42% of operating expenditures in fiscal 2012.

In spite of all this the City continues to spend on questionable projects like the Raleigh Springs Mall renovation and to talk about the fairgrounds project as if these will all be paid for by tax incremental financing and fairy dust.

Cost of pensions/ City Versus County

Wednesday, February 18th, 2015

February 18, 2015

Cost of pensions/ City Versus County

I recently asked for and promptly got a copy of the Shelby County Pension Actuarial Report dated June 30, 2014. I also asked for the City of Memphis report and have yet to get it. However I have the June 30, 2013 report from the City of Memphis.

I first read the Shelby County report and it was like reading a financial report from, your favorite profitable well run private sector firm. Not exciting but very comforting. Not racy but secure.

Then to add spice to my day I took up the City of Memphis pension report. Talk about “A Tale of Two Cities”. Here are some comparisons.

Active Employees, City of Memphis- 6280; Shelby County 5302

Retirees, City of Memphis- 4782; Shelby County 3469

Unfunded Liability, City of Memphis- $709 million; Shelby County $243 million

Retirees on disability, City of Memphis- 635; Shelby County 80. Most  of the County  disability retirees are regular, not line of duty. Most of the disability retirees from the City are line of duty. They get 60% of their highest average salary tax free for life. The problem is the composition the approving pension board at the City made up of their fellow employees. Shelby County gives approval to a disability insurance company. This is costing the City $14 million per year.

Total annual pension payments, City of Memphis $155 million; Shelby County $66 million

Average pension per retiree, City of Memphis- $32,518; Shelby County $19,273

Do I need to say more?

Insure Tennessee! Let Us Have A Discussion

Wednesday, February 11th, 2015

February 11, 2015

Insure Tennessee! Let Us Have A Discussion

 

Recently I heard a talk given by Dr. Scott Morris, founder of the Church Health Center. He talked about the Sears Tower planned renovation and it was fascinating. If it comes off successfully, it could lead to great benefits for midtown and for Shelby County.

 

Before he got into the Sears Tower presentation, he talked about the recently defeated proposal for Insure Tennessee. This is Governor Bill Haslan’s proposal to take federal money from the government to expand Medicaid coverage under the Affordable Care Act to people who do not qualify either for existing Medicaid programs or to buy coverage on an exchange.

 

Haslam unveiled Insure Tennessee in December after nearly two years of negotiating with the federal government because Insure Tennessee was not a straight expansion of Medicaid. It required a waiver approval by the U.S. Department of Health and Human Services because Haslam opted to craft a state-specific program that modeled many aspects of commercial health insurance using funds from a tax that Tennesseans are already paying under the ACA.

 

Dr. Morris stated that this was a no brainer as the money was sitting there and there were people who needed the medical services and after all it was our Tennessee tax money and additionally tax money from other states.

 

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