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15.5.09

Government must cut cyber venture capital losses now

Two ships up and pulled anchor this, leaving even more tattered the credibility of economic development promises made by Bossier City elected officials, and to a lesser degree their Bossier Parish counterparts.

Sports fans also tuned into the world of politics may have realized that the looming demise of the most successful non-baseball franchise in the area’s history, the Bossier-Shreveport Mudbugs minor league professional hockey team, also creates a big hole for Bossier City. For the CenturyTel Center to have any chance at all to pay its operational expenses, the 40-plus (because they reached the playoffs so often and sometimes went far) home game dates of the Mudbugs were crucial. With this anchor tenant gone, the gains unrealized from using the $56.5 million that the city blew on the arena for other purposes – roads work that could have been finished years ago, not having to raise water and sewerage fees on residents, etc. – now will be compounded by actual annual operating losses perhaps into the millions of dollars.

Maybe a last minute deal will keep the franchise alive (the tentative deadline being today), reviving the joy of area fans and relieving those in Bossier City government who were around to stump for the arena from more egg on their faces. But you would have had to been much more attentive to have learned that an even riskier gamble by the city, and parish and state, essentially blew up in the faces of Bossier politicians with the announcement that the U.S. military will place its cyber command headquarters at Ft. Meade, MD.

Bossier City had committed about $35 million, and Bossier Parish about $15 million with the state throwing in $57 million, into the startup of the Cyber Innovation Center the lion’s share of which would be to create a campus for computer-related activities. But the main stated impetus for these sudden appropriations last year was because of a desire to get the Air Force to base an incipient cyber command at Barksdale Air Force Base where some cyber-related activities already were taking place. Having that there would serve as an anchor to attract many other such related entities to the area, it was argued, and creating this Center to service them, it was breathlessly promised, would help haul in thousands of high-tech high-paying jobs.

As was pointed out many times in this space and elsewhere, anybody with some knowledge of these kinds of decisions knew this was a long shot. Eventually, the familiar pattern took hold: lots of different entities began to angle for the new command which meant either it would be fragmented among many sites or a place with superior existing infrastructure and political clout would land the command. The latter now has transpired with the decision to consolidate all military cyber activities next to Washington, D.C., meaning little such activity will transpire at Barksdale, if any.

The military branches still hold out hope that each individual service will still have its own cyber component, but the final blow for Barksdale and Bossier elected officials (and state officials all the way up to the governor) was when the Air Force said if there was going to be such a component for the Air Force it would be started up at Lackland AFB in San Antonio. So just how much economic benefit will $107 million of taxpayers' money now bring; clearly not nearly enough to justify this entire cost.

(Curiously, until this last event none of the local media reported on these with such a huge impact for local economic and political fortunes. Other jilted areas took the event far more seriously. For example, the Omaha World-Herald ran an extensive next-day story on the implications of the decision to Bellevue, NE’s Offutt Air Force Base, and it was widely reported by national media. In fact, the news informally came out Apr. 23 in a Defense Department draft memo reporting that the National Security Administration would lead such efforts from its base at Meade. The Shreveport Times, however, failed to mention that in its report, rather pondering on other matters. It failed to follow up at all on the formal announcement May 5 in congressional testimony. One wonders whether local media are just extremely inattentive or if they had another agenda that mandated suppression of the news. Finally, when word came that not even the Air Force version, if it will be allowed to exist, of a cyber command would be located at Barksdale, did the local media publicize the fact that it would get little of this activity.)

Even as all of this was playing out, the Cyber Innovation Center’s permanent headquarters continues to rise, estimated to cost $36 million (which was a subject of a Times article a week after the draft memo, right before the testimony, wherein the article only stated that current cyber command plans were “in flux”). Those taxpayer resources are gone. The duty of elected officials now is to safeguard the remainder.

No doubt useful things potentially could come from the Center. But the fact is, the costs will far exceed such benefits, as this latest development only makes even clearer than ever. Governments need to construct an exit strategy along the lines of finishing the building and then put it on the market. Maybe it would fetch half its building cost and still bring some jobs to the area, so that taxpayers are out only $18 million (plus land acquisition costs). Or try to lease it out, if there are no buyers, which will realize at least some savings. It’s all too obvious now that this experiment in venture capitalism must end so local and state taxpayers can have their precious resources in times of tight budgets appropriated for more pressing matters. Any additional monies spent past this point will just be throwing good money after bad.

This will take political will rarely seen in these parts, but after having betrayed the citizenry on so many levels in this matter, Bossier City and Bossier Parish politicians at least owe us this much.

14.5.09

Sham "equal pay" bill would create more discrimination

Some truly bad public policy ideas just won’t go away, and over time people, including policy-makers who should know better, forget the reasons why and fall for puerile argumentation on their behalf. This is the case with HB 705 that presumes to address a problem that basically doesn’t exist with freedom-crippling big government but, worse, it also is a Trojan Horse for reviving the con job known as “comparable worth” and threatens to create more pay discrimination in the workplace.

State Rep. Barbara Norton’s bill would define a prohibited employment practice for employers of four or more where pay differs on the basis of gender, and sets up a procedure receive damages if a violation is present. The important operative phrase is this:

No employer may discriminate against an employee on the basis of sex by paying wages to an employee at a rate less than that of another employee for the same or substantially similar work on jobs in which their performance requires equal skill, effort, education, and responsibility and which are performed under similar working conditions including time worked in the position. (emphases added)

13.5.09

Political hijinks based on fates of education, tax bills

Political hijinks were on display yesterday around the Louisiana Capitol as committees tried specially to meet as the sun went down and members went on walkabouts.

Normally, during the session a third of the House’s standing legislative committees meet on Monday mornings, another third on Tuesday mornings. The final third, those considered less busy, meet on Wednesdays, while Thursday is considered a day to take care of extra business not otherwise covered earlier in the week. Only Appropriations tends to be irregular, sometimes meeting after adjournment of the floor and/or on Fridays and/or weekends. But yesterday, rare meetings of Education, a Tuesday committee, and Ways and Means, a Monday committee, were scheduled after floor adjournment, which occurred at nearly 7 PM.

Education was to take up several bills, most controversially two authored by state Rep. Steve Carter that would substantially affect operations of local school boards. It had heard many earlier that day, but not, as scheduled, Carter’s providing the rationale for reconvening later. Ways and Means also had several measures, but one stood out for its notoriety: HB 889 by state Rep. Karen Peterson that would raise tobacco taxes and dedicate them to a number of purposes including education and health care.

Two Republican members of Education, Carter and state Rep. Frank Hoffman (its vice chairman), also serve on Ways and Means. On a previous bill by Peterson which had tried to raise tobacco taxes even more and did not specifically dedicate funds, in committee Carter had voted for it and Hoffman against where it lost narrowly. Education’s meeting was delayed specifically to allow these two to participate in Ways and Means’, quite practically because the author Carter should be present for considerations of his bills. As it was, these two would be needed to make the quorum for Ways and Means.

But Carter and Hoffman never made it to Ways and Means, and neither committee met. Peterson asserted she heard the wayward legislators had been on the floor of the building containing the Governor’s Office. Gov. Bobby Jindal has expressed support of Carter’s two bills, but has criticized Peterson’s. Carter later answered ambiguously about his activities but said he was disappointed the bills had not been handled that day. Carter said he would try again, presumably next week. Education Chairman Democrat state Rep. Austin Badon said he got word he ought to adjourn without hearing them last night.

Circumspection by politicians on this matter means no clear answer will be given. But inferring from the sequence of events, it’s logical that Jindal has tied the fate of Carter’s bills to Peterson’s. In the morning, there appeared to be no fairly reasonable chance that Carter’s bills would go forward, and in that instance authors typically work for postponements. Similarly, the rush to hear HB 889 comes because the House is getting ready to deal with HB 1, the general appropriations bill. Unlike her previous effort HB 75, which suffered defeat from a cigarette pack tax hike of a dollar putting prices well above those of border states and without a clear dedication of funds, the 50 cent increase would put packs at prices comparable to border states and the dedications make it appear funds would go to worthy areas of expenditure hard hit by the current revenue shortfall in state government. In other words, this bill has the potential to go much farther in the process than it previous incarnation

Still, that bill has no chance at becoming law because even if the required two-thirds vote in each chamber got it to Jindal, his veto would make some supporters reconsider and there would be no override. But this would make Jindal look bad, part of Peterson’s objective as the Democrat Party official wishes to follow her national party leaders in tarnishing Republican Jindal’s image given his threat to blossom into a future national leader, this blocking of a tax increase that has popular support that would put funds in areas where there is consensus more money should go. Therefore, his objective is to cut off the bill as early as possible in the process.

Opponents of Jindal and supporters of the funding, largely but not exclusively the same people, wanted this quick consideration in Ways and Means because it could materially alter HB 1: if there seemed to be some guarantee HB 889 would make it out of the House, HB 1 could be amended in it to add in all sorts of new spending. But if HB 1 gets significantly farther along in the process than HB 889 (and it is scheduled to be debated tomorrow), there is less pressure on to pass the latter. Also, every day that HB 889 gets delayed in hearing is one day closer to the end of the session where its opponents can run out the clock on it before it gets too far.

Therefore, it appears the strategy was for Hoffman and Carter to play hooky to slow down the process. While for Carter delay also may have given him a chance to shore up support for his bills, it may also have given Jindal Administration operatives a chance to impress on Carter that the toss-up support for his bills might turn negative if he did not reconsider his past support for higher tobacco taxes. If so, this puts him in a tight spot because the present bill seems more moderate than its predecessor.

All in a day’s, and night’s, work at the Capitol. Only about another six weeks worth to go.

12.5.09

Indexing exemption won't work without other changes

It’s not entirely a surprise that Gov. Bobby Jindal would endorse bills generally indexing the homestead exemption, given his past actions in support, even sometimes grudgingly, of tax relief. But without change suggested by other bills, passage of this concept promises not to change much regarding individual tax liabilities and could make worse the state’s fiscal structure.

Louisiana presently has the nation’s highest homestead exemption at $75,000, which essentially relieves almost half of homeowners of the burden of paying parish (including New Orleans) and school property taxes and reduces it for all others. It has been this way since 1982, however, while the value of the exemption has been approximately halved. Other proposals would raise the limit, but Jindal’s endorsement of indexing by the rate of inflation from the present base assumes erosion of the buying power of the present level of the exemption has made it reasonable and small increases may proceed from here.

But the problem is that local jurisdictions presently can “roll forward” millages. If valuations increase the total take of property taxes, the millage automatically goes down to compensate unless a two-thirds vote of the governing authority (or an elected official such as a sheriff where appropriate) raises the millage anywhere up to its approved level. Indexing that takes away slightly revenues every year from a jurisdiction may prompt governing authorities to inch up millages, thinking voters won’t notice that the overall level doesn’t change on their tax bills (many of whom don’t notice anyway since they are paid through mortgage payments).

So this may look good symbolically, but mostly will have little substantive impact. It also represents a reversal of a healthy trend that the erosion of the exemption had created, spreading more of the tax burden around. Having a high exemption places too much property tax payment on a small proportion of homeowners and business, discouraging the latter. Therefore, assuming levels of revenue should stay the same, economic development would be enhanced by evening out the pain.

The former problem of implementation could be dealt with by passing any of several bills that would make it more difficult for authorities to roll forward, but that would exacerbate the latter problem. Both could be solved by adopting something like state Rep. Kevin Pearson’s HB 252 which would make the exception work at valuation levels between $10,001 to $85,000, and amending it to index at the higher level.

Bills like Pearson’s would spread more of the burden around yet maintain the greater amount of exemption. While some argue this would be injurious to lower-income homeowners, the fact is even in the highest-taxed parishes the extra tax on those presently not paying would be only about $12 a month. Amending this kind of bill to index would not change that and help anybody with property worth more than $85,000. Also amended to it or in separate bill passage could be the measures designed to make rolling forward more difficult.

Supporting indexing in and of itself may score political points among voters but likely will do little else. The HB 252 approach and other amendments to it would have a far more meaningful, and salutary, impact on the state’s fiscal structure.

11.5.09

Agency request displays Shreveport's business-unfriendliness

The Shreveport metropolitan area recently was named eighth-best mid-sized city for jobs growth by Forbes magazine -- perhaps despite Shreveport's city government as it took Caddo Parish's government to step up earlier this year to help maintain a business-friendly climate.

The Caddo Parish Commission had the wisdom to reject raising fees for certain kinds of planning requests. The Metropolitan Planning Commission, which has jurisdiction over zoning matters within Shreveport and emanating five miles outside its borders into Caddo Parish, recently got Shreveport to approve higher fees. Ordinance #174 of 2008 increased most typical fees $100 and most requests for exceptions $150, passing without discussion or dissent.

But Commissioner Matthew Linn, who unlike Shreveport’s councilors owns and operates a business that has had to pay close attention to zoning matters, objected to the parish following suit over its area (much of the parish) covered by the MPC jurisdiction. He pointed out that many of these requests, which already cost hundreds of dollars without the change, now would be that much more and questioned whether this would discourage business formation. At the very least, he argued there should be a graduated scale of fees by business size, as small business is hit worst by the increases. He persuaded the Commission to table the request meaning, for example, now to apply for a variance to serve alcohol would cost $900 in most of the parish but $1,200 in Shreveport. (And that is an application, not a guarantee that favorable action would be taken.)

The reaction of a representative of the MPC, however, spoke volumes about why economic growth is stagnant at best in Shreveport. “The city basically said [in approving the increase], ‘These are hard economic times. We want to reduce the percentage at which we subsidize these private ownership rights,’” said MPC staffer Rusty Jambor.

The presumptiveness and ignorance of this statement is astonishing on three accounts. For one, a service performed by government should have its fee reasonably related to the actual cost of the activity because if not, it is then government being subsidized by private interests forced by all-powerful government to come to it just to exercise their rights as free citizens. When government arbitrarily decides to squeeze revenue out of its citizens not in any response to the actual cost of services but just because it can, it becomes abusive.

(Nor is this rationale limited just to the western shores of the Red River. A few years back fees were raised on emergency medical services and on water and sewerage users in Bossier City to plug a perceived budget hole, their politicians arguing they shouldn’t dip into reserves and/or interest generated from monies saved from gambling revenues. But the draining of general fund reserves has continued and now the city is committing itself to expenses in the $130 million range to improve water and sewerage – the interest of which additionally must be borne by taxpayers, instead of using the fee hike in the provision of that service to cover it.)

Also, in making such an assertion does anybody stop to think about basic economics? If these are “hard economic times” that somehow force a government to raise fees, did it occur that the same hard times make business more sensitive than ever to higher fees? That these hikes may discourage not only application fees but applications whose successful implementation could lead to higher tax revenues? Not that the city should not already know this, as witness Shreveport Mayor Cedric Glover’s admission in his 2009 budget message that higher recreation fees actually decreased overall revenues in that area.

Finally, it is a total misunderstanding to think that compelling payment for trying to do business has anything to do with “subsidizing” private ownership rights. Government itself is nothing but a leech off the free use of private property, as it never could exist without the taxes from activities involving property, so to think that reducing government’s burden on the exercise of those rights through lower fees translates into an increased subsidization of them is exactly backwards and denies the reality that private property rights precede government power. (You can look it up in the Louisiana Constitution.)

It’s not the amount of money in question – the change may stuff only a few tens of thousands more dollars into Shreveport’s coffers, and many fewer now forgone by the parish – but that attitudes such as this can exist within government. This business-unfriendly attitude appears to pervade Shreveport governance and explains the city’s trouble in keeping population and business activity. The worst thing it can do is begin a death spiral of making business more costly to do within its borders that chokes off and contracts business, and therefore city revenues, even more. No amount of plaudits from the media can change that reality.

10.5.09

Even with revenues woes, suspending tax cut bad idea

There is persistent talk that Louisiana should delay implementation of individual income tax cuts passed last year, and that now has an action plan associated with it with the filing of HCR 94 by state Rep. Michael Jackson that would suspend the cuts effects until probably the last week of August, 2010. This provides an explanation for past actions regarding the reduction and another opportunity to remind why this would be a bad idea.

The lowered rates actually went into effect at the beginning of this year for those employed who took a tiny amount of initiative. Typically, governments that levy income taxes create tables by which employers, charged with automatic withdrawal and remittance to the government for all but the lowest-salaried employees, use to determine what amounts are to be deducted. But the law curiously set a date of no earlier than Jul. 1, 2009 for the state to revise these tables, meaning workers had to fill out forms on their own to turn into employers to begin receiving any reduction beginning Jan. 1, 2009. While some have objected to this, it is not inconsistent with conservatism: conservatives believe that people, not government, should take charge of their own lives so to file the paperwork on their own was not too much of a burden to ask rather than be dependent on government to do it, in essence, for them.

But now another gambit to the delayed implementation has become clear: the state constitution allows both houses of the Legislature to pass a resolution suspending a law for sixty days past the adjournment of the next regular session by the same rule (in this case, majority vote) without any gubernatorial intervention. It could be the delayed implementation was a means by which to facilitate this strategy, as having fewer people actually receiving currently the break (with the remainder having to wait until income tax filing for 2009 in 2010) could mean less popular outrage at a suspension for reasons of financial exigency (as is stated in the resolution).

No matter, for three reasons this is a bad idea. First, lower taxes inevitably lead to economic growth which will mitigate revenue problems for government. But starting and stopping them not only delays the effect, it makes it less pronounced as the populace will become wary of the permanence of these cuts and therefore less likely to use the proceeds for economic development purposes, as caution will reduce their willingness to invest them.

Second, it siphons off pressure on elected officials to reduce the size of government. As is becoming apparent in the ongoing budget process at present, there is room for savings. Low priority or no priority jobs have been identified in state government, for example, and now are intended to be cut. Grabbing back the tax cut might take away the impetus to do that.

Third, it would intensify the immoral nature of the taxation enterprise in the worst way. Taxation is a necessary evil, but it does not become immoral until it happens for unnecessary purposes and disproportionately punishes some people. The point above would indicate that unnecessary purposes are being funded through deprivation of people’s liberty by seizing their earnings, and worse is that the suspension would cause greater injury to those who already contribute the most. As of the latest report (which makes compiling exact numbers difficult because it doesn’t break returns down into single or otherwise categories), about a third of income tax filers benefit for sure under the reduction – who already pay a staggering nearly 84 percent of all income taxes. Anything that allows that minority who pull the majority riding in the wagon most of the time a little more rest has a positive moral component to it.

Tough fiscal times for the state do not justify the temporary reversal of this tax cut, so let’s hope HCR 94 goes nowhere.