With Christmas behind us and the new year nearly upon us, I spent some time this week thinking about what next year will bring: presidential politics.
The first voting will start Thursday and end Nov. 4, when we pick the next president of the red, white and blue.
By Thursday night we should have a better idea who will be the Democrat and Republican nominees for president. Iowa, with a population less than Orange County, will hold its caucuses in living rooms and meeting rooms across the state that day. How Iowans vote will have an enormous impact on the race.
On the Democrat side, which has become a three-way tie in Iowa within the margin of error, according to the average of all polls followed by RealClearPolitics.com, a Hillary Clinton victory would help push back Barack Obama’s surge and could end the John Edwards campaign unless he gets second place. An Obama win bloodies Clinton’s nose but doesn’t cause any real damage unless he wins five days later in New Hampshire.
An Edwards win could change everything. After seven years out in the desert, the Democrats want the White House back and will pick whichever candidate they think can take it back in November. If anything, they are pragmatic.
With Clinton’s very high negatives among many general election voters and Obama’s lack of any real experience, Edwards may get the nod as the only top tier candidate who is smart enough and likable enough to win the White House in November.
First, a full disclosure before we talk about the Republican side. I drank the Kool-Aid for former Massachusetts Governor Mitt Romney more than a year ago after meeting all the top candidates except Fred Thompson. Thompson wasn’t a candidate then and, even with the hard work and help of some of my close friends, is not much of a candidate now. I have given and raised money for Romney and I am completely biased.
On the Republican side you have former Arkansas Gov. Mike Huckabee rocketing to the lead from nowhere to pass Romney by five points in Iowa.
A win by Huckabee would propel his candidacy past his certain-loss in New Hampshire where his southern charm does not wear well. Then into Michigan, where Huckabee is already neck and neck with Romney and on to the Bible-Belt South Carolina, where he is expected to win.
Romney will need every bit of his organizational skills and a perfect execution of his plan to win in Iowa. A second-place finish would not end his campaign if he turns around and beats McCain in New Hampshire, but it would leave a mark.
McCain has to win in New Hampshire to continue. Though loved by many Americans for his service to this country, his maverick style has never been something Republicans have warmed up to.
Former New York Mayor Rudy Giuliani is another candidate that I have a lot of good friends working hard to get elected. He has watched his poll numbers drop in every early state caucus or primary where voters have had a chance to see him up close. The campaign continues to say it has a “Big State” campaign and it is ahead in many of the Feb. 5 primaries, where 19 states including California, Colorado, Illinois and New Jersey choose their nominee.
The problem with this strategy is that by Feb. 5 you will have had seven major contests in four weeks. All eyes will be on the winners of the previous contests. A goose egg in every win column, for all intents and purposes, will end Giuliani’s campaign by the time we vote here.
My best guess: Romney will pull off a win in Iowa and New Hampshire (I told you I was biased) on his way to securing the Republican nomination. Republicans want a real executive in the White House.
The Democrats will go with Edwards if he wins Iowa, otherwise it will be Hillary vs. Romney in November. This is going to be a very long year.
Friday, December 28, 2007
Friday, December 21, 2007
Prop. 92's Fans Need Education
The people pushing Proposition 92, a.k.a. “Community College Governance, Funding Stabilization, and Student Fee Reduction Act,” must think that the public is deaf, dumb and blind if they really believe they can hoodwink the electorate into amending the California Constitution to, in their words, “stabilize funding” and lower student fees $5 per unit for community college students. They are, in fact, just lining their own pockets.
First off, if anyone decides that without the $5 per unit reduction in fees, they cannot afford to go to a community college then please don’t go! The good citizens of California are already giving you a $5,500 gift for your future, and if you do not think the extra $75 bucks per semester (full time) is worth it, then maybe we shouldn’t either. The student fees going full-time is $320 per semester. Not only will the state taxpayers completely subsidize your education, but if you really do not have the money, the feds will give you a grant to pay your fees and books.
There is no reason why anyone, no matter how poor, cannot afford a community college education. Try this — you can pay for your complete education by just brewing your coffee at home and passing on your daily Starbucks (OCC has one on campus). It is just about choices.
Before anyone says that I am just bagging on our local Coast Community College District, I am not. I may not agree with them when they basically gave away a $32 million TV station to a bunch of wealthy donors. But that only speaks to how they value taxpayer resources. I do not want to mix the good mission of the States Community College system with how some of the districts handle their finances.
With that being said, the fact that they now want the citizens of California to change the State Constitution so that they can forever lock in an ever-increasing percentage of the state treasury with no accountability is a bit more than this former community college student can take.
This Constitutional Amendment not only locks in a fixed percentage of all state revenue; it would also reallocate the revenue not by how many students the college has or how many courses the students take. No, they actually changed the definition of “changes in enrollment” to mean “the change in the population served by the public community colleges.” What that means in English is that if half the students at OCC did not show up next year, they would still receive the same amount of funding from the state as long as the population of the area served has not gone down.
Another disingenuous part of this Constitutional Amendment is where it states, “Community Colleges should be accountable to taxpayers through the election of local boards facing regular elections.”
It then proceeds to create a brand new state bureaucracy, “The Board of Governors of the Community Colleges.” By this amendment it would require that the majority of this board be composed of people who are either employees, faculty or administrators of the college system they are entrusted to govern. It also adds a new chancellor and six deputy chancellors. That is called the fox guarding the hen house.
I could go on more, but I am feeling charitable with it being Christmas and all.
All in, California spends more than $17 billion for its community college system. On balance, with the need for lifelong learning, it has served the citizens well. Adding another layer of bureaucracy run by a un-elected unaccountable insiders is not a class we need to take.
First off, if anyone decides that without the $5 per unit reduction in fees, they cannot afford to go to a community college then please don’t go! The good citizens of California are already giving you a $5,500 gift for your future, and if you do not think the extra $75 bucks per semester (full time) is worth it, then maybe we shouldn’t either. The student fees going full-time is $320 per semester. Not only will the state taxpayers completely subsidize your education, but if you really do not have the money, the feds will give you a grant to pay your fees and books.
There is no reason why anyone, no matter how poor, cannot afford a community college education. Try this — you can pay for your complete education by just brewing your coffee at home and passing on your daily Starbucks (OCC has one on campus). It is just about choices.
Before anyone says that I am just bagging on our local Coast Community College District, I am not. I may not agree with them when they basically gave away a $32 million TV station to a bunch of wealthy donors. But that only speaks to how they value taxpayer resources. I do not want to mix the good mission of the States Community College system with how some of the districts handle their finances.
With that being said, the fact that they now want the citizens of California to change the State Constitution so that they can forever lock in an ever-increasing percentage of the state treasury with no accountability is a bit more than this former community college student can take.
This Constitutional Amendment not only locks in a fixed percentage of all state revenue; it would also reallocate the revenue not by how many students the college has or how many courses the students take. No, they actually changed the definition of “changes in enrollment” to mean “the change in the population served by the public community colleges.” What that means in English is that if half the students at OCC did not show up next year, they would still receive the same amount of funding from the state as long as the population of the area served has not gone down.
Another disingenuous part of this Constitutional Amendment is where it states, “Community Colleges should be accountable to taxpayers through the election of local boards facing regular elections.”
It then proceeds to create a brand new state bureaucracy, “The Board of Governors of the Community Colleges.” By this amendment it would require that the majority of this board be composed of people who are either employees, faculty or administrators of the college system they are entrusted to govern. It also adds a new chancellor and six deputy chancellors. That is called the fox guarding the hen house.
I could go on more, but I am feeling charitable with it being Christmas and all.
All in, California spends more than $17 billion for its community college system. On balance, with the need for lifelong learning, it has served the citizens well. Adding another layer of bureaucracy run by a un-elected unaccountable insiders is not a class we need to take.
Friday, December 14, 2007
Homes Are Not Piggy Banks
It is only 10 days before Christmas, and to some, what I am about to say will sound like Santa Claus but to others, Scrooge.
But sometimes you just have to say it like you see it. The real estate market, depending how you measure it, hit all-time highs in 2006-07 in the Newport Beach/Costa Mesa area. Homes had more than doubled in value in less than four years.
Now, sales activity has dropped off a cliff and won’t return until prices drop enough, across the board, to get first-time home buyers on the first rung of the housing ladder.
Looking at the data, we can see the average home in Costa Mesa’s 92626 zip code went from around $350,000 in 2002 to over $700,000 in 2006. Newport Beach’s 92660 went from an average of about $500,000 to more than $1 million during the same period. More than a 100% increase in four years.
To get homes selling again, we need to understand how we got here in the first place. The increase in sales prices can be put at the foot of lenders who loaned people money to buy homes with no down payment and no verification of income.
To put it bluntly, if you could fog a mirror, you could get a loan. Welcome to Wall Street’s invention: the sub-prime loan.
In a market like Orange County, with very little supply, it does not take much increase in demand to rocket home prices up. With these sub-prime loans in hand, buyers bid up all available houses.
People will always bet with other people’s money if they have nothing to lose. Prices go up, I win; prices go down, the lenders lose.
If a buyer actually had to come up with a $20,000 or $30,000 down payment, they might not bid up home prices to where they could afford only the house with a temporary teaser rate that lasted long enough to move in. Prices were being forced up by people that had no skin in the game.
So now that sub-prime lending is over and buyers will actually have to pay for a house, prices will have to move down to what people can really afford.
This already happened in the new home market where builders have to sell homes for what people can actually pay in this post sub-prime market.
Take a look: New homebuilders are selling homes at 2005 prices. It’s a great time to buy a new home.
What about buying a resale home, which makes up most of our market? Do not waste your time trying to buy a home unless a seller is really motivated to sell.
For the most part, the only sellers who are really motivated have no equity and their lenders have agreed to accept less than what is owed on the house.
This is what is known as a short sale. Instead of foreclosing the lender, knowing they are about to have a loan go bad, decides it is better to take a loss now with an orderly sale than to have to go through the foreclosure process and end up with a vacant house, which they have to sell anyway.
Vacant houses do not show too well. Well that’s what happens when you loan 100% of the sales price.
Lenders have already written down $76 billion in real estate-related loan losses in 2007. But this is just an adjustment on their books, and until they foreclose or do a short sale, it will not be reflected in the home prices.
Home buyers can get only part of that $76 billion if they make an offer to buy, at a price they can afford. Call your local Realtor, you would be surprised what lenders will accept. Most large lenders have already staffed up their short sale departments, but be patient after you make your offer. This may take some time.
The reality is that more than half of the homeowners in the above zip codes paid less than the lower of those two numbers because they bought their homes prior to 2002. Many bought much prior and for a lot less.Whether you live in a $700,000 home or a $2 million home, most of you did not actually pay that much for your house. In fact, chances are you did not pay half of that amount.
The point I am trying to make is that the fluctuation in home value for most people should make no difference in their lives.
A home is a place to live. It is not a piggy bank. For those who bought their house after 2005 with no money down, you probably have no equity. But if you can afford your payments, pay down your loan and enjoy your home. You will be OK over the long term. Merry Christmas.
But sometimes you just have to say it like you see it. The real estate market, depending how you measure it, hit all-time highs in 2006-07 in the Newport Beach/Costa Mesa area. Homes had more than doubled in value in less than four years.
Now, sales activity has dropped off a cliff and won’t return until prices drop enough, across the board, to get first-time home buyers on the first rung of the housing ladder.
Looking at the data, we can see the average home in Costa Mesa’s 92626 zip code went from around $350,000 in 2002 to over $700,000 in 2006. Newport Beach’s 92660 went from an average of about $500,000 to more than $1 million during the same period. More than a 100% increase in four years.
To get homes selling again, we need to understand how we got here in the first place. The increase in sales prices can be put at the foot of lenders who loaned people money to buy homes with no down payment and no verification of income.
To put it bluntly, if you could fog a mirror, you could get a loan. Welcome to Wall Street’s invention: the sub-prime loan.
In a market like Orange County, with very little supply, it does not take much increase in demand to rocket home prices up. With these sub-prime loans in hand, buyers bid up all available houses.
People will always bet with other people’s money if they have nothing to lose. Prices go up, I win; prices go down, the lenders lose.
If a buyer actually had to come up with a $20,000 or $30,000 down payment, they might not bid up home prices to where they could afford only the house with a temporary teaser rate that lasted long enough to move in. Prices were being forced up by people that had no skin in the game.
So now that sub-prime lending is over and buyers will actually have to pay for a house, prices will have to move down to what people can really afford.
This already happened in the new home market where builders have to sell homes for what people can actually pay in this post sub-prime market.
Take a look: New homebuilders are selling homes at 2005 prices. It’s a great time to buy a new home.
What about buying a resale home, which makes up most of our market? Do not waste your time trying to buy a home unless a seller is really motivated to sell.
For the most part, the only sellers who are really motivated have no equity and their lenders have agreed to accept less than what is owed on the house.
This is what is known as a short sale. Instead of foreclosing the lender, knowing they are about to have a loan go bad, decides it is better to take a loss now with an orderly sale than to have to go through the foreclosure process and end up with a vacant house, which they have to sell anyway.
Vacant houses do not show too well. Well that’s what happens when you loan 100% of the sales price.
Lenders have already written down $76 billion in real estate-related loan losses in 2007. But this is just an adjustment on their books, and until they foreclose or do a short sale, it will not be reflected in the home prices.
Home buyers can get only part of that $76 billion if they make an offer to buy, at a price they can afford. Call your local Realtor, you would be surprised what lenders will accept. Most large lenders have already staffed up their short sale departments, but be patient after you make your offer. This may take some time.
The reality is that more than half of the homeowners in the above zip codes paid less than the lower of those two numbers because they bought their homes prior to 2002. Many bought much prior and for a lot less.Whether you live in a $700,000 home or a $2 million home, most of you did not actually pay that much for your house. In fact, chances are you did not pay half of that amount.
The point I am trying to make is that the fluctuation in home value for most people should make no difference in their lives.
A home is a place to live. It is not a piggy bank. For those who bought their house after 2005 with no money down, you probably have no equity. But if you can afford your payments, pay down your loan and enjoy your home. You will be OK over the long term. Merry Christmas.
Friday, November 30, 2007
Balloons to Inflate Cost
One of the toughest parts of writing this column every week, while also holding down a real job and raising a family, is finding something interesting to write. Then sometimes a story just falls right in your lap.
In June I wrote about the Great Housing Project — excuse me, The Great Park in Irvine. The former El Toro airport will soon be a 9,500 home project.
Not exactly what the voters of Orange County were told when they voted down the airport use and voted for the Great Park. Part of the project will be a $1.2-billion park. I said billion.
It was kicked off in July with a $4.6-million balloon attraction. The tethered balloon is designed to give rides up to 500 feet over the future development. It was built and subsidized by the Great Park Corporation, which owns the land and collects the development fees from the home builders supposedly to pay for its construction and operation.
In July it was explained to the public that the balloon rides, which would cost $20 for adults and $15 for children, would be given free to the public for about six months.
The cost to operate the ride was $1.6 million per year. With some corporate sponsorship revenue — and there hasn’t been any so far — the balloon ride would take approximately 60,000 visitors a year to break even.
The project is on target to get the 60,000 balloon enthusiasts. The problem is that it drew that many because the rides are offered for free.
As I have said previously, nobody in his or her right mind would expect a family of four to take a 10-minute ride up 500 feet and pay $60.
Well, guess what? None of the Great Park directors, except for Christina Shea and Steven Choi, ever expected to get any revenue for the balloon rides. In fact, this week, Chairman Larry Agran made it very clear that he never expected and or wanted any revenues from the balloon from “individuals and families.” He thought it would ruin the whole experience of the park if people actually paid for the ride.
I’m wondering when the balloon ride was first brought to the board, with the $20 charge, why Chairman Agran never mentioned that he would never, ever support any charge for the ride. Maybe he knew that if he said that, the $4.6 million expenditure would never be approved.
What I just described to you was just background for what happened last Thursday at a special meeting of the Great Park Corporation.
On a 7-1 vote they agreed to never charge any fee for the balloon. To add insult to injury, they added additional days of operation and night flights for free. This raised the cost of the whole operation from $1.6 million to $4.2 million per year. And it’s all subsidized by the Irvine taxpayers, despite the fact that only about 30% of the riders are from Irvine.
That is not all. As part of the same vote, they approved an additional expenditure of $11.5 million for a 5-acre lawn, a larger parking lot, visitor tent and lighting for night flights.
Add it up, and they have spent $16.1 million to build and expect to spend another $17.5 million over the next five years to operate a balloon ride. That’s correct — $33.6 million for the ride.
While other parts of Orange County, including Costa Mesa and Newport Beach, are trying to figure out how to pay for basic needs like road repair, soccer fields and better school facilities, Irvine is blowing $33.6 million on free balloon rides.
To paraphrase a famous quote, “Just look how expensive it gets when it’s free.”
In June I wrote about the Great Housing Project — excuse me, The Great Park in Irvine. The former El Toro airport will soon be a 9,500 home project.
Not exactly what the voters of Orange County were told when they voted down the airport use and voted for the Great Park. Part of the project will be a $1.2-billion park. I said billion.
It was kicked off in July with a $4.6-million balloon attraction. The tethered balloon is designed to give rides up to 500 feet over the future development. It was built and subsidized by the Great Park Corporation, which owns the land and collects the development fees from the home builders supposedly to pay for its construction and operation.
In July it was explained to the public that the balloon rides, which would cost $20 for adults and $15 for children, would be given free to the public for about six months.
The cost to operate the ride was $1.6 million per year. With some corporate sponsorship revenue — and there hasn’t been any so far — the balloon ride would take approximately 60,000 visitors a year to break even.
The project is on target to get the 60,000 balloon enthusiasts. The problem is that it drew that many because the rides are offered for free.
As I have said previously, nobody in his or her right mind would expect a family of four to take a 10-minute ride up 500 feet and pay $60.
Well, guess what? None of the Great Park directors, except for Christina Shea and Steven Choi, ever expected to get any revenue for the balloon rides. In fact, this week, Chairman Larry Agran made it very clear that he never expected and or wanted any revenues from the balloon from “individuals and families.” He thought it would ruin the whole experience of the park if people actually paid for the ride.
I’m wondering when the balloon ride was first brought to the board, with the $20 charge, why Chairman Agran never mentioned that he would never, ever support any charge for the ride. Maybe he knew that if he said that, the $4.6 million expenditure would never be approved.
What I just described to you was just background for what happened last Thursday at a special meeting of the Great Park Corporation.
On a 7-1 vote they agreed to never charge any fee for the balloon. To add insult to injury, they added additional days of operation and night flights for free. This raised the cost of the whole operation from $1.6 million to $4.2 million per year. And it’s all subsidized by the Irvine taxpayers, despite the fact that only about 30% of the riders are from Irvine.
That is not all. As part of the same vote, they approved an additional expenditure of $11.5 million for a 5-acre lawn, a larger parking lot, visitor tent and lighting for night flights.
Add it up, and they have spent $16.1 million to build and expect to spend another $17.5 million over the next five years to operate a balloon ride. That’s correct — $33.6 million for the ride.
While other parts of Orange County, including Costa Mesa and Newport Beach, are trying to figure out how to pay for basic needs like road repair, soccer fields and better school facilities, Irvine is blowing $33.6 million on free balloon rides.
To paraphrase a famous quote, “Just look how expensive it gets when it’s free.”
Friday, November 16, 2007
Activists Have the Real Power in Elections
“The world belongs to the activists.”
Rep. Dana Rohrabacher is fond of saying that whenever we talk politics.
Whether we were discussing a recall campaign or fighting the half-cent sales tax the county supervisors put on the ballot to pay for the county bankruptcy, it was always clear to Dana that the activists usually won in the end.
No matter how good the idea or candidate, in America, the most votes win. It may not be a perfect system, but it beats the heck out of all the others.
It took the residents of South County three elections and a supervisorial race to stop the airport at El Toro.
When you count the final tallies for votes, money and passion, they were clearly more active than the rest of the county. They put the final nail in the coffin by getting an anti-airport supervisor elected in North County, thereby flipping the 3-2 majority in their favor and forever ending the debate.
Elections have consequences. That activism put us in the horrible situation we have now at John Wayne. Since that vote in 2002, passenger travel is up 28% to 8.4 million. At this rate it will pass the 10.8 million cap before 2011.
Activism is not always at the ballot box. Most times it is just people in the community who are concerned about local issues.
The fact is, most people are not active in their community and, therefore, they give control over to the people that are. Sometimes for the better; sometimes not. It is amazing how small of a group, even two or three people, can change the outcome for everyone.
Here in Costa Mesa last week, we saw how much of an effect activist citizens had by speaking up at a council meeting. Right or wrong, they had a tremendous effect on the city’s future direction regarding park land, skate parks and even model trains.
Speaking of parks, Costa Mesa’s Eastside residents should keep their eyes on Brentwood Park. Brentwood is a small pocket park just west of Santa Ana Avenue on Monte Vista.
Costa Mesa recently paid $3.5 million to buy a 1.2-acre closed preschool to increase the size of the park. The Eastside has been short on park land since it was subdivided in 1906 by Stephen Townsend of the La Habra Land and Water Company.
That area has less park land per resident than almost any other area in the city. The city wants neighborhood input and will soon put out a request for interested citizens to get involved in the planning of the enlarged park.
The park already has a tot lot but no other amenities like a basketball or tennis court that would be of any recreational use to anyone over the age of eight. If history and human nature follow its normal course, the only people that will be interested enough to show up will be the neighbors.
Nothing wrong with having next-door neighbors give input, but if other Eastside residents don’t show up, I expect the neighbors will win by default, making the additional land into unusable open space for the benefit of them. I can’t blame them, but I do not think the city paid $3.5 million to expand a green belt around a dozen homes.
Getting involved is good for you and your community. Remember, “The world belongs to the activists.”
Rep. Dana Rohrabacher is fond of saying that whenever we talk politics.
Whether we were discussing a recall campaign or fighting the half-cent sales tax the county supervisors put on the ballot to pay for the county bankruptcy, it was always clear to Dana that the activists usually won in the end.
No matter how good the idea or candidate, in America, the most votes win. It may not be a perfect system, but it beats the heck out of all the others.
It took the residents of South County three elections and a supervisorial race to stop the airport at El Toro.
When you count the final tallies for votes, money and passion, they were clearly more active than the rest of the county. They put the final nail in the coffin by getting an anti-airport supervisor elected in North County, thereby flipping the 3-2 majority in their favor and forever ending the debate.
Elections have consequences. That activism put us in the horrible situation we have now at John Wayne. Since that vote in 2002, passenger travel is up 28% to 8.4 million. At this rate it will pass the 10.8 million cap before 2011.
Activism is not always at the ballot box. Most times it is just people in the community who are concerned about local issues.
The fact is, most people are not active in their community and, therefore, they give control over to the people that are. Sometimes for the better; sometimes not. It is amazing how small of a group, even two or three people, can change the outcome for everyone.
Here in Costa Mesa last week, we saw how much of an effect activist citizens had by speaking up at a council meeting. Right or wrong, they had a tremendous effect on the city’s future direction regarding park land, skate parks and even model trains.
Speaking of parks, Costa Mesa’s Eastside residents should keep their eyes on Brentwood Park. Brentwood is a small pocket park just west of Santa Ana Avenue on Monte Vista.
Costa Mesa recently paid $3.5 million to buy a 1.2-acre closed preschool to increase the size of the park. The Eastside has been short on park land since it was subdivided in 1906 by Stephen Townsend of the La Habra Land and Water Company.
That area has less park land per resident than almost any other area in the city. The city wants neighborhood input and will soon put out a request for interested citizens to get involved in the planning of the enlarged park.
The park already has a tot lot but no other amenities like a basketball or tennis court that would be of any recreational use to anyone over the age of eight. If history and human nature follow its normal course, the only people that will be interested enough to show up will be the neighbors.
Nothing wrong with having next-door neighbors give input, but if other Eastside residents don’t show up, I expect the neighbors will win by default, making the additional land into unusable open space for the benefit of them. I can’t blame them, but I do not think the city paid $3.5 million to expand a green belt around a dozen homes.
Getting involved is good for you and your community. Remember, “The world belongs to the activists.”
Friday, November 9, 2007
City Plans Aid Renters
Tuesday’s Costa Mesa’s City Council meeting went long into the night with a three-hour debate on a skate park at Lions Park, followed by a debate to reopen the Fairview Park master plan for a dog park or another skate park. One issue was an appeal of the Planning Commission’s forbidding an Eastside apartment to convert to a condo.
It was clear not everyone understood the condo conversion issue or how it affects property owners’ rights.
For decades, property owners nationwide have tried to convert apartments into condos. It is not a complicated business model to buy apartment buildings for $200,000 per unit and convert them to condos that sell for $450,000 or more. Even with extensive upgrades costs, the profits are sizable. This is what was happening until the condo-conversion moratorium, now over, here in Costa Mesa.
During the last two years, unlike the rest of the county, Costa Mesa had a surge of applications for conversions. This started with the city’s thinking that it could turn renters into homeowners.
To achieve that goal, we allowed condo conversions to be granted without the units adhering to current standards. Most people at the time thought we would get some 20- or 25-year-old apartments whose standards would be close to current. Nobody expected applications from ’50s and ’60s properties, which were way out of standard.
Because the city had no real code, the decision to approve a conversion was at the complete discretion of the Planning Commission and city council with no guidelines to follow.
Besides health and safety issues of older properties, the city was getting applications for ’60s projects that had 40% less parking than was needed. These parking codes were set in a time when families had one car. Now, families have two or more cars. Neighborhoods that had older apartments had no parking for residents. People would have to drive around the block several times to find a space. Single-family residences close to these apartments had cars from apartment residents who lived blocks away.
Over time these issues usually take care of themselves. As buildings get older and lose their economic value, developers buy these properties, raise them and build new homes or condos with adequate parking in their place.
Remember that every other city in the county would never allow a conversion unless the property was up to current standards.T
o help bring more homeownership without hurting neighborhoods, the city adopted a condo-conversion ordinance that would allow apartments to be converted with standards between the old and new ones. Except for health and safety issues, a property could be approved if it met minimum standards. For example, when you figure in guest parking on a two-bedroom unit, the existing standard is 3.5 parking spaces per unit. If it is a conversion the ordinance now allows 2.5 spaces per unit. What will not be approved are older properties that sometimes had 1.5 spaces per unit.
Some may say that it is impossible to bring a 1962 property up to 1985 standards, let alone 2007 standards. That’s the point. When an apartment building was built in 1962, it was built as an apartment, not a condo. The owners of the property have an apartment building not a condominium project. Not allowing an under-parked, over-crowded apartment building from converting to a condominium is not taking away any of the owners’ property rights — they never had that right.
Property owners should know that the city will not hurt their values by prolonging the economic life of a building that, in any other city, would be torn down to make room for a new development. On the other hand, we need to have flexibility to rehabilitate older properties. The new conversion ordinance does both.
It was clear not everyone understood the condo conversion issue or how it affects property owners’ rights.
For decades, property owners nationwide have tried to convert apartments into condos. It is not a complicated business model to buy apartment buildings for $200,000 per unit and convert them to condos that sell for $450,000 or more. Even with extensive upgrades costs, the profits are sizable. This is what was happening until the condo-conversion moratorium, now over, here in Costa Mesa.
During the last two years, unlike the rest of the county, Costa Mesa had a surge of applications for conversions. This started with the city’s thinking that it could turn renters into homeowners.
To achieve that goal, we allowed condo conversions to be granted without the units adhering to current standards. Most people at the time thought we would get some 20- or 25-year-old apartments whose standards would be close to current. Nobody expected applications from ’50s and ’60s properties, which were way out of standard.
Because the city had no real code, the decision to approve a conversion was at the complete discretion of the Planning Commission and city council with no guidelines to follow.
Besides health and safety issues of older properties, the city was getting applications for ’60s projects that had 40% less parking than was needed. These parking codes were set in a time when families had one car. Now, families have two or more cars. Neighborhoods that had older apartments had no parking for residents. People would have to drive around the block several times to find a space. Single-family residences close to these apartments had cars from apartment residents who lived blocks away.
Over time these issues usually take care of themselves. As buildings get older and lose their economic value, developers buy these properties, raise them and build new homes or condos with adequate parking in their place.
Remember that every other city in the county would never allow a conversion unless the property was up to current standards.T
o help bring more homeownership without hurting neighborhoods, the city adopted a condo-conversion ordinance that would allow apartments to be converted with standards between the old and new ones. Except for health and safety issues, a property could be approved if it met minimum standards. For example, when you figure in guest parking on a two-bedroom unit, the existing standard is 3.5 parking spaces per unit. If it is a conversion the ordinance now allows 2.5 spaces per unit. What will not be approved are older properties that sometimes had 1.5 spaces per unit.
Some may say that it is impossible to bring a 1962 property up to 1985 standards, let alone 2007 standards. That’s the point. When an apartment building was built in 1962, it was built as an apartment, not a condo. The owners of the property have an apartment building not a condominium project. Not allowing an under-parked, over-crowded apartment building from converting to a condominium is not taking away any of the owners’ property rights — they never had that right.
Property owners should know that the city will not hurt their values by prolonging the economic life of a building that, in any other city, would be torn down to make room for a new development. On the other hand, we need to have flexibility to rehabilitate older properties. The new conversion ordinance does both.
Friday, November 2, 2007
City Trying to Throw Us a Curve
Tuesday night’s joint Newport Beach City Council/Planning Commission meeting had a verbal presentation of The Irvine Company’s plans for future development of Fashion Island and Newport Center.
Though some might disagree, on balance, The Irvine Company has been a good steward of the development and management at Newport Center. The problems in the presentation started only when it tried to explain the development of the city hall project.
A rule of thumb in business is that if something that shouldn’t be confusing is, someone is trying to confuse you.
That’s how I felt when I walked away after the presentation The Irvine Company (TIC) made for their “non-expansion” expansion of Fashion Island. The confusing part was not the adding of 420 high-rise condos or the 278,000 feet of office space to be built instead of the previously approved 195-room hotel.
It was trying to understand how a new 72,000-square-foot city hall, which needed three acres of land to be built anywhere else in town, now only needs a little more than an acre.
The lack of land needed seems to be explained in The Irvine Company’s statement: “ guarantee use of required parking spaces to exclusively serve the City Hall.” By using TIC’s parking structure, the city would not have to buy the additional land needed for parking.
Does that mean that The Irvine Company is going to pay for the portion of the parking structure that the city uses? I don’t think so.
Calling around to people who have some idea of what would be negotiated in a development agreement with TIC, expect that the city will have to pay for construction of its portion of the parking structure and maintenance of the same.
So now it looks like the city will be paying for 280 spaces in a parking structure on land the city will not own. How do you think this affects citizens who want to visit city hall?
First understand that the parking on San Nichols Drive between Newport Center Drive and Avocado, where city hall is being proposed, is already “Controlled Access Parking.”
What is controlled-access parking? It’s parking for which you pay $1 for each 20-minute segment because you lost or forget to get your parking ticket validated before you got back in your car. TIC is planning an additional 206,000 square feet of office space in this same area.
Therefore, the city’s parking spaces will also have to be accessed controlled. So whenever you go to do anything at city hall, you will have to take a ticket. Just don’t forget the validation.
Of course, that does not include city staff or council — they get a card key to get in and out. Only citizens need to take a ticket.
Now compare this to the City Hall in the Park plan. Thursday afternoon I had the pleasure of talking to two proponents of the park plan: Bill Ficker and Ron Hendrickson.
Besides the fact that the citizens of Newport Beach already own the land, another major difference with their plan is that the “below line of site” parking structure they have planned would provide not only 280 parking spaces for city hall but an additional 120 much-needed spaces for the library.
In addition, the parking could also be used for the park. This parking would be open to the public with no parking tickets to lose.
What a concept: free parking when you go to the library, city hall or the park. Here’s a tough decision. Should the city use the several million dollars already budgeted for the parking lot in the park on city hall or should we just save it?
The reason I bring up these inane issues is that when you are being told that it costs more to build on land we already own than on land we have to buy, you have to wonder are the opponents of city hall in the park comparing apples to apples.Parking costs are just one of the issues with which they are trying to confuse you.
Though some might disagree, on balance, The Irvine Company has been a good steward of the development and management at Newport Center. The problems in the presentation started only when it tried to explain the development of the city hall project.
A rule of thumb in business is that if something that shouldn’t be confusing is, someone is trying to confuse you.
That’s how I felt when I walked away after the presentation The Irvine Company (TIC) made for their “non-expansion” expansion of Fashion Island. The confusing part was not the adding of 420 high-rise condos or the 278,000 feet of office space to be built instead of the previously approved 195-room hotel.
It was trying to understand how a new 72,000-square-foot city hall, which needed three acres of land to be built anywhere else in town, now only needs a little more than an acre.
The lack of land needed seems to be explained in The Irvine Company’s statement: “ guarantee use of required parking spaces to exclusively serve the City Hall.” By using TIC’s parking structure, the city would not have to buy the additional land needed for parking.
Does that mean that The Irvine Company is going to pay for the portion of the parking structure that the city uses? I don’t think so.
Calling around to people who have some idea of what would be negotiated in a development agreement with TIC, expect that the city will have to pay for construction of its portion of the parking structure and maintenance of the same.
So now it looks like the city will be paying for 280 spaces in a parking structure on land the city will not own. How do you think this affects citizens who want to visit city hall?
First understand that the parking on San Nichols Drive between Newport Center Drive and Avocado, where city hall is being proposed, is already “Controlled Access Parking.”
What is controlled-access parking? It’s parking for which you pay $1 for each 20-minute segment because you lost or forget to get your parking ticket validated before you got back in your car. TIC is planning an additional 206,000 square feet of office space in this same area.
Therefore, the city’s parking spaces will also have to be accessed controlled. So whenever you go to do anything at city hall, you will have to take a ticket. Just don’t forget the validation.
Of course, that does not include city staff or council — they get a card key to get in and out. Only citizens need to take a ticket.
Now compare this to the City Hall in the Park plan. Thursday afternoon I had the pleasure of talking to two proponents of the park plan: Bill Ficker and Ron Hendrickson.
Besides the fact that the citizens of Newport Beach already own the land, another major difference with their plan is that the “below line of site” parking structure they have planned would provide not only 280 parking spaces for city hall but an additional 120 much-needed spaces for the library.
In addition, the parking could also be used for the park. This parking would be open to the public with no parking tickets to lose.
What a concept: free parking when you go to the library, city hall or the park. Here’s a tough decision. Should the city use the several million dollars already budgeted for the parking lot in the park on city hall or should we just save it?
The reason I bring up these inane issues is that when you are being told that it costs more to build on land we already own than on land we have to buy, you have to wonder are the opponents of city hall in the park comparing apples to apples.Parking costs are just one of the issues with which they are trying to confuse you.
Friday, October 12, 2007
Proposed Bills Nit-Picky, Redundant
By midnight Sunday, Gov. Schwarzenegger will have vetoed, signed or let pass into law — by doing nothing — 965 bills that were approved by a majority of both houses of the Democrat-controlled state legislature.
These 965 bills that received enough votes to get to the governor’s desk could become 965 additional laws that some people think Californians could not live one more day without.
Understand that this is whittled down from the 5,000-plus bills that our elected representatives thought we needed badly enough that they had their staff, with the help of legislative counsel, write and put into the legislative hopper. To think that we could not live another day without the help and protection of this legislation boggles the mind.
The reason for all this legislation is that government in California has gotten so out of hand that it must now control every aspect of our lives 24 hours per day.
Do not get me wrong: Laws are necessary to protect us from violent criminals, unscrupulous individuals and to set basic standards to protect our food, water supply etc. My point is we had enough laws on the books last year to protect us from all those things without these 965 additional laws.
California has become the ultimate “nanny-state,” and it gets worse every year. Much of our legislation is laws that are written to fix the unintended consequences of previously passed laws.
Some legislation that passes may be considered a good idea, but should not be a law.
An example of that would be SB 7, which the governor signed into law and that makes it a crime to smoke in a car with anyone younger than 18. Now is it a good idea not to smoke with minors in a car? Probably, even if you do not believe all the overblown and unproven statistics about the dangers of second-hand smoke.
But is it to the level that we should have our police force and our overcrowded courts system spend the time to enforce or adjudicate it? Aren’t there enough real crimes to go after with our limited law enforcement resources?
How about AB 105, which will make it a crime if a tanning salon does not see a driver’s license or some other government document showing that the would-be tanner is 18 years of age?
You also have to be given a written warning specifying the dangers of indoor tanning.
It is already a crime to let anyone 14 to 18 tan without a signed parental/guardian written permission form. Now it will be a crime if a 40-year-old doesn’t show ID.
This law was written and passed by the same legislative body that finds it unconscionable and a grievous obstruction of your constitutional rights to ask for any identification before you walk in a voting booth.
We spend more time and money protecting people from tanning booths than we do to protect the vote of citizens not to be canceled out by someone who should not be voting.
This week I was reminded again of how our nanny-state intrudes in my life.
A friend called and said someone had dropped out of a pheasant hunting trip in South Dakota and asked if I wanted to go.
Now understand I am not really a big hunter and have hunted birds only on a couple of occasions.
But a pheasant hunting trip to South Dakota may be a once-in-a-lifetime experience.
Like a good husband, I got permission from my wife to go. The cost was within our budget so I called the airlines to book a flight.
One problem: I don’t own a shotgun. No problem, I can go on Saturday after the Pop Warner football game where one of my daughters is a cheerleader.
I called back my friend to confirm and told him about buying the shotgun. He then let me know about the 10-day waiting/cooling-off period we have in California to buy a shotgun.
I asked if he meant a handgun, but he reiterated that it now included shotguns as well.
So here I am, a 49-year-old father of four with no criminal past (they do a criminal background check), and if I don’t leave in the next 10 minutes I will not be able get to the store, pay for a shotgun and start the 10-day clock, after which I have to come back to the store to pick it up in time to get on the plane.
Gotta run now and explain to my wife why I am going to be late for our date night.
These 965 bills that received enough votes to get to the governor’s desk could become 965 additional laws that some people think Californians could not live one more day without.
Understand that this is whittled down from the 5,000-plus bills that our elected representatives thought we needed badly enough that they had their staff, with the help of legislative counsel, write and put into the legislative hopper. To think that we could not live another day without the help and protection of this legislation boggles the mind.
The reason for all this legislation is that government in California has gotten so out of hand that it must now control every aspect of our lives 24 hours per day.
Do not get me wrong: Laws are necessary to protect us from violent criminals, unscrupulous individuals and to set basic standards to protect our food, water supply etc. My point is we had enough laws on the books last year to protect us from all those things without these 965 additional laws.
California has become the ultimate “nanny-state,” and it gets worse every year. Much of our legislation is laws that are written to fix the unintended consequences of previously passed laws.
Some legislation that passes may be considered a good idea, but should not be a law.
An example of that would be SB 7, which the governor signed into law and that makes it a crime to smoke in a car with anyone younger than 18. Now is it a good idea not to smoke with minors in a car? Probably, even if you do not believe all the overblown and unproven statistics about the dangers of second-hand smoke.
But is it to the level that we should have our police force and our overcrowded courts system spend the time to enforce or adjudicate it? Aren’t there enough real crimes to go after with our limited law enforcement resources?
How about AB 105, which will make it a crime if a tanning salon does not see a driver’s license or some other government document showing that the would-be tanner is 18 years of age?
You also have to be given a written warning specifying the dangers of indoor tanning.
It is already a crime to let anyone 14 to 18 tan without a signed parental/guardian written permission form. Now it will be a crime if a 40-year-old doesn’t show ID.
This law was written and passed by the same legislative body that finds it unconscionable and a grievous obstruction of your constitutional rights to ask for any identification before you walk in a voting booth.
We spend more time and money protecting people from tanning booths than we do to protect the vote of citizens not to be canceled out by someone who should not be voting.
This week I was reminded again of how our nanny-state intrudes in my life.
A friend called and said someone had dropped out of a pheasant hunting trip in South Dakota and asked if I wanted to go.
Now understand I am not really a big hunter and have hunted birds only on a couple of occasions.
But a pheasant hunting trip to South Dakota may be a once-in-a-lifetime experience.
Like a good husband, I got permission from my wife to go. The cost was within our budget so I called the airlines to book a flight.
One problem: I don’t own a shotgun. No problem, I can go on Saturday after the Pop Warner football game where one of my daughters is a cheerleader.
I called back my friend to confirm and told him about buying the shotgun. He then let me know about the 10-day waiting/cooling-off period we have in California to buy a shotgun.
I asked if he meant a handgun, but he reiterated that it now included shotguns as well.
So here I am, a 49-year-old father of four with no criminal past (they do a criminal background check), and if I don’t leave in the next 10 minutes I will not be able get to the store, pay for a shotgun and start the 10-day clock, after which I have to come back to the store to pick it up in time to get on the plane.
Gotta run now and explain to my wife why I am going to be late for our date night.
Friday, September 28, 2007
UCI’s Rehiring Ensures Liberal Slant
The decision to rehire uber-liberal lawyer Erwin Chemerinsky as founding dean of UC Irvine’s new law school by Chancellor Michael Drake was a mistake of historic proportion.
I am not here to criticize Drake or to even try to understand the labyrinth of three-level chess he has to play to navigate in the largest publicly funded university system in the world.
But this decision will set UCI’s law school on the road to becoming one of the most liberal law schools in the nation.
Erwin Chemerinsky is not being hired to be a professor at an existing law school where he can spout off his liberal views.
He is being hired as the founding dean of a new, yet-to-be-formed public law school.
The founding dean is the person around whom the school is built, as in any new organization, whether academic, business or social; it is formed and guided by its leadership. Chemerinsky is the leader Drake has chosen.
What kind of professors do you think he will hire, liberal or conservative? Will they be professors who believe in the actual words of the Constitution, or like him, believe that the Constitution is some living, breathing document that has to be reinterpreted as time goes on?
Do you think they will be professors who think that lower courts should use decision from the United States Supreme Court, or should they also use cases and opinions from foreign courts that do not have the Constitution as a hindrance in their decision?
This is a man who has been a board member for the ACLU for more than 10 years. He has worked to get “Under God” taken out of our Pledge of Allegiance and fought to have a cross taken out of Los Angeles County’s “City of Angels” seal, even though the city was founded by Christian missionaries.
He does not believe in the death penalty no matter how heinous the crime; he fought against the three-strikes law; and when it comes to national defense, he thinks that every enemy combatant should have the full protection of the Constitution — even in the time of war, no matter what danger it poses to our men and women fighting in harm’s way.
What amazes me is hearing extremely educated individuals, mostly with law degrees, explain to us less-educated proletariat how hiring one of the most polarizing left-wing lawyers in America as a founding dean will make no difference in what type of law school UCI creates. He is not just liberal. He is polarizing.
Now I already know what he and his supporters will say. “We do not pick law professors based on their politics; we just pick the best qualified professors.”
If you believe that, you must either be a lawyer or have some other advanced degree that removed your common sense. It has been known to happen that in higher education any bit of common sense you might have after college will be completely removed by some liberal professor in grad school.
That’s the same argument bandied about whenever a president puts forward a new justice to the Supreme Court. “All we care about is if they are qualified.”
Baloney. We care about how they think and they learn how to think in law school.
I am not saying that Chemerinsky would not be sincere in trying to create a non-ideological law school. It’s just that, because he is who he is, he can’t. The pool of talent he will attract will be left-leaning because that’s who he is.
How many conservative law professors would want to work full time for him? Would you want to be in an environment in which your superior is against everything that you believe in?
Clearly the pool he will have to pick from will be more likely liberal than conservative.
Sending our best and brightest to a law school run by an extremely liberal dean and faculty and asserting it will not affect the type of lawyers it produces is like jumping in a pool and not expecting to get wet.
It can’t happen.
I am not here to criticize Drake or to even try to understand the labyrinth of three-level chess he has to play to navigate in the largest publicly funded university system in the world.
But this decision will set UCI’s law school on the road to becoming one of the most liberal law schools in the nation.
Erwin Chemerinsky is not being hired to be a professor at an existing law school where he can spout off his liberal views.
He is being hired as the founding dean of a new, yet-to-be-formed public law school.
The founding dean is the person around whom the school is built, as in any new organization, whether academic, business or social; it is formed and guided by its leadership. Chemerinsky is the leader Drake has chosen.
What kind of professors do you think he will hire, liberal or conservative? Will they be professors who believe in the actual words of the Constitution, or like him, believe that the Constitution is some living, breathing document that has to be reinterpreted as time goes on?
Do you think they will be professors who think that lower courts should use decision from the United States Supreme Court, or should they also use cases and opinions from foreign courts that do not have the Constitution as a hindrance in their decision?
This is a man who has been a board member for the ACLU for more than 10 years. He has worked to get “Under God” taken out of our Pledge of Allegiance and fought to have a cross taken out of Los Angeles County’s “City of Angels” seal, even though the city was founded by Christian missionaries.
He does not believe in the death penalty no matter how heinous the crime; he fought against the three-strikes law; and when it comes to national defense, he thinks that every enemy combatant should have the full protection of the Constitution — even in the time of war, no matter what danger it poses to our men and women fighting in harm’s way.
What amazes me is hearing extremely educated individuals, mostly with law degrees, explain to us less-educated proletariat how hiring one of the most polarizing left-wing lawyers in America as a founding dean will make no difference in what type of law school UCI creates. He is not just liberal. He is polarizing.
Now I already know what he and his supporters will say. “We do not pick law professors based on their politics; we just pick the best qualified professors.”
If you believe that, you must either be a lawyer or have some other advanced degree that removed your common sense. It has been known to happen that in higher education any bit of common sense you might have after college will be completely removed by some liberal professor in grad school.
That’s the same argument bandied about whenever a president puts forward a new justice to the Supreme Court. “All we care about is if they are qualified.”
Baloney. We care about how they think and they learn how to think in law school.
I am not saying that Chemerinsky would not be sincere in trying to create a non-ideological law school. It’s just that, because he is who he is, he can’t. The pool of talent he will attract will be left-leaning because that’s who he is.
How many conservative law professors would want to work full time for him? Would you want to be in an environment in which your superior is against everything that you believe in?
Clearly the pool he will have to pick from will be more likely liberal than conservative.
Sending our best and brightest to a law school run by an extremely liberal dean and faculty and asserting it will not affect the type of lawyers it produces is like jumping in a pool and not expecting to get wet.
It can’t happen.
Friday, September 14, 2007
Don’t Bother With Health-Care Bill
he Assembly passed its vision of health-care reform this week just prior to ending the 2007 session. The governor said he will veto it and intends to call lawmakers back Wednesday for a special session to come up with a health-care-reform bill he can support.
Gov. Arnold Schwarzenegger and the Democrats are looking to overhaul how health care is paid for and delivered in California. If they get their way, the state will slip down the road to more socialism and more unemployment.
This won’t be good for the citizens, taxpayers or health-care providers. The best thing that can happen is nothing.
Assembly Bill 8, which was passed and introduced by Assembly Speaker Fabian Nuñez and co-authored by the other half of the terrible twosome, Senate President Pro Tem Don Perata, proposes to create the California Cooperative Health Insurance Purchasing Program, Cal-CHIPP, in order to function as a purchasing pool for health-care coverage by employers.
To fund this idea, they intend to charge all California employers a 7.5% tax on the total Social Security wages for its full-time or part-time employees, if they do not already provide health care.
Schwarzenegger will veto that bill for several reasons, mainly because it is funded purely from employer’s funds.
Also, the bill does not force every Californian to purchase or otherwise get health care (sometimes referred to as “individual mandate”). In his proposal, Schwarzenegger would tax several areas, not just employers.
He would charge employers with 10 or more employees a 4% tax of their payrolls, hospitals would be charged a 4% tax of their gross revenues, and physicians would be taxed 2% of their gross revenues. What a brilliant way to lower health-care costs — tax the health-care providers.
The problem with both bills is that no matter what you want to call it, this is a new tax on Californians. More taxes never lower costs. Lucky for us, either legislation needs a two-thirds vote to raise taxes and that would take Republican votes that neither the governor nor Democrats control.
Not so lucky for us is how the governor and the Democrats get around that. I expect them to cut a deal in the special session without the taxes included and to put the method to pay for it on the ballot as an initiative, which only takes a simple majority. That’s right. Expect to see television ads with heart-wrenching stories of how some poor soul was denied health care because he or she did not have insurance.
And the fault will be blamed on some greedy corporation. It’s not that difficult to get people to vote to tax someone else, especially if that someone is portrayed as some uncaring corporation.
Next stop on this health-care train is “Single-Payer Universal Health Care.” Once the government collects the money, it decides how it gets spent. Doctors and hospitals will be told, just like in Medicare, what they can charge for a service or procedure. They will not be allowed to contract with you outside the system.
The private sector will be completely driven out of health care. This affects you even if you have private insurance. Once we go to Single Payer Universal Care the government also controls the providers. Your doctor will no longer be able to work directly with you; it will be against the law.
Rationing of services will be next. The government will decide what care, if any, that you will get. How many young people will want to be a physician if their employer is the state or federal government?
So while Canada and England avoid the flaws of socialized medicine, California leads us toward them.
If you are sick, really sick, where in the world would you want to be?
The answer is the United States. We have the finest health-care system in the world. And no matter what they show you in “Sicko,” there isn’t a quality facility like Hoag Memorial Hospital Presbyterian, let alone the Mayo Clinics, in Cuba.
Gov. Arnold Schwarzenegger and the Democrats are looking to overhaul how health care is paid for and delivered in California. If they get their way, the state will slip down the road to more socialism and more unemployment.
This won’t be good for the citizens, taxpayers or health-care providers. The best thing that can happen is nothing.
Assembly Bill 8, which was passed and introduced by Assembly Speaker Fabian Nuñez and co-authored by the other half of the terrible twosome, Senate President Pro Tem Don Perata, proposes to create the California Cooperative Health Insurance Purchasing Program, Cal-CHIPP, in order to function as a purchasing pool for health-care coverage by employers.
To fund this idea, they intend to charge all California employers a 7.5% tax on the total Social Security wages for its full-time or part-time employees, if they do not already provide health care.
Schwarzenegger will veto that bill for several reasons, mainly because it is funded purely from employer’s funds.
Also, the bill does not force every Californian to purchase or otherwise get health care (sometimes referred to as “individual mandate”). In his proposal, Schwarzenegger would tax several areas, not just employers.
He would charge employers with 10 or more employees a 4% tax of their payrolls, hospitals would be charged a 4% tax of their gross revenues, and physicians would be taxed 2% of their gross revenues. What a brilliant way to lower health-care costs — tax the health-care providers.
The problem with both bills is that no matter what you want to call it, this is a new tax on Californians. More taxes never lower costs. Lucky for us, either legislation needs a two-thirds vote to raise taxes and that would take Republican votes that neither the governor nor Democrats control.
Not so lucky for us is how the governor and the Democrats get around that. I expect them to cut a deal in the special session without the taxes included and to put the method to pay for it on the ballot as an initiative, which only takes a simple majority. That’s right. Expect to see television ads with heart-wrenching stories of how some poor soul was denied health care because he or she did not have insurance.
And the fault will be blamed on some greedy corporation. It’s not that difficult to get people to vote to tax someone else, especially if that someone is portrayed as some uncaring corporation.
Next stop on this health-care train is “Single-Payer Universal Health Care.” Once the government collects the money, it decides how it gets spent. Doctors and hospitals will be told, just like in Medicare, what they can charge for a service or procedure. They will not be allowed to contract with you outside the system.
The private sector will be completely driven out of health care. This affects you even if you have private insurance. Once we go to Single Payer Universal Care the government also controls the providers. Your doctor will no longer be able to work directly with you; it will be against the law.
Rationing of services will be next. The government will decide what care, if any, that you will get. How many young people will want to be a physician if their employer is the state or federal government?
So while Canada and England avoid the flaws of socialized medicine, California leads us toward them.
If you are sick, really sick, where in the world would you want to be?
The answer is the United States. We have the finest health-care system in the world. And no matter what they show you in “Sicko,” there isn’t a quality facility like Hoag Memorial Hospital Presbyterian, let alone the Mayo Clinics, in Cuba.
Friday, August 24, 2007
‘Equitable’ Tax Plan Just Won’t Cut It
It’s normal in a political year for candidates to talk about an “equitable” tax system.
If you are on the far left of the Democratic Party and in control of both houses of Congress it is now time for you put your more “equitable” tax plan into place. The people who put Democrats in office, the left, have been complaining the rich keep getting richer and the poor keep getting poorer.
The truth is all boats have risen since the post-9/11 tax cuts of 2001.
But don’t let facts get in the way of a good political fight. No matter how well the economy has grown because of the tax cuts, you can not convince someone who believes the government’s jobs is to redistribute the wealth of others in order to make a more “equal” society.
If a country’s corporate tax rates are too high it will not attract that capital. When Ronald Reagan came into office and lowered personal tax rates from 70% to 28%, the U.S. became one the most competitive places on the planet to invest.
What the left does not realize is what the rest of the world has figured out: Lower personal and corporate taxes create jobs, which in turn grow the economy so everyone has a better standard of living.
When looking at the largest 30 economies in the world, who would think that since the Reagan tax cuts in the ’80s, the U.S. has gone from being one of the most competitive in the world to now, according to the Washington, D.C.-based Tax Foundation. Previously high tax rate countries like Sweden, Denmark and Norway have corporate tax rates 50% less than the U.S.
Our tax rates are 50% higher than “socialist” Scandinavia, and the Democrats still want to raise the rate! Europe and the former Soviet bloc countries have figured out lower tax rate
s actually bring in more revenue as a percentage of the Gross Domestic Product (GDP) than do higher taxes. In fact, while the U.S. collects 2.2% of GDP in corporate taxes, the other 29 countries collect 3.1% of GDP with much lower rates.
With world tax rates down, any increase in the U.S. rate will move more capital offshore, hurt the economy, and put people out of work. No matter; I predict higher taxes in the near future. The 2001 tax cuts have sunset provisions that if Congress does not act to extend, will automatically raise rates to pre-2001 levels. With Democrats squealing for a more equal tax system, do not expect to see any legislation that would keep taxes from going up, let alone legislation to lower taxes.
What is a concern for the country is a much bigger problem for the people of California. California has some of the highest tax rates in the country. Not only are we losing jobs to other countries, we are losing jobs to 0% tax states like Nevada, Texas and Florida.
Jobs are not the only thing we are losing. We are also losing some of our most productive citizens. Two baby boom business acquaintances in as many weeks have told me they are leaving California solely because of the high tax rates here and moving to 0% tax states. As one of them said: “When we were raising our son, I just paid my taxes and did not complain … I no longer feel I am getting anything out of sending that six-figure check each year.”
Expect more baby boomers to come to the same conclusion. These taxpayers are not the type California can afford to lose. You need 10 families of four making $80,000 per year to replace one high income earner who leaves for a more tax-friendly environment.
While politicians try to create a more “equitable” tax system, people and capital around the world will vote with their feet and move to where they think it is a more equitable system.
If you are on the far left of the Democratic Party and in control of both houses of Congress it is now time for you put your more “equitable” tax plan into place. The people who put Democrats in office, the left, have been complaining the rich keep getting richer and the poor keep getting poorer.
The truth is all boats have risen since the post-9/11 tax cuts of 2001.
But don’t let facts get in the way of a good political fight. No matter how well the economy has grown because of the tax cuts, you can not convince someone who believes the government’s jobs is to redistribute the wealth of others in order to make a more “equal” society.
If a country’s corporate tax rates are too high it will not attract that capital. When Ronald Reagan came into office and lowered personal tax rates from 70% to 28%, the U.S. became one the most competitive places on the planet to invest.
What the left does not realize is what the rest of the world has figured out: Lower personal and corporate taxes create jobs, which in turn grow the economy so everyone has a better standard of living.
When looking at the largest 30 economies in the world, who would think that since the Reagan tax cuts in the ’80s, the U.S. has gone from being one of the most competitive in the world to now, according to the Washington, D.C.-based Tax Foundation. Previously high tax rate countries like Sweden, Denmark and Norway have corporate tax rates 50% less than the U.S.
Our tax rates are 50% higher than “socialist” Scandinavia, and the Democrats still want to raise the rate! Europe and the former Soviet bloc countries have figured out lower tax rate
s actually bring in more revenue as a percentage of the Gross Domestic Product (GDP) than do higher taxes. In fact, while the U.S. collects 2.2% of GDP in corporate taxes, the other 29 countries collect 3.1% of GDP with much lower rates.
With world tax rates down, any increase in the U.S. rate will move more capital offshore, hurt the economy, and put people out of work. No matter; I predict higher taxes in the near future. The 2001 tax cuts have sunset provisions that if Congress does not act to extend, will automatically raise rates to pre-2001 levels. With Democrats squealing for a more equal tax system, do not expect to see any legislation that would keep taxes from going up, let alone legislation to lower taxes.
What is a concern for the country is a much bigger problem for the people of California. California has some of the highest tax rates in the country. Not only are we losing jobs to other countries, we are losing jobs to 0% tax states like Nevada, Texas and Florida.
Jobs are not the only thing we are losing. We are also losing some of our most productive citizens. Two baby boom business acquaintances in as many weeks have told me they are leaving California solely because of the high tax rates here and moving to 0% tax states. As one of them said: “When we were raising our son, I just paid my taxes and did not complain … I no longer feel I am getting anything out of sending that six-figure check each year.”
Expect more baby boomers to come to the same conclusion. These taxpayers are not the type California can afford to lose. You need 10 families of four making $80,000 per year to replace one high income earner who leaves for a more tax-friendly environment.
While politicians try to create a more “equitable” tax system, people and capital around the world will vote with their feet and move to where they think it is a more equitable system.
Saturday, August 11, 2007
Mortgage Woes Not Taxpayers' Problem
This week has seen turmoil for the financial markets. The seeds of this turmoil started right here in Orange County, which is ground zero for the sub-prime mortgage industry.
These are loans to buy or refinance homes for less-than-creditworthy borrowers. The chickens have come home to roost, as many borrowers cannot or will not make their payments. Many of the homes purchased in the last couple of years are worth less than what is owed.
Unlike in the past, these homes were sold with 100% financing. Any drop in value and the loan is underwater.
In Econ 101 you learn very quickly that people and businesses will do what is rational. In the last two to three years what has been rational for lenders is to make what may look like risky loans — zero down payments, bad credit, etc. Because the property that these loans were secured against was rising in value, the lenders were always secure.
In case of a default, the lender could always recoup the loan amount from the sale of the property.In most cases, if a borrower got behind they would sell the house on the open market and put cash in their pocket.
Lending and borrowing have intrinsic risks to both parties. Let's look at the rational decisions each party made at the time the loan was given.
The lenders charge interest and fees for the loans. They enjoy great profits on loaning money at higher rates than their cost of funds. What about the borrower/home buyer? They made a rational decision to buy the home with no money down. They risked nothing because they put nothing down. They also got a tax deduction to subsidize their payments.
Clearly, looking back now, we can see that these buyers, with nothing to lose, bid up property prices.
Part of today's drop in prices is just the lack of buyers who were buying with no money down. Now that these people are out of the market, prices have come down.
Now we hear from presidential hopefuls and other politicians on the left that the U.S. taxpayer should bail out these borrowers because they did not know what they were doing. Their argument is that it is mean-spirited not to help them keep their home.
Don't get me wrong: If a lender wants to negotiate a loan with a borrower for a lower interest rate or payments, I am fine with that. In many cases it is in the lenders' best interest to keep the borrower in the house and get some payments.
But a government bailout would be the worst thing that could happen.
First off, taxpayers would not only be bailing out homeowners but also billion-dollar banks that made these bad loans.
Taxpayers shouldn't be bailing out lenders or home buyers who got in over their heads and bought houses they couldn't afford. The only way to have a free market is to allow people's bad decisions to have consequences. If not, people will always take a risk if someone bails them out.
In the name of home ownership, the left wants taxpayers to subsidize risk for multinational billion-dollar businesses. This is called privatizing profit but socializing loss.
If the loan is good and the house goes up in value, the government does not get the gain. We only take the losses. Not a good way to run a railroad.
Being what human nature is, we will always have excesses in the market. People have short memories. Real estate markets will always go up too high and come down too low.
There is one big difference between the last real estate downturn in the late '80s and now. Back then, the government-insured banks took the hits and the taxpayers picked up the tab to the tune of hundreds of billions of dollars; socialized losses. This time, the private sector is taking the hits. Let's keep it that way.
These are loans to buy or refinance homes for less-than-creditworthy borrowers. The chickens have come home to roost, as many borrowers cannot or will not make their payments. Many of the homes purchased in the last couple of years are worth less than what is owed.
Unlike in the past, these homes were sold with 100% financing. Any drop in value and the loan is underwater.
In Econ 101 you learn very quickly that people and businesses will do what is rational. In the last two to three years what has been rational for lenders is to make what may look like risky loans — zero down payments, bad credit, etc. Because the property that these loans were secured against was rising in value, the lenders were always secure.
In case of a default, the lender could always recoup the loan amount from the sale of the property.In most cases, if a borrower got behind they would sell the house on the open market and put cash in their pocket.
Lending and borrowing have intrinsic risks to both parties. Let's look at the rational decisions each party made at the time the loan was given.
The lenders charge interest and fees for the loans. They enjoy great profits on loaning money at higher rates than their cost of funds. What about the borrower/home buyer? They made a rational decision to buy the home with no money down. They risked nothing because they put nothing down. They also got a tax deduction to subsidize their payments.
Clearly, looking back now, we can see that these buyers, with nothing to lose, bid up property prices.
Part of today's drop in prices is just the lack of buyers who were buying with no money down. Now that these people are out of the market, prices have come down.
Now we hear from presidential hopefuls and other politicians on the left that the U.S. taxpayer should bail out these borrowers because they did not know what they were doing. Their argument is that it is mean-spirited not to help them keep their home.
Don't get me wrong: If a lender wants to negotiate a loan with a borrower for a lower interest rate or payments, I am fine with that. In many cases it is in the lenders' best interest to keep the borrower in the house and get some payments.
But a government bailout would be the worst thing that could happen.
First off, taxpayers would not only be bailing out homeowners but also billion-dollar banks that made these bad loans.
Taxpayers shouldn't be bailing out lenders or home buyers who got in over their heads and bought houses they couldn't afford. The only way to have a free market is to allow people's bad decisions to have consequences. If not, people will always take a risk if someone bails them out.
In the name of home ownership, the left wants taxpayers to subsidize risk for multinational billion-dollar businesses. This is called privatizing profit but socializing loss.
If the loan is good and the house goes up in value, the government does not get the gain. We only take the losses. Not a good way to run a railroad.
Being what human nature is, we will always have excesses in the market. People have short memories. Real estate markets will always go up too high and come down too low.
There is one big difference between the last real estate downturn in the late '80s and now. Back then, the government-insured banks took the hits and the taxpayers picked up the tab to the tune of hundreds of billions of dollars; socialized losses. This time, the private sector is taking the hits. Let's keep it that way.
Friday, August 3, 2007
City Hall Land Talks Not Smart
It is heating up here in Newport Beach as proponents of the "City Hall in the Park" initiative gather their signatures. Meanwhile, the City Council majority is getting plans ready to build a $5 million passive park on the same site.
City Councilman Keith Curry, who penned a column against the initiative, called me to discuss our differences on the issue. Before I talk about our differences, let me say Curry is an engaging advocate for not locating the City Hall next to the library on Avocado Avenue. He thinks the OCTA site up the street would be a better location for City Hall. Though I completely disagree with him on this issue, the people of Newport should be glad to have a councilman of his caliber representing them. Curry comes out of the John Moorlach mold: elected officials not afraid to speak their minds.
My issues are simple: What is doable, and how much will it cost the taxpayers? To that end, the city has commissioned a study known to all as the DMJM study. What the study says is Newport would save $10 million building on the land next to the library. You would think that might settle the issue. That isn't chump change.
This $10 million in savings does not take into account the fact that the land is already owned by the city. If you read my previous column, you will remember I valued the land at $21 million. That would make a savings of $31 million to the taxpayers by voting for the initiative.
The opposition disagrees, saying the city is required to replace the park land somewhere else in the city and therefore you cannot count the $21 million savings. Really? Last time I drove by the site it was still a vacant lot, not a park.
They might have some argument had a park already been built; but it is not. The city is under no obligation that a majority vote of the council can't solve.
Now let's look at what is doable: On the library site, we do not have to negotiate price or terms with anyone. We already own it. The other site is owned by OCTA. Has anyone even asked OCTA what they think? Last I checked, the property was being used for buses. OCTA has in no way, shape or form approved selling, relocating or swapping any site with the city.
And the property the city wants to swap with OCTA is owned by the Irvine Co. Do we have a price for that parcel? Will they even sell it?
I have done enough negotiations in my life to know you do not want to get yourself into any negotiations involving two other parties that have no reason to do anything.
Why would OCTA want to move the bus transfer station? If you do not think they know how to negotiate, ask the bus drivers who just ended their strike.
Let's not fool ourselves. This issue will be on the ballot, and like it or not, the citizens of Newport Beach will be making the decision.
The City Council should slow down on plans to build a park until the voters have had a chance to speak. That vote will give the council all the direction it needs.
City Councilman Keith Curry, who penned a column against the initiative, called me to discuss our differences on the issue. Before I talk about our differences, let me say Curry is an engaging advocate for not locating the City Hall next to the library on Avocado Avenue. He thinks the OCTA site up the street would be a better location for City Hall. Though I completely disagree with him on this issue, the people of Newport should be glad to have a councilman of his caliber representing them. Curry comes out of the John Moorlach mold: elected officials not afraid to speak their minds.
My issues are simple: What is doable, and how much will it cost the taxpayers? To that end, the city has commissioned a study known to all as the DMJM study. What the study says is Newport would save $10 million building on the land next to the library. You would think that might settle the issue. That isn't chump change.
This $10 million in savings does not take into account the fact that the land is already owned by the city. If you read my previous column, you will remember I valued the land at $21 million. That would make a savings of $31 million to the taxpayers by voting for the initiative.
The opposition disagrees, saying the city is required to replace the park land somewhere else in the city and therefore you cannot count the $21 million savings. Really? Last time I drove by the site it was still a vacant lot, not a park.
They might have some argument had a park already been built; but it is not. The city is under no obligation that a majority vote of the council can't solve.
Now let's look at what is doable: On the library site, we do not have to negotiate price or terms with anyone. We already own it. The other site is owned by OCTA. Has anyone even asked OCTA what they think? Last I checked, the property was being used for buses. OCTA has in no way, shape or form approved selling, relocating or swapping any site with the city.
And the property the city wants to swap with OCTA is owned by the Irvine Co. Do we have a price for that parcel? Will they even sell it?
I have done enough negotiations in my life to know you do not want to get yourself into any negotiations involving two other parties that have no reason to do anything.
Why would OCTA want to move the bus transfer station? If you do not think they know how to negotiate, ask the bus drivers who just ended their strike.
Let's not fool ourselves. This issue will be on the ballot, and like it or not, the citizens of Newport Beach will be making the decision.
The City Council should slow down on plans to build a park until the voters have had a chance to speak. That vote will give the council all the direction it needs.
Monday, July 30, 2007
Lack of Transparency in KOCE-TV Sale
One of the most important factors in running any public agency or governmental body is transparency.
Without transparency, you have corruption. The framers of our Constitution knew it was so important that they included in the First Amendment, "Congress shall make no law … abridging the freedom of speech, or of the press." Journalists are needed to make sure government is transparent so that we the citizens understand what is happening with our public institutions.
This last week we saw the final chapter in an embarrassing and bizarre example of the lack of transparency. I am talking about the so-called sale of Coast Community College District's television station KOCE to the KOCE-TV Foundation.
Just getting the facts of this actual sale was a feat in itself. What I found was that the terms of the sale were different depending on which source you went to. Neither of the two major papers in Orange County had the same terms of sale, and the college district's website added an additional fact that nobody had ever reported: That the KOCE-TV Foundation was given credit from previous donations it had given to KOCE as part of the purchase price. I decided to use the facts from the actual Asset and Purchase Agreement between KOCE-TV Foundation and Coast Community College District, and the opinion from the 4th District Court of Appeal. The opinion, filed June 23 2005, involves the interpretation of a statute governing the sale of property, other than real property, belonging to a community college district.
The facts laid out by the justices were simple. The district put KOCE up for bid, the trustees rejected an all-cash bid for $40 million and accepted a bid of $8 million in cash (later to be reduced by previous contributions) and a 30-year note with no interest and no payments for five years for $17.5 million from the KOCE-TV Foundation.
Now we all know that money tomorrow is worth a lot less than money today. That is why we have to calculate the present value of the future payments to figure out how much the offer from the KOCE-TV Foundation was really worth. You would assume the payments would be $700,000 per year, which over 25 years equals $17.5 million. The net present value of those payments are approximately $5.5 million. If you add it to the supposed down payment of $8 million, the total purchase price would be $13.5 million. That offer is $26.5 million less than the $40 million all-cash offer. Last time I checked, the college district, like all school districts, was in need of money. But money from a religious group would be heresy in the world of public education.
The court concluded that the district refused taking the additional $26.5 million because it came from " … a group of televangelists." The justices correctly invalidated the sale and said the district could keep KOCE or sell it, but if they sold it, it would have to go to the highest all-cash bidder.
But there is a twist here that no one reported; a twist that only the world of insulated college trustees could get away with: Upon examination of the Asset and Purchase Agreement, we find that the payment to the district is not the $700,000 per year you would expect. No, in fact, the payments are zero for the first five years, $125,000 for the next five years and $187,500 for the remaining 25 years, for a present value of $1.47 million. If you add the supposed $8 million down payment, the total purchase price comes out to $9.47 million. That is more than $30 million less than those "slimy" evangelists offered. And why were the payments lower than expected? You won't believe it. The college district has to pay the KCET-TV Foundation $357,000 per year for programming (telecourses) and advertisements. That was not reported anywhere.
The main argument for selling the station to the foundation was it would air the telecourses for free. Nobody expected the college would have to pay $357,000 for the privilege.
This last week the foundation settled with those "slimy" evangelists. The district, which was a defendant in the lawsuit, refused to disclose the settlement saying, "that they did not have a copy of the agreement and did not know the terms…. " Next week we will look at the settlement and how much more money the college trustees left on the table.
Without transparency, you have corruption. The framers of our Constitution knew it was so important that they included in the First Amendment, "Congress shall make no law … abridging the freedom of speech, or of the press." Journalists are needed to make sure government is transparent so that we the citizens understand what is happening with our public institutions.
This last week we saw the final chapter in an embarrassing and bizarre example of the lack of transparency. I am talking about the so-called sale of Coast Community College District's television station KOCE to the KOCE-TV Foundation.
Just getting the facts of this actual sale was a feat in itself. What I found was that the terms of the sale were different depending on which source you went to. Neither of the two major papers in Orange County had the same terms of sale, and the college district's website added an additional fact that nobody had ever reported: That the KOCE-TV Foundation was given credit from previous donations it had given to KOCE as part of the purchase price. I decided to use the facts from the actual Asset and Purchase Agreement between KOCE-TV Foundation and Coast Community College District, and the opinion from the 4th District Court of Appeal. The opinion, filed June 23 2005, involves the interpretation of a statute governing the sale of property, other than real property, belonging to a community college district.
The facts laid out by the justices were simple. The district put KOCE up for bid, the trustees rejected an all-cash bid for $40 million and accepted a bid of $8 million in cash (later to be reduced by previous contributions) and a 30-year note with no interest and no payments for five years for $17.5 million from the KOCE-TV Foundation.
Now we all know that money tomorrow is worth a lot less than money today. That is why we have to calculate the present value of the future payments to figure out how much the offer from the KOCE-TV Foundation was really worth. You would assume the payments would be $700,000 per year, which over 25 years equals $17.5 million. The net present value of those payments are approximately $5.5 million. If you add it to the supposed down payment of $8 million, the total purchase price would be $13.5 million. That offer is $26.5 million less than the $40 million all-cash offer. Last time I checked, the college district, like all school districts, was in need of money. But money from a religious group would be heresy in the world of public education.
The court concluded that the district refused taking the additional $26.5 million because it came from " … a group of televangelists." The justices correctly invalidated the sale and said the district could keep KOCE or sell it, but if they sold it, it would have to go to the highest all-cash bidder.
But there is a twist here that no one reported; a twist that only the world of insulated college trustees could get away with: Upon examination of the Asset and Purchase Agreement, we find that the payment to the district is not the $700,000 per year you would expect. No, in fact, the payments are zero for the first five years, $125,000 for the next five years and $187,500 for the remaining 25 years, for a present value of $1.47 million. If you add the supposed $8 million down payment, the total purchase price comes out to $9.47 million. That is more than $30 million less than those "slimy" evangelists offered. And why were the payments lower than expected? You won't believe it. The college district has to pay the KCET-TV Foundation $357,000 per year for programming (telecourses) and advertisements. That was not reported anywhere.
The main argument for selling the station to the foundation was it would air the telecourses for free. Nobody expected the college would have to pay $357,000 for the privilege.
This last week the foundation settled with those "slimy" evangelists. The district, which was a defendant in the lawsuit, refused to disclose the settlement saying, "that they did not have a copy of the agreement and did not know the terms…. " Next week we will look at the settlement and how much more money the college trustees left on the table.
Saturday, July 21, 2007
KOCE-TV Foundation, District's Deal Done Dirt Cheap
I have been traveling a lot this week, but I finally got a chance to analyze the latest information about Coast Community College District's supposed sale of the public TV station KOCE to the KOCE-TV Foundation. I say "supposed" because once you talk to all of the players (and I have), and you read all the documents, it is clear KOCE was not sold to the foundation but was given to them in a no-money-down deal.
To understand how this was done, let's go back to 2004. The college district was in a contentious exchange of what should happen to KOCE. Some faculty thought the money used to subsidize the station should be spent in the classroom (in other words, to get them higher salaries). Others understood the station paid for itself with the Tele-Courses and should be left as is. The state was paying close to $2 million a year for students to take the courses, and the actual courses cost 15% of that.S
ome college district trustees, like Board President Jerry Patterson, said they would be just fine with giving the station to the foundation. Others thought it should be sold to the highest bidder and the money put back into the colleges. The trustees who wanted to get the most money for the TV station won out, or so they thought, and a bidding process was set up with an outside media brokerage firm to obtain the highest bids in a closed-bid process.
This is where opinions diverge on what happened next. But here is what we do know: Among several bidders, Daystar Television Network bid $25.1 million. The KOCE Foundation made a winning $32-million bid of cash and terms. Once the bidding was closed, Daystar upped its bid to $40 million. The trustees still chose the foundation as the highest "responsible bidder" and started the process of negotiating the actual terms of the sale. This is where they gave away the station behind closed doors.
Negotiating the final terms for the sale on the district's side of the table was Patterson.
First off, they lowered the price by $4 million. The foundation had 12 million reasons why the price was too high and as Patterson told me, "We negotiated it down $4 million" and lowered the price by the same. Forget the fact that the foundation thought the station was worth $32 million when it made the bid.
Foundation officials agreed on an $8 million cash down-payment and a note of $20 million. Problem was, the foundation did not have the $8 million. Though district officials were supposed to pick a "responsible bidder" they knew the foundation did not have the money and would have to raise it. What the public does not know is the college district's trustees allowed the KOCE-TV foundation to borrow $10 million from a bank, secured against the assets of the TV station and all of its equipment. I have never seen a situation where a government entity sells an asset and allows the buyer to not only borrow the down-payment, but also take an additional $2 million to put in their pocket. In addition, the district loaned its $20 million subordinate to the banks.
In layman's terms: If the foundation defaults on its bank loan, the bank takes the TV station and wipes out the district's $20 million note. So much for a "responsible bidder."
So how do you make sure the foundation does not default on the bank loan? You loan the district's money at 0% interest for 30 years with no payments for five. Try getting those terms at Bank of America. So how does the foundation make the payments to the district in five years? That is where the Tele-Courses come back into the picture. The district signs a seven-year agreement to pay the foundation $357,142.85 per year to run the courses in the early morning and evening. But remember, there are no payments for five years. It just so happens that if you multiply $357,142.85 by seven years you get $2,499,999.95. Let's lower the note to the district (a.k.a. taxpayers) by $2.5 million and now the foundation only owes $17.5 million. In fact, by the time the deal closed, the sale price was not $28 million, as the district's news release stated, but the lower price of $25.5 million.
Now I could go on with other terms which would make your head spin. But suffice it to say the note to the district in my opinion was written by the foundation, for the foundation, by the foundation's attorneys.
So let's go over it again. The foundation bought the TV station with no money down, put $2 million in its pocket and sold airtime back to the district to make its payments to the district.
I've been making business deals for about 30 years and I believe in my bones this deal was agreed to in principle with a wink and a nod by the foundation members and some college trustees prior to any bidding for the station.
No one would bid $32 million they didn't have unless they knew they would never have to pay it. Anyone got the D.A.'s number?
To understand how this was done, let's go back to 2004. The college district was in a contentious exchange of what should happen to KOCE. Some faculty thought the money used to subsidize the station should be spent in the classroom (in other words, to get them higher salaries). Others understood the station paid for itself with the Tele-Courses and should be left as is. The state was paying close to $2 million a year for students to take the courses, and the actual courses cost 15% of that.S
ome college district trustees, like Board President Jerry Patterson, said they would be just fine with giving the station to the foundation. Others thought it should be sold to the highest bidder and the money put back into the colleges. The trustees who wanted to get the most money for the TV station won out, or so they thought, and a bidding process was set up with an outside media brokerage firm to obtain the highest bids in a closed-bid process.
This is where opinions diverge on what happened next. But here is what we do know: Among several bidders, Daystar Television Network bid $25.1 million. The KOCE Foundation made a winning $32-million bid of cash and terms. Once the bidding was closed, Daystar upped its bid to $40 million. The trustees still chose the foundation as the highest "responsible bidder" and started the process of negotiating the actual terms of the sale. This is where they gave away the station behind closed doors.
Negotiating the final terms for the sale on the district's side of the table was Patterson.
First off, they lowered the price by $4 million. The foundation had 12 million reasons why the price was too high and as Patterson told me, "We negotiated it down $4 million" and lowered the price by the same. Forget the fact that the foundation thought the station was worth $32 million when it made the bid.
Foundation officials agreed on an $8 million cash down-payment and a note of $20 million. Problem was, the foundation did not have the $8 million. Though district officials were supposed to pick a "responsible bidder" they knew the foundation did not have the money and would have to raise it. What the public does not know is the college district's trustees allowed the KOCE-TV foundation to borrow $10 million from a bank, secured against the assets of the TV station and all of its equipment. I have never seen a situation where a government entity sells an asset and allows the buyer to not only borrow the down-payment, but also take an additional $2 million to put in their pocket. In addition, the district loaned its $20 million subordinate to the banks.
In layman's terms: If the foundation defaults on its bank loan, the bank takes the TV station and wipes out the district's $20 million note. So much for a "responsible bidder."
So how do you make sure the foundation does not default on the bank loan? You loan the district's money at 0% interest for 30 years with no payments for five. Try getting those terms at Bank of America. So how does the foundation make the payments to the district in five years? That is where the Tele-Courses come back into the picture. The district signs a seven-year agreement to pay the foundation $357,142.85 per year to run the courses in the early morning and evening. But remember, there are no payments for five years. It just so happens that if you multiply $357,142.85 by seven years you get $2,499,999.95. Let's lower the note to the district (a.k.a. taxpayers) by $2.5 million and now the foundation only owes $17.5 million. In fact, by the time the deal closed, the sale price was not $28 million, as the district's news release stated, but the lower price of $25.5 million.
Now I could go on with other terms which would make your head spin. But suffice it to say the note to the district in my opinion was written by the foundation, for the foundation, by the foundation's attorneys.
So let's go over it again. The foundation bought the TV station with no money down, put $2 million in its pocket and sold airtime back to the district to make its payments to the district.
I've been making business deals for about 30 years and I believe in my bones this deal was agreed to in principle with a wink and a nod by the foundation members and some college trustees prior to any bidding for the station.
No one would bid $32 million they didn't have unless they knew they would never have to pay it. Anyone got the D.A.'s number?
Saturday, June 23, 2007
Let's Look at the Peters and Pauls
I never expected to write about the candidates for the presidential race. It's not exactly local news, but after hearing the Democratic candidates' debate on CNN two weeks ago, I've been annoyed by how out of touch they are with reality.
Listening to the Democratic presidential candidates, you would think the U.S. economy is in the tank, people are dying in the streets from lack of health care, we have no middle class — just haves and have-nots — and only the government can fix the inequities of society.
Of course, the only way the Democrats know how to fix these inequities is to take from Peter and give to Paul. Peter won't like it, but you will always get Paul's vote, and there are a lot more Pauls than Peters. They always try to put Peter in the worst light by making him or her a sleazy executive from some Enron-type company that gets rich stealing money from poor widows.
The reality is that the Peters (or Patricias) are the most productive citizens. I am sure there are some Peters who are lazy rich kids living off of grandpa's hard work, but for the most part, the ones I know are not. The vast majority are self-made, very hardworking and honest to a fault. They work a lot more hours than most Pauls, and they are very disciplined. They understand the concept of delayed gratification and are willing to wait for things if it will help them in the long run.
At the risk of sounding politically incorrect, let's talk about Paul (or Paula). Before I go any further, let's take off the table the Pauls who have real physical or mental disabilities and children who through no fault of their own are being raised by Paul. In that case, Peter has been more then generous in giving to Paul. In fact, Americans give the disadvantaged around the world more money per capita than any other country on earth — and, by the way, "red" county Peters give more than "blue" county Peters.
Statistically speaking, Paul has children earlier in life than Peter and is more likely to raise those children alone without a spouse. In fact, the vast majority of poverty in this country plagues children born without a father in the home. But just like Europe before us, the left wants to make fathers unnecessary and have the government fill that role. I just don't know how the government can discipline a 13-year-old boy without a father around. Sure it's been done, but I wouldn't want those odds in Vegas. The only way government knows how to discipline is with juvenile hall — not exactly the most compassionate way to raise a child.
If the left took all the money they wanted from Peter, they could never solve Paul's problems. Paul can only change his situation by becoming Peter.
What we should be teaching in this country is how to be a Peter and not a Paul, how to get ahead in life by working hard and being honest.
I never heard any of the candidates talk about relying on self-sufficiency or self-discipline to get ahead, only how the government could solve their plight.
These ideas may not sound compassionate. But whether people like it or not, the truth is the truth no matter how you spin it.
The ideas may sound old-fashioned, but they come from a time when we had more Peters than Pauls.
Listening to the Democratic presidential candidates, you would think the U.S. economy is in the tank, people are dying in the streets from lack of health care, we have no middle class — just haves and have-nots — and only the government can fix the inequities of society.
Of course, the only way the Democrats know how to fix these inequities is to take from Peter and give to Paul. Peter won't like it, but you will always get Paul's vote, and there are a lot more Pauls than Peters. They always try to put Peter in the worst light by making him or her a sleazy executive from some Enron-type company that gets rich stealing money from poor widows.
The reality is that the Peters (or Patricias) are the most productive citizens. I am sure there are some Peters who are lazy rich kids living off of grandpa's hard work, but for the most part, the ones I know are not. The vast majority are self-made, very hardworking and honest to a fault. They work a lot more hours than most Pauls, and they are very disciplined. They understand the concept of delayed gratification and are willing to wait for things if it will help them in the long run.
At the risk of sounding politically incorrect, let's talk about Paul (or Paula). Before I go any further, let's take off the table the Pauls who have real physical or mental disabilities and children who through no fault of their own are being raised by Paul. In that case, Peter has been more then generous in giving to Paul. In fact, Americans give the disadvantaged around the world more money per capita than any other country on earth — and, by the way, "red" county Peters give more than "blue" county Peters.
Statistically speaking, Paul has children earlier in life than Peter and is more likely to raise those children alone without a spouse. In fact, the vast majority of poverty in this country plagues children born without a father in the home. But just like Europe before us, the left wants to make fathers unnecessary and have the government fill that role. I just don't know how the government can discipline a 13-year-old boy without a father around. Sure it's been done, but I wouldn't want those odds in Vegas. The only way government knows how to discipline is with juvenile hall — not exactly the most compassionate way to raise a child.
If the left took all the money they wanted from Peter, they could never solve Paul's problems. Paul can only change his situation by becoming Peter.
What we should be teaching in this country is how to be a Peter and not a Paul, how to get ahead in life by working hard and being honest.
I never heard any of the candidates talk about relying on self-sufficiency or self-discipline to get ahead, only how the government could solve their plight.
These ideas may not sound compassionate. But whether people like it or not, the truth is the truth no matter how you spin it.
The ideas may sound old-fashioned, but they come from a time when we had more Peters than Pauls.
Saturday, June 16, 2007
The Bill That Wouldn't Die
Last week I thought we were safe. The U.S. Senate had gone home and pulled the Comprehensive Immigration Reform Act of 2007 off the senate floor to go where all dead bills go. Then on Thursday, like Frankenstein, Senate Bill 1348 came back to life.
A lot of people have very different opinions of this immigration bill. They should, since it has 281 sections. The problem for most people is not necessarily the wording in the bill, though some sections would make you wonder if this bill was written by senators from the U.S. One opinion that does seems universal is that when it really comes down to it, no one thinks the Feds can implement it. No matter how much tough language the Senate puts in about strengthening the border with beefed-up border patrols or electronic surveillance equipment, no one believes it. No matter how much it talks about verifications and doing background checks, no one believes it. In fact, most average Americans have evidence to the contrary that the federal government cannot handle any program of this size and complexity. Government agencies make the cable companies look good.
Example: This week, the government admitted it was unable to process passports to legal U.S. citizens even though it had two years to prepare for the increased need based on the 2005 Western Hemisphere Travel Initiative, which required U.S. passports for travel between the U.S. and Mexico, Canada or the Caribbean. By Friday, the State Department was so overwhelmed with passport applications that the U.S. House Rules Committee voted to prohibit the implementation of the travel initiative. This was just for processing passports to existing U.S. citizens.
Let's look at what the Comprehensive Immigration Reform Act of 2007 asks to implement. First, this bill would require that Homeland Security process an estimated 12 million immigrants who can "establish that the alien was in this country for 5 years prior to April 5th 2006 and was not legally present in the United States on April 5th 2006 or their visa expired and therefore were not legally in this country … for purposes of this subparagraph, an alien who has violated any conditions of his or her visa shall be considered not to be legally present in the United States." The only way you can stay in this country is to admit you were here illegally. The immigrant would have to produce "conclusive documents" showing employment, pay stubs, etc., and if they can't, then they can offer — and this is a tough one — "sworn affidavits from nonrelatives who have direct knowledge of the alien's work." This will help those people out of work making fake green cards. Now they can make "sworn affidavits."
Second, the department has to set up an Automated Biometric Fingerprint Identification System (IDENT) and have all the immigrants fingerprinted. I am sure all the illegal immigrants who have committed crimes will be first in line.
After that, the IRS has to provide proof that the immigrant has either paid their taxes or doesn't owe any. This from a department that can't even answer its phones. With a backlog of 12 million, I am sure they will do a full audit. My guess is they will just require another "sworn affidavit" stating that the immigrant did not make enough money to pay taxes.
Let's be honest — nobody believes that this bill would ever really be enforced. Business leaders want cheap labor; taxpayers pick up the cost of education, health care and uninsured drivers; and liberal politicians — well, they just want votes. In fact, if we gave liberals everything they wanted except "the path to citizenship," then this bill would be dead faster that you can say "amnesty."
I agree that 12 million illegal immigrants in this country is a big problem and that the Feds need to do something. But to simply change the law and, presto, all 12 million become legal is not the way to solve a problem. This problem didn't happen overnight, and it won't be fixed overnight. In fact, the status quo is better than this bill.
A lot of people have very different opinions of this immigration bill. They should, since it has 281 sections. The problem for most people is not necessarily the wording in the bill, though some sections would make you wonder if this bill was written by senators from the U.S. One opinion that does seems universal is that when it really comes down to it, no one thinks the Feds can implement it. No matter how much tough language the Senate puts in about strengthening the border with beefed-up border patrols or electronic surveillance equipment, no one believes it. No matter how much it talks about verifications and doing background checks, no one believes it. In fact, most average Americans have evidence to the contrary that the federal government cannot handle any program of this size and complexity. Government agencies make the cable companies look good.
Example: This week, the government admitted it was unable to process passports to legal U.S. citizens even though it had two years to prepare for the increased need based on the 2005 Western Hemisphere Travel Initiative, which required U.S. passports for travel between the U.S. and Mexico, Canada or the Caribbean. By Friday, the State Department was so overwhelmed with passport applications that the U.S. House Rules Committee voted to prohibit the implementation of the travel initiative. This was just for processing passports to existing U.S. citizens.
Let's look at what the Comprehensive Immigration Reform Act of 2007 asks to implement. First, this bill would require that Homeland Security process an estimated 12 million immigrants who can "establish that the alien was in this country for 5 years prior to April 5th 2006 and was not legally present in the United States on April 5th 2006 or their visa expired and therefore were not legally in this country … for purposes of this subparagraph, an alien who has violated any conditions of his or her visa shall be considered not to be legally present in the United States." The only way you can stay in this country is to admit you were here illegally. The immigrant would have to produce "conclusive documents" showing employment, pay stubs, etc., and if they can't, then they can offer — and this is a tough one — "sworn affidavits from nonrelatives who have direct knowledge of the alien's work." This will help those people out of work making fake green cards. Now they can make "sworn affidavits."
Second, the department has to set up an Automated Biometric Fingerprint Identification System (IDENT) and have all the immigrants fingerprinted. I am sure all the illegal immigrants who have committed crimes will be first in line.
After that, the IRS has to provide proof that the immigrant has either paid their taxes or doesn't owe any. This from a department that can't even answer its phones. With a backlog of 12 million, I am sure they will do a full audit. My guess is they will just require another "sworn affidavit" stating that the immigrant did not make enough money to pay taxes.
Let's be honest — nobody believes that this bill would ever really be enforced. Business leaders want cheap labor; taxpayers pick up the cost of education, health care and uninsured drivers; and liberal politicians — well, they just want votes. In fact, if we gave liberals everything they wanted except "the path to citizenship," then this bill would be dead faster that you can say "amnesty."
I agree that 12 million illegal immigrants in this country is a big problem and that the Feds need to do something. But to simply change the law and, presto, all 12 million become legal is not the way to solve a problem. This problem didn't happen overnight, and it won't be fixed overnight. In fact, the status quo is better than this bill.
Saturday, June 9, 2007
Great Park is a Misnomer
It has been six weeks since I started this column. My goal for each article is to look at issues that affect us all and try to drill down to what is really going on below the surface. People who have a vested interest in how a particular situation turns out will spin things in such a way as to hide or confuse the public to the point that it is hard to understand what is actually happening.
This reminds me of George Orwell's book "1984," which when I went to high school was mandatory reading but, taking a quick survey in my office, none of college-educated 20-somethings had even heard of it.
Orwell wrote it in 1948 and flipped the date for the book about the future. Orwell's Thought Police make not just doing something but thinking something illegal a "thoughtcrime."
Fast forward. We call those "hate crimes" today. That is where our criminal justice system adds additional penalties to crimes not for what you did, but what you thought about while doing what you did.
In "1984," Big Brother used language to control people. War means peace, freedom means slavery, and ignorance means strength. By changing the meaning of words, Big Brother renders the populace incapable of seeing what is really happening. It's not that much different today.
When talking about health care, the left wing says there is a "right to health care," that everyone should have it even if that means it has to be free to some and, therefore, cost more for everyone else.
When talking about the immigration bill stalled in the Senate, the left uses phrases like "path to citizenship," "family unification" and "orderly process," when in fact the real issues are overcrowded schools, overflowing emergency rooms and downward pressure on the wages of workers who are here legally.
But let's talk about an issue closer to home. Two weeks ago, I wrote about the chance we might lose the back nine of the Newport Beach Golf Course because of the expansion plans for John Wayne Airport. Elections have consequences, and we in this part of the county are about to feel them. The fight for an airport at El Toro Marine Corps Air Station is over, the runways have been torn out, and the south part of the county has won its "Great Park." It has to bother you a little that the plan for a park at El Toro has now become the great housing project with traffic, people and pollution, that south county said they were trying to avoid by not having an airport.
But just like in "1984," changing the meaning of words is everything. Not many people would have voted for the "Great Housing Development," so just call it the Great Park.
The original plan pitched to county voters was 4,700 acres of "urban regional park and a variety of agricultural, material recovery/recycling, recreational, cultural, educational, employment, public and housing land uses." Once the measure passed and the county let Irvine annex the base, Irvine rezoned it to 3,700 homes, an industrial/office park, some retail and the now much smaller park.
Based on Irvine's new zoning, the federal government (read federal taxpayers) sold the property to the highest bidder in four parcels. Two parcels had only one bid. Subtract out the industrial and retail piece and the property sold for less than $90,000 per lot.
To put that in perspective, I bought lots in 1989 for $90,000 to build $300,000 homes. Needless to say, Lennar, the winning bidder, made a killing.
But something interesting happened on the way to developing what is now call Heritage Fields. The cost of building the Great Park went out of control. The park's cost, which started at less than $200 million, was now approaching $1.5 billion and rising.
The only way to pay for it was more park fees. That's when the city pulled another trick out of its hat. Officials rezoned the one parcel, which had only one bidder, to residential and allowed Lennar an astounding 5,800 additional homes for a total of 9,500 homes. To put it another way, $42,000 per lot.
Well, you might think who got taken on that deal. Do you think the bids might have been higher if builders knew they could build 9,500 homes instead of 3,700?
Instead of $640 million to the United States Treasury, it would be more like $1 billion.
Which brings me back to the use of language. If you go to the Heritage Fields website (www.heritagefields.com), you will find little if any reference to housing.
The nonpublic part of the property was broken into three districts: The Park District, The Lifelong Learning District and the Transit Oriented Development District, all three of which, if you didn't know it already, are 9,500 units of high-density housing.
Nowhere on the website does it talk about dense housing, just "neighborhoods designed for a creative class" of people who seek a stimulating environment."
This reminds me of George Orwell's book "1984," which when I went to high school was mandatory reading but, taking a quick survey in my office, none of college-educated 20-somethings had even heard of it.
Orwell wrote it in 1948 and flipped the date for the book about the future. Orwell's Thought Police make not just doing something but thinking something illegal a "thoughtcrime."
Fast forward. We call those "hate crimes" today. That is where our criminal justice system adds additional penalties to crimes not for what you did, but what you thought about while doing what you did.
In "1984," Big Brother used language to control people. War means peace, freedom means slavery, and ignorance means strength. By changing the meaning of words, Big Brother renders the populace incapable of seeing what is really happening. It's not that much different today.
When talking about health care, the left wing says there is a "right to health care," that everyone should have it even if that means it has to be free to some and, therefore, cost more for everyone else.
When talking about the immigration bill stalled in the Senate, the left uses phrases like "path to citizenship," "family unification" and "orderly process," when in fact the real issues are overcrowded schools, overflowing emergency rooms and downward pressure on the wages of workers who are here legally.
But let's talk about an issue closer to home. Two weeks ago, I wrote about the chance we might lose the back nine of the Newport Beach Golf Course because of the expansion plans for John Wayne Airport. Elections have consequences, and we in this part of the county are about to feel them. The fight for an airport at El Toro Marine Corps Air Station is over, the runways have been torn out, and the south part of the county has won its "Great Park." It has to bother you a little that the plan for a park at El Toro has now become the great housing project with traffic, people and pollution, that south county said they were trying to avoid by not having an airport.
But just like in "1984," changing the meaning of words is everything. Not many people would have voted for the "Great Housing Development," so just call it the Great Park.
The original plan pitched to county voters was 4,700 acres of "urban regional park and a variety of agricultural, material recovery/recycling, recreational, cultural, educational, employment, public and housing land uses." Once the measure passed and the county let Irvine annex the base, Irvine rezoned it to 3,700 homes, an industrial/office park, some retail and the now much smaller park.
Based on Irvine's new zoning, the federal government (read federal taxpayers) sold the property to the highest bidder in four parcels. Two parcels had only one bid. Subtract out the industrial and retail piece and the property sold for less than $90,000 per lot.
To put that in perspective, I bought lots in 1989 for $90,000 to build $300,000 homes. Needless to say, Lennar, the winning bidder, made a killing.
But something interesting happened on the way to developing what is now call Heritage Fields. The cost of building the Great Park went out of control. The park's cost, which started at less than $200 million, was now approaching $1.5 billion and rising.
The only way to pay for it was more park fees. That's when the city pulled another trick out of its hat. Officials rezoned the one parcel, which had only one bidder, to residential and allowed Lennar an astounding 5,800 additional homes for a total of 9,500 homes. To put it another way, $42,000 per lot.
Well, you might think who got taken on that deal. Do you think the bids might have been higher if builders knew they could build 9,500 homes instead of 3,700?
Instead of $640 million to the United States Treasury, it would be more like $1 billion.
Which brings me back to the use of language. If you go to the Heritage Fields website (www.heritagefields.com), you will find little if any reference to housing.
The nonpublic part of the property was broken into three districts: The Park District, The Lifelong Learning District and the Transit Oriented Development District, all three of which, if you didn't know it already, are 9,500 units of high-density housing.
Nowhere on the website does it talk about dense housing, just "neighborhoods designed for a creative class" of people who seek a stimulating environment."
Saturday, June 2, 2007
The Costs of 'Free' Health Care
What is it about the health-care system in America that makes politicians think they can fix it by giving it away to more people for free? Remember Economics 101, Rule No. 1: Whenever you price something at less than it costs, people will use more of it than they need. This is true whether you subsidize cars, corn or health care. Rule No. 2: People will not buy something for what it's worth if the government will give it to them for free. Rule No. 3: If you charge people more when they can get it elsewhere less expensively, then they will get it elsewhere.
With this in mind, let me tell you what are our caring politicians are cooking up for us in Sacramento. Assembly Speaker Fabian Nunez (D-Los Angeles) has proposed a bill that has three main aspects that I will focus on.
First, it gives free or almost-free health insurance to families that make up to 300% of the federal poverty level, which is $61,950 per year ($31 per hour) for a family of four.
Secondly, this grand idea will be paid for by every business in California that has more than two employees and a payroll over $100,000 per year, with a 7.5% additional payroll tax on employers who do not provide health insurance to all employees and their dependants. When did it become the responsibility of business owners to provide health care to everyone?
Lastly, the Healthy Families Program, which is a state program that uses federal funds (paid for by you, the taxpayer) would, "delete as an eligibility requirement … that the child must meet citizen and immigration status requirements." By the way, the program is already running in the red and will spend $3 billion more than it takes in within just five years, so trying to add 1 million children of illegal immigrants may not be the best idea.
So let's look at the consequences of this brilliant solution.
1) Do you think people will use more or less health care if it is free than if they had to pay a portion of it? Think about it: You have a runny nose? Go to the doctor — heck, it's free! Hurt your ankle? Let's do an MRI — hey, it's free! The fact is, consumers like you and me need to be invested in our own health.
2) People who are now paying for their own health care as responsible parents and adults will quit paying for it and get it free from the government. Do you think that might wreck the assemblyman's budget when the already self-insured jump on board the government gravy train? Also, do you think you might get a few more people to come across the border if they get free health care, no questions asked? Heck, why not bring the whole family? It's free!
3) Let's say I am a widget maker in California and you charge me an additional $5,000 per year for every $31-per-hour worker I have, compared with say Arizona, Nevada or Texas. You can bet that over time I will take my widget factory and that $31-an-hour job to Arizona, Nevada or Texas. This leaves California with more people on free health care and less jobs to support them.
In the end, it does what all socialized health-care systems in the world do where health care is "free": Use goes up and the price goes out of sight. Next, the government has to ration it out. One-year wait for a hip replacement, unless you are over 68 and then they rationalize that the benefit to society is not that important if you walk anymore or not. Next thing you know, we are discussing doctor-assisted suicide as a way to cut costs. This is not fiction. Any European will tell you that it is happening in Europe today.
Now, it may not be perfect, but the United States of America has one of the finest health-care systems in the world. And I know enough that "free" healthcare is the most expensive health care you can get.
With this in mind, let me tell you what are our caring politicians are cooking up for us in Sacramento. Assembly Speaker Fabian Nunez (D-Los Angeles) has proposed a bill that has three main aspects that I will focus on.
First, it gives free or almost-free health insurance to families that make up to 300% of the federal poverty level, which is $61,950 per year ($31 per hour) for a family of four.
Secondly, this grand idea will be paid for by every business in California that has more than two employees and a payroll over $100,000 per year, with a 7.5% additional payroll tax on employers who do not provide health insurance to all employees and their dependants. When did it become the responsibility of business owners to provide health care to everyone?
Lastly, the Healthy Families Program, which is a state program that uses federal funds (paid for by you, the taxpayer) would, "delete as an eligibility requirement … that the child must meet citizen and immigration status requirements." By the way, the program is already running in the red and will spend $3 billion more than it takes in within just five years, so trying to add 1 million children of illegal immigrants may not be the best idea.
So let's look at the consequences of this brilliant solution.
1) Do you think people will use more or less health care if it is free than if they had to pay a portion of it? Think about it: You have a runny nose? Go to the doctor — heck, it's free! Hurt your ankle? Let's do an MRI — hey, it's free! The fact is, consumers like you and me need to be invested in our own health.
2) People who are now paying for their own health care as responsible parents and adults will quit paying for it and get it free from the government. Do you think that might wreck the assemblyman's budget when the already self-insured jump on board the government gravy train? Also, do you think you might get a few more people to come across the border if they get free health care, no questions asked? Heck, why not bring the whole family? It's free!
3) Let's say I am a widget maker in California and you charge me an additional $5,000 per year for every $31-per-hour worker I have, compared with say Arizona, Nevada or Texas. You can bet that over time I will take my widget factory and that $31-an-hour job to Arizona, Nevada or Texas. This leaves California with more people on free health care and less jobs to support them.
In the end, it does what all socialized health-care systems in the world do where health care is "free": Use goes up and the price goes out of sight. Next, the government has to ration it out. One-year wait for a hip replacement, unless you are over 68 and then they rationalize that the benefit to society is not that important if you walk anymore or not. Next thing you know, we are discussing doctor-assisted suicide as a way to cut costs. This is not fiction. Any European will tell you that it is happening in Europe today.
Now, it may not be perfect, but the United States of America has one of the finest health-care systems in the world. And I know enough that "free" healthcare is the most expensive health care you can get.
Friday, May 25, 2007
When Golf Trumps Cash
What is the ideal use of land? That is a difficult question to answer without first looking at several factors: What is it being used as currently? Do you have alternative uses? What does the public want? These are all important questions to ask, but the answer to one alone will not suffice.
I raise this issue because the lease will soon be up on the back nine holes of the Newport Beach Golf Course. The county leases the land to a course operator, and at the same time, John Wayne Airport needs more space for rental car companies. Should the county extend the lease or make another use of the property?
This is clearly becoming a heated issue around town, but so far all I have heard are the anecdotal stories of how much people love the course. Give that credit to Dave Ellis, the consultant hired by the course operators to get their lease extended. No one knows how to craft a debate better than Ellis.
In the end this may be more of a political decision than an economic one. Going against golf courses is more dangerous than fighting Republicans, Democrats, union bosses and big business combined. It could be because so many of these people mentioned are golfers themselves. Let's face it: Golfers can be a little fanatical. What other sport calls spouses golf widows?
Let me start off by saying that I am not on either side of this debate. I live on a golf course (Mesa Verde Country Club). It's a great game, and the last thing I want to do is tear out a golf course and put in a parking lot. I do, however, want the debate to be more than just, "I like golf, so the golf course should stay."
We need to look at the issue as a whole and come to a few conclusions before we make a decision. And if that decision is to keep the golf course, then I will be more than happy. I just want to make sure that the decision is made with all the facts on the table. I am always amazed by how many of these issues are decided without all the facts.
So here is my stab at some of the important questions.
How large is the back nine? My back-of-the-napkin calculations put it at 30 acres plus.
How much is it worth? Land in the area easily sells for $2 million an acre for office buildings. Let's discount it 25% for being under the flight path, about $1.5 million per acre. That times 30 acres equals $45 million. Now we're talking about real money.
Does the county have any other uses for the land? So far we have only heard about the rental car lot.
But there are other competing issues. John Wayne's proposed expansion adds a new terminal and an additional 2,500-space parking structure. You might ask yourself if we would have to build a parking structure that large if we had some land for parking, hence the back nine. Parking structures cost roughly $25,000 a space. If we move half the new need at JWA (1,250 spaces) multiplied by $25,000 we save at least $31,250,000 in construction costs, and we only used eight of those 30 acres.
So in the end, I am just asking a few simple questions, the most important of which is this: How much is it worth to the taxpayers to have the back nine? Thirty-one million dollars? Forty-five million dollars?
The driving force behind all these issues is the expansion of John Wayne. As we have predicted for years, the airport use is going up.
Bottom line, if the airport gets expanded it will need more parking for passengers and rental car companies. And, therefore, this decision — and many more like it — are coming down the pike.
So while we get the hard decisions in this part of the county, Irvine is debating how to spend its $1.5 billion on El Toro Great Park instead of El Toro airport.
Maybe they should use some of that money to pay for the additional parking structures needed. That way we wouldn't have to worry about losing our golf course.
I raise this issue because the lease will soon be up on the back nine holes of the Newport Beach Golf Course. The county leases the land to a course operator, and at the same time, John Wayne Airport needs more space for rental car companies. Should the county extend the lease or make another use of the property?
This is clearly becoming a heated issue around town, but so far all I have heard are the anecdotal stories of how much people love the course. Give that credit to Dave Ellis, the consultant hired by the course operators to get their lease extended. No one knows how to craft a debate better than Ellis.
In the end this may be more of a political decision than an economic one. Going against golf courses is more dangerous than fighting Republicans, Democrats, union bosses and big business combined. It could be because so many of these people mentioned are golfers themselves. Let's face it: Golfers can be a little fanatical. What other sport calls spouses golf widows?
Let me start off by saying that I am not on either side of this debate. I live on a golf course (Mesa Verde Country Club). It's a great game, and the last thing I want to do is tear out a golf course and put in a parking lot. I do, however, want the debate to be more than just, "I like golf, so the golf course should stay."
We need to look at the issue as a whole and come to a few conclusions before we make a decision. And if that decision is to keep the golf course, then I will be more than happy. I just want to make sure that the decision is made with all the facts on the table. I am always amazed by how many of these issues are decided without all the facts.
So here is my stab at some of the important questions.
How large is the back nine? My back-of-the-napkin calculations put it at 30 acres plus.
How much is it worth? Land in the area easily sells for $2 million an acre for office buildings. Let's discount it 25% for being under the flight path, about $1.5 million per acre. That times 30 acres equals $45 million. Now we're talking about real money.
Does the county have any other uses for the land? So far we have only heard about the rental car lot.
But there are other competing issues. John Wayne's proposed expansion adds a new terminal and an additional 2,500-space parking structure. You might ask yourself if we would have to build a parking structure that large if we had some land for parking, hence the back nine. Parking structures cost roughly $25,000 a space. If we move half the new need at JWA (1,250 spaces) multiplied by $25,000 we save at least $31,250,000 in construction costs, and we only used eight of those 30 acres.
So in the end, I am just asking a few simple questions, the most important of which is this: How much is it worth to the taxpayers to have the back nine? Thirty-one million dollars? Forty-five million dollars?
The driving force behind all these issues is the expansion of John Wayne. As we have predicted for years, the airport use is going up.
Bottom line, if the airport gets expanded it will need more parking for passengers and rental car companies. And, therefore, this decision — and many more like it — are coming down the pike.
So while we get the hard decisions in this part of the county, Irvine is debating how to spend its $1.5 billion on El Toro Great Park instead of El Toro airport.
Maybe they should use some of that money to pay for the additional parking structures needed. That way we wouldn't have to worry about losing our golf course.
Friday, May 18, 2007
Our Budget Boondoggle
The news out of Sacramento was good last week if you are a state worker, teacher or prison guard. At first glance it looks like the state brought in more money this year than was expected, hence the pay raises for government employees and pension plans.
You may ask how the state took in so many more of your dollars.
First, let's thank smokers. I know they are a dying breed, but without them we could not come close to balancing the budget. The 1998 Tobacco Settlement Act pays California $10 billion over 25 years. Cigarette manufacturers raise smokes another buck and, bingo, California gets billions. But why wait 25 years if you can get it now? California borrowed almost $4.5 billion of that 25-year payout in 2003 to balance the budget. The state securitized that revenue stream, and when the money comes in from the tobacco companies we just give it to Wall Street with interest. It worked so well we did it again: Less than four years later we borrowed an additional $1.2 billion to balance this year's budget.
Second, the governor proposes to sell the EdFund, which guarantees student loans in the state. A $1 billion, one-time boost that I'm sure will allow Wall Street to be extremely generous to our California college students — not to mention the loss of income down the road.
A closer look at the numbers and you find that all of these one-time revenue-generators are really borrowing against future revenue to pay today's expenses. Making one-time sales of government assets is like refinancing your house to buy groceries. Sooner or later the borrowing comes due.
But the state can be more creative than that. With these $3-plus gasoline prices, the state is raking in extra gas and sales tax (California makes more on a gallon of gas than Exxon). Proposition 42 and Proposition 1A force the state to use most of this money on transportation projects. What a novel idea, gas taxes for roads!
Well here's an idea: Why don't we move $627 million from the public transportation account to a new budget line item, "home-to-school transportation"? That's right, in one fell swoop we moved more than $500 million to pay for school buses. Forget that this used to be a school expense. Now it is taken out of your gas taxes — a slight of hand that would make an Enron chief financial officer blush.
When doing a long-term business deal — which is not unlike what the state budget is — what sense does it ever make to sell off a potential long-term revenue source for a mere percentage of the total worth? Sure, you may make some teachers and prison guards happy in the short term, but what about a few years down the road when we don't bring in money from these long-term revenue sources?
Case in point: To balance future budgets, Gov. Arnold Schwarzenegger is also planning to lease the state lottery for 40 years to some hedge fund for a lump sum of around $37 billion. He'd sell it but the state Constitution won't allow it. Last year, the lottery brought over $1.3 billion to our schools. Over the next 40 years, the lottery would bring in an estimated $90 billion — a $53-billion loss no one seems to mind.
In California, we do not have a revenue problem; we have a spending problem. We are not going to solve the problems of today by sacrificing the future. First and foremost, we need to balance the budget the old-fashioned way, by reducing spending and keeping it less than what we bring in.
Sure, we can make some people happy today by selling off our assets, but what about five or 10 years down the road?
You may ask how the state took in so many more of your dollars.
First, let's thank smokers. I know they are a dying breed, but without them we could not come close to balancing the budget. The 1998 Tobacco Settlement Act pays California $10 billion over 25 years. Cigarette manufacturers raise smokes another buck and, bingo, California gets billions. But why wait 25 years if you can get it now? California borrowed almost $4.5 billion of that 25-year payout in 2003 to balance the budget. The state securitized that revenue stream, and when the money comes in from the tobacco companies we just give it to Wall Street with interest. It worked so well we did it again: Less than four years later we borrowed an additional $1.2 billion to balance this year's budget.
Second, the governor proposes to sell the EdFund, which guarantees student loans in the state. A $1 billion, one-time boost that I'm sure will allow Wall Street to be extremely generous to our California college students — not to mention the loss of income down the road.
A closer look at the numbers and you find that all of these one-time revenue-generators are really borrowing against future revenue to pay today's expenses. Making one-time sales of government assets is like refinancing your house to buy groceries. Sooner or later the borrowing comes due.
But the state can be more creative than that. With these $3-plus gasoline prices, the state is raking in extra gas and sales tax (California makes more on a gallon of gas than Exxon). Proposition 42 and Proposition 1A force the state to use most of this money on transportation projects. What a novel idea, gas taxes for roads!
Well here's an idea: Why don't we move $627 million from the public transportation account to a new budget line item, "home-to-school transportation"? That's right, in one fell swoop we moved more than $500 million to pay for school buses. Forget that this used to be a school expense. Now it is taken out of your gas taxes — a slight of hand that would make an Enron chief financial officer blush.
When doing a long-term business deal — which is not unlike what the state budget is — what sense does it ever make to sell off a potential long-term revenue source for a mere percentage of the total worth? Sure, you may make some teachers and prison guards happy in the short term, but what about a few years down the road when we don't bring in money from these long-term revenue sources?
Case in point: To balance future budgets, Gov. Arnold Schwarzenegger is also planning to lease the state lottery for 40 years to some hedge fund for a lump sum of around $37 billion. He'd sell it but the state Constitution won't allow it. Last year, the lottery brought over $1.3 billion to our schools. Over the next 40 years, the lottery would bring in an estimated $90 billion — a $53-billion loss no one seems to mind.
In California, we do not have a revenue problem; we have a spending problem. We are not going to solve the problems of today by sacrificing the future. First and foremost, we need to balance the budget the old-fashioned way, by reducing spending and keeping it less than what we bring in.
Sure, we can make some people happy today by selling off our assets, but what about five or 10 years down the road?
Friday, May 11, 2007
Alienable Rights
Most of us know of our certain inalienable rights — life, liberty and the pursuit of happiness. These rights separate us from every other country in the world and are why America is the great nation it is today.
More directly, with regard to property rights, we have the 5th Amendment: "… nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation" as well as the 14th Amendment: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law …"
But what about those rights that aren't inalienable, those rights that some presume to have? When thinking about your home, do you think you have a right to a view? Do you think you have the right to a certain amount of sunlight? What about the right to keep someone from innocently looking into your backyard from their secondstory window? What about the right to decide the color of your neighbor's home? How about the design? Is it your decision to say what's "compatible" in your neighborhood?
What about your neighbor's rights when they want to remodel their home? What about their right to build their home to better suit them and their family? Do you really think you have the right to tell them how to build and design their home?
Many of the homes in our communities built in the 1960s and '70s are ready for major renovations. This is a good thing. It is imperative as we have more homeowners interested in doing just this that we respect their right to do what is in their best interest.
When we buy property, we own from the center of the earth and outward, including the land underneath, and the air above. Though we have "due process of law" and zoning jurisdictions, should we really be subject to losing our inalienable rights because some people think they have phony rights to a view, sunlight and compatible design? It is not the responsibility of a homeowner, absent of an existing deed restriction, to protect a neighbor's view, sunlight or ocean breeze, or to make his or her house compatible with your 1972 "Brady Bunch" special.
Homeowners' rights are bent, walked over and crushed every week in city council and planning commission meetings all across the United States when your neighbors get up to the microphone and assert all of these phony rights in front of a council that may just be counting votes for election time.
Let's face it. Some politicians would make the "majority" happy and get reelected rather than stick their necks out to protect some homeowners' rights and maybe lose an election. We need leaders in city halls to stand up for property rights and to communicate why they are so important. In turn, they need voters to support them when they do the right thing.
More directly, with regard to property rights, we have the 5th Amendment: "… nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation" as well as the 14th Amendment: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law …"
But what about those rights that aren't inalienable, those rights that some presume to have? When thinking about your home, do you think you have a right to a view? Do you think you have the right to a certain amount of sunlight? What about the right to keep someone from innocently looking into your backyard from their secondstory window? What about the right to decide the color of your neighbor's home? How about the design? Is it your decision to say what's "compatible" in your neighborhood?
What about your neighbor's rights when they want to remodel their home? What about their right to build their home to better suit them and their family? Do you really think you have the right to tell them how to build and design their home?
Many of the homes in our communities built in the 1960s and '70s are ready for major renovations. This is a good thing. It is imperative as we have more homeowners interested in doing just this that we respect their right to do what is in their best interest.
When we buy property, we own from the center of the earth and outward, including the land underneath, and the air above. Though we have "due process of law" and zoning jurisdictions, should we really be subject to losing our inalienable rights because some people think they have phony rights to a view, sunlight and compatible design? It is not the responsibility of a homeowner, absent of an existing deed restriction, to protect a neighbor's view, sunlight or ocean breeze, or to make his or her house compatible with your 1972 "Brady Bunch" special.
Homeowners' rights are bent, walked over and crushed every week in city council and planning commission meetings all across the United States when your neighbors get up to the microphone and assert all of these phony rights in front of a council that may just be counting votes for election time.
Let's face it. Some politicians would make the "majority" happy and get reelected rather than stick their necks out to protect some homeowners' rights and maybe lose an election. We need leaders in city halls to stand up for property rights and to communicate why they are so important. In turn, they need voters to support them when they do the right thing.
Saturday, May 5, 2007
Hefty Price For City Hall
How rich is Newport Beach?
I know some very wealthy people call Newport home, but is the city so flush with cash that, when it comes to capital expenses, total cost is lost in the equation?
I am referring to the largest capital expenditure the city will incur this decade: building a new city hall. The number being batted around town is $50 million. No study, no report, just an out-of-the-air guess.
My antenna always goes up when I see a large government project proposed.
Call me cynical, but why is it that whenever a capital project is proposed, some members of our local government always say, "This is what we need"? They should ask how much it costs, if the city can afford it and if there's a better use for the money.
The supposed need always overwhelms the question of cost.
In making any large capital decision, whether it's a Fortune 500 company, your immediate family, or, say, the city of Newport Beach, you should always ask yourself several questions: Do we need it? What do we have (cash, assets, land)? What do we owe (bonds, loans, pension obligations)? What will we have left after the fact?
If, after asking those questions, the proposal seems affordable and logical, only then should we be asking where to put it, what design to use and what color to paint it.
Let's, for argument's sake, acknowledge that a new city hall is needed. Call me a cheap, unsophisticated hayseed from the Midwest, but why would the city consider not using the surplus land it owns? Specifically, a 12-acre vacant lot at MacArthur Boulevard and San Miguel Drive.
Let's see, the land needed for a city hall is 3 acres. At the asking price of about $7 million an acre, the cost for the land alone would be $21 million.
Even in Newport Beach, $21 million is real money. But let's not stop here.
The land is next to the city library. How novel, a city library next to a city hall. If you haven't seen the library from the road, you are not supposed to; it was dug into the hill, not exactly inexpensive construction either. But what the heck? You wouldn't want to affect the view of a few homes. It's just taxpayers' money.
But wait one minute. Previous City Councils said the land should be a park. Oh, I forgot. We still have 9 acres left for a park, and with a city hall next door we might even have people to use it.
Given the choice, previous councils might have saved 3 acres had they known a new city hall might be needed.
Let's be real. Twenty-one million dollars is a lot of hard-earned money from the people of Newport Beach.
There is an old real estate axiom: When someone makes an offer and you don't take it, you just bought it for that price.
Let's just say we already had a 9-acre park and 3 additional acres becomes available for $21 million. Would you pay that much for the additional land?
If Newport doesn't use the land for a new city hall, its taxpayers and leaders just paid a steep price.
I know some very wealthy people call Newport home, but is the city so flush with cash that, when it comes to capital expenses, total cost is lost in the equation?
I am referring to the largest capital expenditure the city will incur this decade: building a new city hall. The number being batted around town is $50 million. No study, no report, just an out-of-the-air guess.
My antenna always goes up when I see a large government project proposed.
Call me cynical, but why is it that whenever a capital project is proposed, some members of our local government always say, "This is what we need"? They should ask how much it costs, if the city can afford it and if there's a better use for the money.
The supposed need always overwhelms the question of cost.
In making any large capital decision, whether it's a Fortune 500 company, your immediate family, or, say, the city of Newport Beach, you should always ask yourself several questions: Do we need it? What do we have (cash, assets, land)? What do we owe (bonds, loans, pension obligations)? What will we have left after the fact?
If, after asking those questions, the proposal seems affordable and logical, only then should we be asking where to put it, what design to use and what color to paint it.
Let's, for argument's sake, acknowledge that a new city hall is needed. Call me a cheap, unsophisticated hayseed from the Midwest, but why would the city consider not using the surplus land it owns? Specifically, a 12-acre vacant lot at MacArthur Boulevard and San Miguel Drive.
Let's see, the land needed for a city hall is 3 acres. At the asking price of about $7 million an acre, the cost for the land alone would be $21 million.
Even in Newport Beach, $21 million is real money. But let's not stop here.
The land is next to the city library. How novel, a city library next to a city hall. If you haven't seen the library from the road, you are not supposed to; it was dug into the hill, not exactly inexpensive construction either. But what the heck? You wouldn't want to affect the view of a few homes. It's just taxpayers' money.
But wait one minute. Previous City Councils said the land should be a park. Oh, I forgot. We still have 9 acres left for a park, and with a city hall next door we might even have people to use it.
Given the choice, previous councils might have saved 3 acres had they known a new city hall might be needed.
Let's be real. Twenty-one million dollars is a lot of hard-earned money from the people of Newport Beach.
There is an old real estate axiom: When someone makes an offer and you don't take it, you just bought it for that price.
Let's just say we already had a 9-acre park and 3 additional acres becomes available for $21 million. Would you pay that much for the additional land?
If Newport doesn't use the land for a new city hall, its taxpayers and leaders just paid a steep price.
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