Fees

The Dismal Science Confutes Emergency Management in Flint

The entire world now knows what crass bureaucratic stupidity, feeble political direction, and witless press coverage did to Flint. We have demonstrated that Flint’s politicians and financial managers made terrible decisions in an effort to replace plunging tax revenue, which had reached statutory and constitutional rate limitations.

Flint Water Bill 1The foremost source of revenue expanded was Flint’s water & sewerage charges. Annual free cash flow from water & sewerage charges was increased from nil to $ 28.7 million (bottoms of page 3-13) over the decade from 2004 [FY2005 CAFR, large file] to 2014 [FY2015 CAFR, large file]. The big jump in free cash flow from water & sewerage charges occurred in 2014 as a consequence of Flint River sourcing. Flint only had to pay the DW&SD pirates for water up to April 25th in 2014. Annual free cash flow from water & sewerage charges in 2013 [FY 2014 CAFR, large file] was only $ 9.4 million when they paid DW&SD all year. Why Flint resourced to the Flint River in one number: $ 19.3 million more in cash flow. And most of this $ 19.3 million is now gone with the return to DW&SD water. We will know how much gone later this year.

That $ 28.7 million in free cash flow during 2014 was a 77% markup on actual Flint water & sewerage costs. Only $ 7 million of it was used for infrastructure, mostly to prepare for the now abandoned Flint River sourcing. Only $ 2 million of it was used to pay off water & sewerage debt. The remaining $ 18.5 million was used by other Flint city departments and applied to other Flint obligations. That $ 18.5 million dollars became 22% of all Flint City revenues. Greater than any other source of revenue, greater than income tax revenue, greater than property tax revenue, greater than State revenue sharing, greater than Federal revenue sharing. That $ 28.7 million dollars was the only reason Flint was able to exit emergency management. That and a $ 65.3 million theft from restatement of Flint’s water and sewerage enterprise fund net positions, from their 2014 CAFR to their 2015 CAFR (compare ending 2014 to beginning 2015 net positions on the bottom of pages 3-13).

Let’s consider a counterfactual. Suppose that Michigan’s bureaucrats and political leaders were actually competent and, under the unrelenting scrutiny of a watchful press, arranged for proper chemistry controls of Flint River sourced water. No Flint residents were exposed to lead, no one died from legionella pneumophila, and Flint residents sang the praises of their new water. Its tough to ignore recent history, but do so for a moment so we can explore a very important question:

Would the financial reorganization of Flint under its popularly elected politicians and emergency managers have worked?

You Betcha! (13)Nuh Uh.(1)

Time to Light These Clowns Up

Someone needs to impress upon the MRP legislative and executive leadership that “NO” means “NO” . . . period.

Roughly nine months ago, We the People of Michigan, by a record-breaking 4-to-1 statewide margin, told our elected nobility in Lansing “HELL NO” on a proposed tax increase, which they’d tried to sell as a road proposal, but which the voting public saw clearly as a political sausage job that produced a cronyist’s grab bag of goodies. Thus, every single county in this state, without exception and in no uncertain terms, clearly delivered a mandate-level message that we are no longer interested in extending the legislature a taxpayer-funded line of credit, until such time as they get their spending priorities in order. You would think that a statewide vox populi shellacking, with a turnout rate typical of the biennial congressional primaries, would clue in the GoverNerd, and the rest of the MRP/MIGOPe professional political establishment, that We the People are done being their ATM.

You would think that . . . but you would be wrong. Six months after that ballot box rejection, while most of us were tucking our children into bed (or monitoring local election results), the lords and barons in the Michigan Legislature essentially told we the proletariat that our opinion is irrelevant, and that “no” really means “don’t ask again” – which, of course, they didn’t – by passing a “road funding” tax package that was nearly identical to the core of Proposal 15-1, less the elements required to force it onto the ballot. In doing this, they flatly rejected the clear will of the people, imposed through legislative fiat that which they couldn’t persuade the electorate to publicly ratify, and took yet another step toward government by aristocracy.

You Betcha! (30)Nuh Uh.(6)

Emergency Managers, Emergency Management

Synonyms for Headlee Evasion

Darnell Early

Darnell Early

La victoria trova cento padri, a nessuno vuole riconoscere l’insuccesso
A victory finds 100 fathers, nobody claims credit for a failure.
Galezzo Ciano, 2o Conte di Cortellazzo e Buccari, Diary (1942)

The left wing meme on the Flint Water fiasco is that Governor Snyder seized absolute control of Flint and installed doctrinaire Republican viceroys who ruthlessly slashed Flint’s payroll and expenditures without any regard for the residents.

If only this were so.

Michael Brown

Michael Brown

The Flint emergency managers had only one common thread in their backgrounds, long records of administration in government and the nonprofit sectors. No productive experience. Experts at spending other people’s money. Well paid experts.  Outright Democrats or chameleons politically; typical politics of the bureaucratic class. Look at the backgrounds of the Flint emergency managers:

Edward Kurtz

Michael K. Brown

Edward Kurtz, again

Michael K. Brown, again

Darnell Early

Gerald (Jerry) Ambrose

Emergency managers are not viceroys with absolute powers. The evolution of emergency management in Michigan was frustrated by public union opposition. Five successive laws, one repealed by referendum. The law in force during the critical Flint water fiasco decisions is PA 436 of 2012. The powers it confers upon emergency managers are:

MCL 141.1549, Section 9

(2) Upon appointment, an emergency manager shall act for and in the place and stead of the governing body and the office of chief administrative officer of the local government. The emergency manager shall have broad powers in receivership to rectify the financial emergency and to assure the fiscal accountability of the local government and the local government’s capacity to provide or cause to be provided necessary governmental services essential to the public health, safety, and welfare. Following appointment of an emergency manager and during the pendency of receivership, the governing body and the chief administrative officer of the local government shall not exercise any of the powers of those offices except as may be specifically authorized in writing by the emergency manager or as otherwise provided by this act and are subject to any conditions required by the emergency manager.

The emergency managers replace the mayors, council, and chief administrative officers of the municipal governments. While this does indeed give them extraordinary powers of control, their control is anything but absolute. The municipal charter continues in effect and continues to protect the prerogatives of lesser bureaucrats. The vague statutory powers of emergency managers beyond replacing the mayor, council, and chief administrative officer poses unremitting legal jeopardy to emergency managers. Encourages timidity and bureaucratic subterfuge. Not absolute control.

You Betcha! (15)Nuh Uh.(0)

Headlee Evasion Caused Flint’s Water Quality Fiasco

Water Has A Very Special Attribute In Southeast Michigan

Water is Money Image 6You probably think the water which comes out of the taps in your house is for drinking and washing. You would be wrong. Michigan drinking water is first and foremost a mechanism for Michigan politicians to evade limits imposed upon them by the Headlee Amendment. You probably think Michigan water systems have quality as their top concern. You would be wrong. Michigan water departments are directed to maximize revenue by their political masters. These unfortunate facts are the genesis of Flint’s sorry water quality.

Michigan’s lefties and the ignorati in our media have fabricated a popular history of the Flint water situation which begins with Governor Snyder and his emergency managers on 25 April 2014, the date Flint started drawing its drinking water from the Flint River. Craven emergency managers appointed by Governor Snyder plotted to poison Flint residents to save a few bucks. The truth is rather different.

The history of this calamity actually begins in 1978, when the Headlee Amendment to Michigan’s Constitution was passed by outraged Michigan voters.

You Betcha! (26)Nuh Uh.(3)

Gordie Howe Bridge On A Slow Roll to Oblivion

Canadian Economic Collapse and Extravagant Liberal Party Campaign Promises Doom Governor Snyder's Bridge

The estimated cost of constructing the NITC DRIC Gordie Howe Bridge between Detroit and Windsor has now more than tripled since the Canada agreed to fund the entire cost back in June 2012. Its total cost, including interest payments, is now over four times the 2012 estimate. The recent, sharp collapse in the value of the Loonie – the Canadian currency – is being blamed. But it appears that deliberate lying cost underestimation in 2012 and project creep over the last 30 months play a much bigger role in the eyepopping new cost estimates.USDCAD

Financial markets trade the U.S. Dollar and the Canadian Dollar back and forth as ‘USDCAD‘, which is the equal value ratio of Loonies per greenback. The higher USDCAD is, the weaker the Loonie. USDCAD is now quoted around 1.40 (1.4 Loonies per greenback). The Loonie was 37% stronger back in June 2012 when Governor Snyder and then Canadian Prime Minister Harper worked out their agreement; USDCAD was then about 1.02.

Direct construction costs are now estimated to be C$ 2 billion ($ 1.43 billion USD) higher than the C$ 973 million ($ 950 million USD) estimate touted back in 2012. A 37% increase due to currency adjustments would be only $ 360 million (USD), so we know the 2012 deliberate lie underestimation was in the vicinity of $ 1.64 billion (USD). Additionally, the collapse of the Loonie now requires the establishment of a C$ 1.5 billion ($ 1.07 billion USD) reserve to offset the expected rise in Canadian dollar denominated bond interest rates. The Canadian government bond yield curve has doubled at its short end since the middle of September 2015 in response to the collapse of the Loonie. The Gordie Howe Bridge will be financed at those higher Canadian bond interest rates. The total Canadian government cost estimate is now C$ 4.8 billion ($ 3.43 billion USD).Snyder Harper Image

Harper’s Conservative government was defeated in October of last year after NDP voters abandoned their own party for the elysian promises of Justin Trudeau and his Liberal Party. Virtually the same promises our Dear Leader made in 2008 – ‘Hope and Change’ recycled for a northern audience. Harsh reality is already wrecking the promises Trudeau made to win the October election, so will the Canadian government continue to throw money at an unneeded bridge?

You Betcha! (14)Nuh Uh.(3)

Fast and Loose in the Michigan Senate

Switch Subsidy Bill Passage Was A Senate Rules Violation

David Knezek ImageIn their slobbering rush to deliver tax breaks for one very specific data center last Thursday, the Michigan Senate violated its own rules regarding the consideration of appropriations bills. The Knezek amendment to SB 616, S-1:

Enacting section 1. The legislature shall annually appropriate sufficient funds from the state general fund to the state school aid fund created in section 11 of article IX of the state constitution of 1963 to fully compensate for any loss of revenue to the state school aid fund resulting from the enactment of this amendatory act.

converted SB 616 into an appropriations bill according to the definition in Michigan’s 1963 Constitution, in its Article IV, Section 31.

Michigan Senate Rule 3.602 requires:

“Any bill requiring an appropriation to carry out its intended purpose shall be considered an appropriation bill (See Constitution Article IV, Section 31). Appropriations bills, when reported back to the Senate favorably by a committee other than the Committee on Appropriations, shall, together with amendments proposed by that committee, be referred to the Committee on Appropriations for consideration.

Michael Kowall Image 2Senator Kowall moved a suspension of the Senate Rules after the noon recess on Thursday to bring nine bills on to Third Reading, including SB 616. From Senate Journal 106, page 1910: “be placed on their immediate passage at the head of the Third Reading of the Bills calendar.” was his motion. Senate Journal 106 indicates that his request was passed by a majority. This allowed final action and passage on SB 616 in the Senate that day.

Reading the record, it would appear that Senator Kowall was suspending Rule 3.207 to consider SB 616 and the eight other bills which had been placed on to ‘General Orders’ that morning for final passage under ‘Third Reading’, out of normal order. Senate Rule 3.207 requires a one day delay between the ‘Second Reading’ (‘General Orders’), and the ‘Third Reading’ (‘Final Action’). Suspending this prescribed one day delay is a common practice when time is of the essence.

Senator Kowall had already moved that morning, before recess, to place SB 616 and the same eight other bills then under ‘Committee Reports’ (‘First Reading’) under ‘General Orders’ (‘Second Reading’), so they could be on that day’s calendar. Also out of normal order, but again a common practice when time is of the essence.

But did either of Senator Kowall’s two suspension motions suspend Michigan Senate Rule 3.602?

Is Michigan Senate Rule 3.602 a fundamental rule as defined by Mason’s Manual of Legislative Procedure? Mason’s is the underlying body of rules adopted by the Michigan Senate when their own rules are mute on an issue.  Fundamental rules cannot be suspended according to Mason’s and all the other accepted bodies of parliamentary rules.

You Betcha! (16)Nuh Uh.(0)

Another Deceitful Michigan Tax Scam Exposed

Desperate Local Politicians Seek to Preserve Surreptitious Business Activities Tax

Tax Image 1Less noticed during this year’s roads tax furore, a roiling commercial property tax dispute has exposed a widespread, sub rosa business activities tax hidden in commercial real property taxes. A hidden tax you have been paying with every purchase at big box chain retailers who occupy stores they themselves own. Big box retailers have been exposing and successfully challenging this corrupt assessing practice through the Michigan Tax Tribunal and local units of government are howling over the loss of their ill gotten revenue.  Michael B. Shapiro of Honigman, Miller has been leading the charge against these bloated assessments.

Local units of government are demanding the Michigan Legislature overturn long standing real estate valuation principles and the Michigan court rulings which hold that assessed true cash value (i.e. fair market value) for tax purposes be based upon what a property would be sold for at arm’s length. They want true cash value to effectively incorporate the retail success of current owner-occupants. This artificially jacks up the property’s true cash value, its taxes, and the prices you pay at the store. Remember that businesses don’t pay taxes, customers of those businesses – in this case you – do.

Michigan’s nitwit media have deceitfully relabeled traditional true cash value assessment the ‘Dark Stores Loophole’. Local government organizations are screaming about lost revenues.  Even MoveOn.org is right in there with a petition to support their favorite spenders.  This is a devious effort to stampede our state’s legislators into codifying creative assessment methods solely intended to extract surreptitious revenues from shoppers. A follow on to the more blatant ‘Amazon Tax’ campaign of 2014. The State of Michigan got into your pocket last year, now it is your local government’s turn.

The term ‘Dark Stores Loophole’ was created to suggest that vacant big box stores have lower, fire sale values when compared to occupied stores. True enough, but we are discussing assessments used to determine real estate, i.e. property, taxes. Not taxes on business activity. The two creative assessment methods used most often to loot shoppers are ‘construction cost‘ and ‘imputed lease‘ calculations. Each might be valid under some very limited circumstances, but both are entirely invalid when assessing big box retailers.

You Betcha! (9)Nuh Uh.(0)

How Refreshing This Would be to Hear in Michigan

Sorry, we’ve got our perpetually bowing to Obama, nasally Progressive quisling, and his obedient toad, so, forget about that, Boobus Michiganderus.

Yessirree, we’re about to get the *best* energy policy that money can buy in Lansing, and get it good and hard.

H/t Sundance

You Betcha! (14)Nuh Uh.(1)