Category Archives: Economics

Bakersfield, Boise, or this?

After days of watching winter do its thing along the east coast, I can’t resist posting this morning’s photo taken just after the sun made its appearance.

It was a typical Hawaii winter day.

But if you would rather retire in Bakersfield or Boise, be my guest (a reference to yesterday’s post).


Early Wednesday Morning...

City’s explanation of discrepancies in real property tax assessments don’t satisfy

Thanks to Star-Advertiser business writer, Andrew Gomes, for his story on Sunday about the discrepancies between the selling prices of high-value Oahu homes and their often much lower appraisals for property tax purposes (“Home price, taxable value can diverge“).

Here’s the basic thrust of the story:

…in the upper reaches of the island’s housing market where trophy properties shine, it’s not uncommon for city appraisers to value a home well below what a new owner paid.

Sometimes city appraisers can’t justify purchase prices as a “real” value. As a result, an owner’s property tax obligation can be based on land and building values far below what they sold for, resulting in less revenue for the city.

“Sales price and cost is not equal to value,” said Gary Kurokawa, the city’s deputy director of budget and fiscal services.

The difference for a multimillion-dollar home can amount to tens of thousands of dollars not flowing to the city.

Some of the examples are eye-popping.

Gomes cites the example of a Black Point mansion that sold a few years ago for $16.5 million, and then got a $1 million facelift. It was assessed for tax purposes at $9.5 million in 2015, but dropped for 2016 to $8.4 million, a 50% discount off its selling price two years ago.

Gomes reported:

“Sales price and cost is not equal to value,” said Gary Kurokawa, the city’s deputy director of budget and fiscal services.

I admit that I’m confused. Here’s an excerpt from the applicable city ordinance.

Sec. 8-7.1 Valuation–Considerations in fixing.
(a) The director of budget and fiscal services shall cause the fair market value of all taxable real property to be determined and annually assessed by the market data and cost approaches to value using appropriate systematic methods suitable for mass valuation of real property for ad valorem taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments throughout the county.

It seems pretty obvious to me that the best “estimate” of a property’s actual market value is the price someone has just paid in an open market transaction.

You don’t have to look far to find agreement with this proposition.

“The only real measure of market value is what a particular house sells for. Period,” according to the website CREonline.com.

Could something be amiss with the city’s standard methodology? Under what circumstances do appraisers walk past an actual sales price to assign a dramatically lower (or higher) assessed value, which by law is supposed to approximate the market price?

Perhaps there needs to be a better explanation from the city’s end of just how they actually made the assessments that Gomes cites in his story.

Former Gov. Lingle in the middle of Illinois budget standoff

Hmmm. Remember Linda Lingle? Yes, Hawaii’s Linda Lingle.

Back at the beginning of 2015, she signed on as a consultant, and chief operating officer, for newly elected Illinois Gov. Bruce Rauner.

Rainer, with Lingle in tow, lost little time in that he would be tying a number of non-money items into his proposed state budget for the 2015-2016 fiscal year.

According to a New York Times summary:

Mr. Rauner has tied passage of the budget to changes in workers’ compensation and collective bargaining rights for unionized public employees, measures that he says will help revive the Illinois economy and bring in much-needed revenue. Democratic Party leaders in the state reject those suggestions, saying that the governor is making demands that are unrelated to the budget.

And this in a state where Democrats hold super-majorities in both houses of the State Legislature.

According to Politico:

…Rauner’s agenda was nearly dead on arrival in the Democratic-controlled legislature—it includes such nonstarters for Democrats as tort reform, workers compensation reform, term limits, redistricting reform, and, first and foremost, collective bargaining curbs on public employee unions. The curbs would give local governments, including school boards, the right to decide if they want to collectively bargain with workers and which benefits should be on the table.

The budget should have gone into effect on July 1, but the governor and legislature didn’t reach a deal. And the state is still operating without a budget as we hit the end of 2015.

Meanwhile, after several courts ordered that public employees continue to be paid despite the budget impasse, the administration has been borrowing to pay its bills.

The Huffington Post reported on a recent speech by House Speaker Michael Madigan, where he spoke about the state’s budget crisis.

Here’s an excerpt of Madigan’s speech, as reported by the Huffington Post:

This goes right to the heart of the difference of opinion between myself and the governor. .. The history of the American government prior to 1933 was pretty much to remain out of the business of managing the economy. The beginning of 1933 with the administration of Franklin Roosevelt, there was a dedicated effort by the federal government to in effect manage the economy and to work always to create jobs, to raise wages, to raise the standard of living. That has obtained through both Democrat and Republican administrations. … That’s been the policy of this country for all of these years and that’s where I say I don’t think any government should be in the business of lowering wages and the standard of living. The responsibility upon the government is to move in the opposite direction. To do what the government can do and do well – raise wages on a continuing basis and maintain a good standard of living for everybody in the country.

Among those hardest hit by the budget stalemate have been social service agencies, who are not being paid and are having to suspend staff and programs as reserves are depleted, and the clients they work with across the state of Illinois.

Steve Brown, spokesman for the House Speaker, had a bit to say about Lingle, according to Politico.

— Brown suggested — and we’ve heard whispers of this in the past — that Lingle’s hiring had something to do with ties to a close Rauner adviser and strategist Nick Ayers and “dark money” that flowed from groups tied to him and attacked Lingle opponents. Background on that here: http://bit.ly/1RSlisr. Ayers is a Georgia-based political operative and past head of the Republican Governors Association.

— Ayers’ Target Enterprises, which handles campaign ads, was one of the biggest payees during Rauner’s record-breaking, $65 million campaign for governor.

— An audience member asked Brown what evidence he’s seen of her work in the Legislature: Brown said so far she organized a parade for the state fair.

Well, perhaps the least fortunate are taking the brunt of cutbacks, but Lingle was in line to be paid nearly $200,000 annually. However, it isn’t clear whether the lack of a new state budget has delayed implementing her new position and salary.

Here’s what an Illinois newspaper reported back in May 2015:

The former governor of Hawaii is making more money as an aide to Illinois Gov. Bruce Rauner than she did when she oversaw the Aloha State.

Rauner’s office, along with payroll records filed this week by the Illinois comptroller, show Linda Lingle will receive $60,000 for a state contract running from April to June. After that, she will go on the state payroll as an employee with an annual salary of $198,000.

In 2010, during her final of eight years as governor in Hawaii, Lingle was paid $117,306.

And so it goes for our former governor.

A reader says: I won’t pay for news.

I received an interesting email this week from a regular reader who also takes the time to write long, detailed essays on a number of issue which are submitted as comments on my blog posts.

The mail comments on Civil Beat’s paywall, and takes the simple position that “people don’t pay for content anymore.”

I’ll let the email speak for itself.

Recently, CB has been enforcing its paywall. I just cannot read it unless I subscribe.

Well, the reality is that I am very probably not going to take up a CB subscription. This is because I do not pay for anything, and never have. I can get around the paywalls for the WSJ and the NYT quite easily. I’ve taken up a mild interest in renewable energy, and can read daily journalism on that for free. But the idea of paying for the news is alien to me. So I am not going to read any local journalism, it seems. At all. And that’s a shame, among other reasons because it will affect the quality and substance of my comments on your blog. It will also affect what I read on your blog, which is probably much less because I won’t know what you are talking about (e.g., the TMT controversy, etc.).

I’m not sure how to respond to this kind of approach to the economics of information.

“I do not pay for anything, and never have,” the writer says.

Well, I’m sure the writer is paying for food, water, housing, transportation, clothing, and similar expenses. They’re paying for communicating, a computer or smartphone, broadband service, etc. Probably cable tv service.

Good journalism doesn’t grow on trees. And it’s as essential a service–or perhaps more essential–than some of the things that we all routinely spend money on without thinking.

So refusing to pay for it is a matter personal priorities.

I’m recalling the term that used to come up in such discussions. Freeloader. I shouldn’t be so blunt, but that’s how it looks.

None of us has the answer to how we’re going to fund journalism going forward. There are lots of different models being test flown. Civil Beat’s is one of them. None produce news without cost. And, yes, there are back door ways to defeat the need to pay your share. I’m of the view that we should be paying what we can, and when push comes to shove, prioritize which news sources we will pay for first, until budget limits are reached. But that’s a different calculus from a blanket, “I do not pay for anything.”

As far as simply not reading any local journalism if any of it requires payment, that’s really a choice to be satisfied with being a second-class citizen, uninformed about local issues.

Anyway, I thought I would see how others feel about this. The writer is not alone, obviously. But I have the feeling that popular views are shifting to see that good journalism costs and has value. People used to say they wouldn’t pay to listen to music, but that’s no longer the case. Hopefully someone will come up with a news subscription service that accomplishes a similar change of attitude towards journalism.

But let us know what you think.

Plan to address UH athletic deficit draws quick pushback

The University of Hawaii at Manoa athletic program aired a plan last week for dealing with its chronic deficit, but the plan is already getting push back from at least one key constituency, the students.

Last Friday, the newspaper reported athletic director David Matlin’s budget presentation to the Board of Regents (“How the University of Hawai’i at M?noa Athletic Department wants to balance its budget“).

Matlin laid out a plan to raise over $14 million in new annual revenues over the next four years. He identified several potential sources.

UH Athletics’ Initiatives: $4.7 million

Student Fees’ Increase: $1.7 million

Direct Legislative Support: $5.5 million

Increased UH Institutional Support: $2.3 million

The proposal would double the current student athletic fee from $50 to 100 per semester. And the additional “institutional support” would also come from tuition dollars.

The story on Matlin’s proposal was posted at Kaleo.org last Friday. And on Monday, a Ka Leo editor penned this far less than enthusiastic reply with a clear message: “Dear UH Athletics, stay away from our wallets.”

Irene Fang, Ka Leo’s associate opinions editor, raised several key points, including one that nobody seems to want to talk about, “the student body’s apathy towards athletics.”

In a nutshell, Fang says, students are at UH to get an education and a college degree, and most aren’t affected by athletics.

At the same time, she argues, the financial reality is that Hawaii isn’t in a position to raise the kind of money needed to field a competitive football team. And schools that do don’t accomplish it with student money.

Mid-ranked University of Washington (UW) spent almost $30 million, as reported by PointAfter.com, which is roughly how much a university should spend on a competitive football team. However, there are no UW athletic fees. Reported by Husky Athletics, 97 percent of the athletic program is self-sustained, with the remaining three percent coming from the state. In fact, four of the top five NCAA ranked schools in Texas, Michigan, Alabama and Ohio State charge no student athletic fees, as reported by USA Today.

And given the stagnant or declining share of state revenues that have been allocated to the university system, and especially the flagship Manoa campus, in recent years, seeking additional ongoing revenues dedicated to support of the athletic program seems like a long shot, at best.

And that’s the biggest problem.

The earlier Ka Leo story quoted Matlin.

“We have no professional teams, so UH athletics is our NFL, NBA, and MLB,” he said. “When our teams are doing well and competing for national championships, the morale of the state is uplifted.”

You can’t continue to squeeze the university’s primary mission, education, in order to fund a competitive athletic program that is of primary interest to those outside the university.

So while the numbers in Matlin’s plan may add up, the politics of it don’t.