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Fighting the fantasies

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Illinois

* Perhaps the dumbest report I’ve seen in years was former Chicago Inspector General David Hoffman’s “analysis” of the city’s parking meter lease deal. According to Hoffman’s report, if the city had just increased parking meter rates on its own, it would’ve reaped twice the amount of money of leasing the meters.

The report was silly because of the political facts on the ground. Cook County’s one percentage point sales tax hike has practically created a revolution - or at least a revolution in the Tribune editorial board’s collective mind. The county board has once again voted to roll back half the tax, and Ald. Toni Preckwinkle promised yesterday that she will eliminate the rest of the tax increase if she is elected county board president.

For good reason, there is little to no enthusiasm in the Democratic-dominated Illinois House to increase the income tax, and the House GOP has pledged to unite against any such move. Every Republican running for governor is promising not to increase taxes, with Dan Proft actually pledging to cut taxes.

My point here is that if Mayor Daley and the city council had actually voted to double parking meter rates on their own, the outcry would have been so loud and intense that by now those rate hikes would assuredly have been rolled back. If not, lots of aldermen, and even the mayor, would be in extreme danger of losing their jobs.

I’m going over all this again because the first “scoop” of the New York Times’ Chicago Media Cooperative focuses on some revelations about the deal…

After a rocky start hurt their bottom line, Chicago’s new parking meter operators are raking in more than $1.1 million a week and expect even more revenue next year, according to internal company documents obtained by the Chicago News Cooperative.

The parking meter company projects total revenues of more than $75 million and net income of about $58 million in 2010, after a second round of rate increases go into effect across the city on Jan. 1. In the first 10 ½ months of operation ending Dec. 31 of this year, the company expects $32.7 million in net operating profit, for a 70 percent profit margin.

Much of the “new” meat in the story is about how initial costs were higher than expected and revenues were lower…

According to the meter deal’s income statement for May 2009, revenues for the month were about 20 percent below projections. At the same time, expenses were far over budget, mostly for “supplemental staffing.”

The rest of the story is mainly about how parking rates will rise next year and the private company will make more money. Nothing really new there.

* In other budget news…

Illinois, the fifth largest U.S. state by population, postponed selling $3.46 billion of municipal bonds to fund state pensions because of a delay in appointing a new official to oversee debt sales, said Kelly Kraft, spokeswoman for the state budget department.

Great. The budget spokesperson essentially confirmed that Quinn’s dithering on replacing his Blagojevich hand-me-down caused serious problems.

* Also, Gov. Quinn met with some Naperville business leaders and the Daily Herald has their response…

Sean Sebold, president of Sebold Capital Management and a member of the chamber’s board of directors, said businesses produce jobs, not government and he called an income tax increase a “job killer.”

“You think someone is going to bring a business out of a state to our state with a 4.5 percent income tax?” he asked. “What it will also do is drive retirees out of the state.”

The income tax would still be on the lower side, and retirees do not pay taxes on pension income. The Daily Herald didn’t note that, however.

And this quote, also from that DH story, is why Dan Hynes is having such a tough time knocking Quinn off his perch…

John Schmitt, president and CEO of the chamber, said he was not prepared to comment specifically on Quinn’s income tax proposal but that the chamber doesn’t typically support tax increases. But he was glad the business community had a chance to share its concerns and called the visit productive.

“He seems to be open minded and progressive,” Schmitt said of Quinn. “Because of what his predecessors did to the office of governor he has a tough battle but he’s working to restore confidence in the office and I think he’ll do it.”

Voters want Quinn to succeed, understand he was put in an impossible situation and are willing to overlook the glitches to date. If this attitude survives next year, it’ll be tough for Republicans to beat him as well. But there’s no guarantee of that, of course.

Thoughts?

…Adding… I forgot to post our relevant quote of the day…

But when asked how the state budget situation could be fixed without a tax increase, Quinn said, “You could pray for manna from heaven.”

posted by Rich Miller
Friday, Nov 20, 09 @ 11:17 am

Comments

At some point, you stop being the new guy, and actually have to get the work done. Quinn can’t expect to win the general (maybe the primary) on good will.

Comment by Pat collins Friday, Nov 20, 09 @ 11:26 am
I don’t understand why the Inspector General analyzing the deal and finding it wanting is “dumb.” Facts on the ground don’t negate the fact that something might have been screwed up, or worse. In fact, pretty much everything the IG or Bill Holland does after the fact. Why is that dumb?

Comment by Chicago Cynic Friday, Nov 20, 09 @ 11:26 am
It might be a question of the day, but there’s been an awful lot to take shots at-my pal mr.kirk has come in for his own abuse from zorn this morning, but you might note politicians in the state who aren’t screwing up catastrophically.

As for this you are pointing at something that’s hit a lot of talk in d.c., namely the costs of privatization. A lot of democrats (jan schakowsky) have complained in d.c. that the contracting out of things like diplomatic security (blackwater, dyncorp), food to supply troops (halliburton) ect has hidden the true costs of the wars in that those private employees don’t show up on killed in action lists, the way these increases in parking rates don’t directly hit the mayor. It’s worth a debate about whether or not we’re gaining with privatization at the national and local level or if we’re giving politicians a way to get shielded from criticism.

Comment by shore Friday, Nov 20, 09 @ 11:26 am
===Why is that dumb? ===

Because it’s an impossible fantasy based on total irreality.

Comment by Rich Miller Friday, Nov 20, 09 @ 11:34 am
So then it’s ok to play hide the pea by masking massive rate increases behind a patina of privatization? It’s still a bad deal and that was his point.

Comment by Chicago Cynic Friday, Nov 20, 09 @ 11:37 am
The NYT article also quotes several investment bankers who also seem to conclude that Chicago didn’t get enough for the parking deal and got the short end of the stick.

How does that go again? Putting lipstick on a pig?

Comment by Louis G. Atsaves Friday, Nov 20, 09 @ 11:41 am
The other problematic part of the report was that the IG added up the total amount of revenue the parking meters would/should have collected over the term of the lease and then criticized the City for leasing the meters for less than that full amount. It was as if present value was a completely foreign concept.

Comment by Scooby Friday, Nov 20, 09 @ 11:45 am
Quinn’s quote is an example of why I have no faith in his ability to address the budget issues. The State budget deficit can easily be eliminated by severe cutbacks in State services. Obviously, that would have a great impact on a lot of needy people, but to dismiss it as an option is irresposible and the reason we are in this mess in the first place. You could raise income taxes to 10% and still find good programs that need funds. Until our politicians realize that you sometimes have to say no, we will will never get out of this financial crisis.

Comment by Pelon Friday, Nov 20, 09 @ 11:48 am
“You think someone is going to bring a business out of a state to our state with a 4.5 percent income tax?”

Quite a question, taken in isolation.

As you point out, Rich, even if it were pushed to 5%, Illinois’ income tax rate would still be on the low side in comparison with our neighbors’ top rates, which range as high as 8.98% (Iowa), 7.75% (Wisconsin) and 6% (Kentucky and Missouri).

And in all these graduated-rate states, taxpayers already are paying more (than they would be in Illinois) when they hit earnings as low as $20K or even $10K.

But that’s the trouble with context - it complicates fearmongering.

Comment by Linus Friday, Nov 20, 09 @ 11:48 am
Quinn’s quote is priceless, because it’s what nearly every Democrat in the House is thinking.

Comment by Josh Friday, Nov 20, 09 @ 11:51 am
What is the difference, the parking meter firm doubled, or will double the cost by next year, so what is the difference? THis sham that Daley can say, “I didn’t double it, the vendor doubled it.” Well the Mayor and the Aldermen gave the contract to the vendor and the vendor will realize the annual increase and we get a one-time payout.

Comment by Jimmy Joe Friday, Nov 20, 09 @ 11:56 am
Linus,

You take that income tax issue in isolation, as well. Other states do not have the multi-layer taxing bodies that Illiois does. Townships and Forest Preserve districts also flood Illinois citizens with demands for taxes. When you add up all the local,township,forest preserve, county, and state taxes, Illinois is a very high tax state.

This has been highlighted many times in this blog and should be remembered anytime talk of comparing different states taxing levels occurs.

Comment by dupage dan Friday, Nov 20, 09 @ 11:58 am
I think it can be argued that the OIG report was, at least in part, used and perhaps created as a stepping stone for Hoffman’s Senate campaign, and perhaps doesn’t have the expertise to evaluate it as such. It’s also true that the city council lacks the political will to raise meter rates without a buffer.

But Hoffman’s conclusions appear valid, and the NYT article you reference includes statements from economists that confirm his assessment, at least with regards to potential revenue lost.

However, if the council and mayor believed that any fallout would be mitigated and absorbed by LAZ, it was a gross miscalculation. And every January 1st through 2013, parkers will be reminded of this transaction as rates increase incrementally. In the meantime, the city will likely have blown through the entire nut, and will have little to show for it for the next 70 years.

It’s also worth noting that Alderman Waguespack commissioned his own review that produced similar underlying results - that the meters were sold for a percentage of their value.

Comment by The Doc Friday, Nov 20, 09 @ 11:59 am
Hynes has to demonstrate to Democrats that Quinn is a loser if he gets the nomination.

Dan is going to have to start fearmongering. He will need to use his state office to ramp up the heat on our budget crisis. The more voters are confronted by a dithering governor while the state lists towards the ocean bottom, the more voters will be willing to jump from Quinn’s ship.

Hynes can’t be seen torpedoing it. That is where he went wrong a few months back with his billing questions. Hynes has to demonstrate to Democrats that our state finances have worsened under Quinn’s dottering 11 month time in office, and that we might go down within the year. I don’t see how that would be difficult to orchestrate.

The Quinn Administration and the Illinois economy is at a standstill. As long as voters think the worse is over and that an economic rebound will arrive within the year, Quinn may have the time necessary to survive Hynes because Democrats will believe that their president’s economic policies will work by the time of the General Election.

We are in a political quandary. If we dump Quinn aren’t we suggesting that Obama is a flop too? Voting for Quinn is a vote for political support for the President in this case. Hynes has to find a way around this situation by fearmongering Democrats enough to dump Quinn without them feeling that they are also abandoning their economic policies.

He can do it, I think.

Comment by VanillaMan Friday, Nov 20, 09 @ 12:01 pm
“At some point, you stop being the new guy, and actually have to get the work done. Quinn can’t expect to win the general (maybe the primary) on good will.”—pat collins

I agree. President Obama stopped being cut slack pretty much by his 5th month, or so, in office. He’s definitely not getting cut any slack today (10 months into his administration), and rightfully so. Like you note, at some point the office holder has to be held to account, or at least he should be.

For some reason with Quinn there is a double standard. It could be that maybe not much was expected of him, so people aren’t too disappointed by his inabilities.

Finally, depending one’s vantage point… quinn winning the governor’s race in November really means mike madigan is in effect for all intents and purposes the governor. mike madigan is highly respected for his leadership qualities and his powerful abilities with respect to governing. for some people it is ideal to have mike madigan in effect leading the state for the most part.

and, assuming daley runs for mayor again, and wins, you’d have him controlling the chicago metro part of the state and mike madigan controlling the rest of the state, with quinn just signing off on whatever they want or need done under their leadership, or Madigan-Daley co-governships if you will.

Quinn would be like Queen Elizabeth, or a figure-head type figure, while Daley and Madigan (more so madigan) would be the prime ministers running the government.

more power to ‘em!

Comment by Will County Woman Friday, Nov 20, 09 @ 12:02 pm
Restoring confidence by endlessly kicking the can down the road? Oops, I was not prepared to comment either. So, I must be qualified to be a CEO or a politician.

Comment by vole Friday, Nov 20, 09 @ 12:10 pm
P.Q.— “Manna From Heaven”

Dick Durbin—- “A Dream Come True”

lol, The quotable quotes these days are starting to sound an awful like the handwritten comments posted in my old high school year book by seventeen year old girls! What’s going on? Is there something in the water?

Comment by Responsa Friday, Nov 20, 09 @ 12:14 pm
–”Sinsheimer decided to take a fresh look at everything,” Kraft said.–

What’s he need to look at? These aren’t exotic borrowings. That statement begs a clarifying follow-up question or three.

Comment by wordslinger Friday, Nov 20, 09 @ 12:17 pm
Dupage Dan is right. The overall tax burden is high in Illinois. That makes living here especially tough in the middle of the Great Recession, which has, I would note, no end in sight for folks down on the ground here. Unemployment nationally is actually predicted by many to go up a bit before going down very slowly over the next few years. And many jobs may never come back, because of the increase in productivity created by the recession.

In the middle of all this comes Pat Quinn, with Mayor Daley and the Chicago Machine at his elbow and wealthy Democratic liberals hovering above his head, wanting a tax increase that will be felt most heavily by the middle class. And he’s completely unapologetic about it. It’s for our own good and we should pay. He’s stuck with it, too because Hynes has taken the progressive track and the GOP candidates will campaign on a no-income-tax increase platform. After months of Blagojevich trial stories, will Illinois taxpayers cave and give state government even more money. Pat probably thinks so, but it doesn’t seem that sure a thing to me.
The general looks like it is going to be a referendum on an income tax increase for a very historically corrupt state government in the middle of a recession–the one whose current employees are enjoying a 16 percent pay increase over the current four-year union contract plus state-tax-free pensions that go up three percent a year when they retire.

Comment by cassandra Friday, Nov 20, 09 @ 12:19 pm
Chicago issued more parking tickets than last year, yet revenue is way down. Shocking!

http://www.myfoxchicago.com/dpp/news/metro/chicago-city-parking-ticket-revenue-way-down

Comment by Ravenswood Right Winger Friday, Nov 20, 09 @ 12:21 pm
===If we dump Quinn aren’t we suggesting that Obama is a flop too?===

What? That is a completely ridiculous question but typical of your constant denigration of the president. Go buy a tea bag.

Comment by Bill Friday, Nov 20, 09 @ 1:11 pm
Bill, he didn’t include the full, logical chain of thought. It’s from the philopsher Otter, and it begins with “the issue isn’t whether we took a few liberties with our dates….”

Comment by wordslinger Friday, Nov 20, 09 @ 1:14 pm
I wonder if we could somehow set up a debate between Bill and VMan.

Comment by Rich Miller Friday, Nov 20, 09 @ 1:18 pm
Anytime, anywhere. You buy the drinks.

Comment by Bill Friday, Nov 20, 09 @ 1:21 pm
If you’re buying, I’m drinking.

Comment by John Bambenek Friday, Nov 20, 09 @ 1:26 pm
“You think someone is going to bring a business out of a state to our state with a 4.5 percent income tax?”

yes, definetly. What a complete 2 dimensional and unrealistic view of business. If I want to sell product x. Ad there are 10 million possible customers in IL for my product, who have the money and the desire to buy it. I am not going to deprive myself of those sales, I simply account for the tax in factoring my profits.

Business goes where there is demand and money. otherwise there would be no business in any state with an income tax, and all business would be in states with no income tax. Since that is not true we know there are deicsions other then tax which drive business.

Consider a small buisnes that mows lawns. if nobody in a community is offering this service creating a huge demand, I doubt your going to see a small lawn/landscape company refuse to start up because of the income tax. Just the contrary, such a wide open market with no competition is the jucy steak, not the tax rate.

Comment by Ghost Friday, Nov 20, 09 @ 1:30 pm
D Dan and Cassandra: You’re absolutely right, to bring in the rest of that context - local as well as state taxes, including ppty and sales as well as income taxes.

And when you do so, when you combine all those taxes, here’s what you find: Illinois still comes out ahead of other states. In FY2006, we ranked 41st in the nation in state and local “own-source” revenue as a percentage of personal income (15.4%, the second-lowest in the Midwest, compared with a US avg of 16.9%).

Illinois was in the middle of the pack — 25th in the nation — in state and local own-source revenue per capita ($5,598, compared with US avg of $5,803).

Source: the national Federation of Tax Administrators (www.taxadmin.org/fta/rate/slshare.html)

The bottom line: All the context in the world continues to refute any argument that increasing general state taxes puts Illinois at a disadvantage, compared with other states, when it comes to amount of taxes assessed.

Something like 30 other states, who are all suffering from the same national recession as Illinois, have all included a tax increase in their various efforts to climb out of big fiscal holes. As is widely reported, Illinois faces one of the deepest holes of all - and our “solutions” so far have been limited to cutting vital services (leading to more job losses and pressure on struggling families) and adopting short-term budget gimmicks such as borrowing (jacking-up our long-term costs).

Comment by Linus Friday, Nov 20, 09 @ 1:35 pm
Rich,

The point that I was trying to make in the Daily Herald was that those retirees that have assets outside pensions and retirement plans… those with discretionary income and assets will not stay. All assets outside retirement accounts will be subject to the illinois income tax. So retirees that were prudent and understand how to make money, will leave, and have left. I have seen them.

Comment by Sean Sebold Friday, Nov 20, 09 @ 1:40 pm
===My point here is that if Mayor Daley and the city council had actually voted to double parking meter rates on their own, the outcry would have been so loud and intense that by now those rate hikes would assuredly have been rolled back. If not, lots of aldermen, and even the mayor, would be in extreme danger of losing their jobs.===

I don’t understand this. Are you saying that the sale of the parking meters has not caused political fallout, and that aldermen are not in danger of losing their jobs over it? Do you think the voters won’t hold incumbents to blame for rate hikes because they delegated those rate hikes to a private company? Outside of the editorial pages, I hear far more grumbling about the parking meters than I do about the sales tax.

Comment by enn Friday, Nov 20, 09 @ 1:42 pm
I meant lease, not sale, of course.

Comment by enn Friday, Nov 20, 09 @ 1:43 pm
Rich: he was looking at the numbers and the effects overall on revenue collection. He was dealing with facts, not potential political fallout. OK, he might not have factored in PV vs. future value completely, but my overall point is that it is wrong to criticize him for coming to a conclusion without somehow factoring in politics. Lord help us if all policy analysis in the future only looks at what might be politically popular or not.

As the Doc said, as the rates go up the administration will still have a hard time deflecting criticism onto the company. Aint going to work.

Comment by pseudonymous Friday, Nov 20, 09 @ 1:55 pm
===it is wrong to criticize him for coming to a conclusion without somehow factoring in politics===

It’s not politics, it’s reality. And it’s a silly conclusion.

Comment by Rich Miller Friday, Nov 20, 09 @ 1:59 pm
Linus-

I don’t disagree that some kind of revenue increase may be needed.

I object to Quinn’s obsession with a solution that depends disproportionately on taxing middle class income–with scant attention to any type of consumption taxes such as expanded service taxes or a graduated tax that falls more heavily on the truly wealthy (and $80k a year is not wealthy). In fact, under pressure, Quinn’s proposal actually became less progressive as the summer
session progressed. I guess he figures us poor folks are too busy working to vote and can’t afford to make campaign contributions.

Comment by cassandra Friday, Nov 20, 09 @ 2:12 pm
Re rich “it’s not politics, it’s reality”

I am missing your logic Rich. Independent OIG reports and other good government agencies are supposed to factor in political contingencies? That runs counter to their purpose as independent. That’s reality.

And wasn’t this board trumpeting the CCounty rollback as inevitable until some commissioners completely jumped sides. Nothing should be taken for granted in this state.

Comment by Patriot Friday, Nov 20, 09 @ 2:40 pm
“If we dump Quinn aren’t we suggesting that Obama is a flop too?” Geez Bill, sometimes you can be so easily provoked.

Will the economy improve next year? If it does, then Quinn and Obama come out ahead. Quinn gets renominated and re-elected, and Obama gets the deserved credit.

If you are willing to dump Quinn, then you are aware that Quinn and our economy may be still in the doldrams a year from now because you want the party to keep the governor’s office, right? So, if that is your concern, then you are also hedging your bets regarding Obama’s economic solutions, right? It’s true. I’m just pointing that out.

Hynes has to be aware that Quinn supporters are hopeful for an economic turnaround, in order to justify nominating Quinn. We won’t do it if the economy still looks iffy, will we? Hynes gets nominated if the economy still looks sucky.

The Big Hope contains success for both Obama and Quinn, and turning your back on Quinn is making an indirect statement regarding how well you believe Obama is doing. Both men represent the status quo now, and Hynes is the challenger.

That is how you get coattails in an election. Quinn is riding Obama’s coattails. For Hynes to win, he needs to be aware that Democrats may still be supporting that Big Hope for an Obama economic recovery before the General Election.

You and I both like Hynes over Quinn. Stop being so defensive.

Comment by VanillaMan Friday, Nov 20, 09 @ 2:42 pm
Hoffman did his job and found out that the deal could have been better. Not sure why that is “dumb” either.

Comment by alexandrascott Friday, Nov 20, 09 @ 4:03 pm
How quickly they forget…

Rich, I would agree with you that the Hoffman report is a bit light, but come on. Dial up the Capitol Fax Wayback Meter and recall all the whoppers turned out by Blago’s OMB and CMS.

The “Efficiency Initiatives” piece was easily award-winning fiction, and the various pension raid schemes were close behind.

Hoffman could take the Nobel in Economics alongside that tripe.

Comment by Arthur Andersen Friday, Nov 20, 09 @ 4:04 pm