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Tuesday, October 22, 2013


Story first appeared in The Detroit News.

Last week I got news that my health insurance costs are going up. A lot. In 2014 my monthly premium for a family of four will increase 15 percent to $575, my deductible will double to $3,000 and I will lose my drug coverage, adding another $100 a month to my expenses. My story is typical for employees of Gannett, the Detroit News' parent company, and other businesses across the country.

Obamacare is not just creating havoc in state exchanges, it is roiling the larger private health insurance market. Costs are skyrocketing thanks to the expensive mandates, regulations and taxes buried in the Affordable Car Act.

Call it the Unaffordable Care Act.

Billed by President Barack Obama as a historic reform that would reduce heath insurance costs by $2,500 a year and cover 40 million uninsured, the program is dictating terms to every health insurer while offering employees a grim choice of rising costs with their company plan or seeking refuge in unworkable, expensive government-run state exchanges.

While many small employers have welcomed a delay in the ACA's employer mandate until 2015, businesses that already provide insurance are facing Obamacare's new reality. The bad news has come in waves as companies like Home Depot and Trader Joe's announced they are dropping coverage for part-time employees. Hundreds of thousands of consumers are losing their "mini-med plans" because they don't meet Washington's minimum requirements. Now come the premium increases for self-insured businesses that an analysis by Duke University's Center for Health Policy estimates will cost an average family $800 a year. In Michigan, for example, insurance costs for the Extreme Chrysler dealership in Jackson are going up 70 percent and Michigan Group Benefits insurance says its clients' average increase is 23 percent.

The $2,100 cost jump in my Gannett plan, administered by United Health, is actually worse than it appears, as my premiums have already swelled by 45 percent since 2011 as insurers anticipated federal regs forcing, for example, coverage of dependents up to 26 years old. Gannett must also swallow a $63 tax for each individual in its group plan and another $2.13 fee per head to "study heath care outcomes." Similar costs threaten private, union-negotiated health plans, leading Teamsters President Jimmy Hoffa to say Obamacare will "destroy the very health and well being of our members."

"Health care costs historically have been going up 7 percent a year, so anything above that is probably due to provisions in Obamacare," concludes Drew Gonshorowski, a policy analyst for the Heritage Foundation's Center for Analysis, who says the ACA's over-regulation is upsetting important insurance calculations like "age-brand compression" that balances risk pools.

"Insurance pricing is one of the most complicated, difficult-to-price markets," he says. "The ACA doesn't allow insurers to price freely."

Obamacare promises that its state exchanges offer insurance options, but the government-run system is dysfunctional. Three weeks after its launch, the federally run Michigan Health Care Exchange is still a nightmare. In the first two weeks I couldn't sign up because the three security questions wouldn't load. Last week, the security questions were finally there, but then I stalled at the next page. After waiting in a chat room, an Obamacare assistant finally responded: "Unfortunately, (high volume) is causing some glitches for some people trying to create accounts, log in, and complete their application. Keep trying and thanks for your patience."

But if/when if I do get in, more sticker shock awaits.

An analysis of the feds' own data by Heritage's Gonshorowski finds Michigan consumers (as in most states) will experience cost increases across the board. For a family of four, the state exchange will increase costs from $771 to $864 per month. Even for a 27-year old, the youth demographic on which exchanges depend to subsidize older applicants, the exchange increase costs from $117 to $255 per month, a 118 percent hike.

"The essence of the law is working," said the president at his Monday news conference. "The prices are lower than we expected, the choice is greater than we expected." Do you believe him or your lying eyes?

Henry Payne's column runs every Tuesday online. Payne is a Detroit News editorial writer and editorial cartoonist. He also is editor of The Detroit News Politics forum.

Monday, October 21, 2013


Story first appeared in The Detroit Free Press

Michigan ranks 44th among states for the average amount of debt owed by college kids who got four-year degrees in 2011 -- $26,951. New Mexico had the lowest amount of debt, $16,276; recent college graduates in New Hampshire had the highest, $32,385. Average annual student debt for Michigan college graduates has grown 5.3% since 2004, according to Michigan's Performance Tracker for Public Universities . The statistics were released by Business Leaders for Michigan earlier this month, which noted higher debt levels carried by students equate to less money for local economies in Michigan.

Average Student Debt

What it is: The average amount of debt for undergraduate students graduating in 2011 in each U.S. State for public universities that are 4-years and above.
Why it matters: This information helps us know the debt burden for students graduating with undergraduate degrees in each state. The higher the debt, the longer a student may take to pay it back. This means that many graduating students will have to spend a higher share of their future income on paying student loans rather than spending their money in the economy.

- See more at: http://www.blmperformancetracker.com/average-student-debt/#sthash.YGLSw9Lh.dpuf

Thursday, October 17, 2013


Story first appeared in the Philadelphia Business Journal.

CBRE Group Inc. has made a big, local retail play and bought Fameco, a regional firm formed in 1992 by Brandon Famous and Jeffrey Cohen. A Philadelphia Tax Lawyer was unavailable for comment.

Terms of the transaction weren’t disclosed. The company will go under the name CBRE | Fameco.

The deal bolsters CBRE’s strength in the retail real estate sector. The transaction gives the firm: 250 shopping centers and retail properties; 20 million square feet to lease; 20 million square feet of property management; and 75 retailers to its tenant roster.  A Philadelphia Construction Lawyer may be contacted for more assistance with the project.

Fameco’s 100 employees will join CBRE and, for now, CBRE | Famco will continue to be based out of Conshohocken, Pa. In all, CBRE will have nine offices throughout the region with the three Fameco locations folded in.

The deal was a deliberate effort by CBRE to gain a stronger retail foothold.  There is consideration of using a Pennsylvania Graphic Design Company for advertising materials.

“We are the global leader in real estate services and the leader in the Philadelphia region but candidly, there was a gap in our service line,” said Robert W. Walters, executive managing director of CBRE’s Philadelphia office. “In our mind, clients more and more are looking to work with fewer and fewer service providers and are looking for firms that have a platform and resources across the board to help them. We think this is going to be extremely beneficial to our employees and our clients throughout the tri-state area.”

The deal aims to also help Fameco’s clients that can see some benefits from CBRE’s resources, Walters said.  Some clients park their vehicles under Pennsylvania Carports.

Famous and Cohen, who will continue on with the firm, weren’t available for comment. However, Walters said that he has had casual conversations on and off with Fameco partners over the years about merging but those talks didn’t get serious until the last few months.

“The timing was right,” he said. “From our standpoint, when we look around at our business and we think about how can we grow not just for the sake of getting bigger and growing but where are the opportunities for CB to grow and what are our clients looking for in a service provider. There was a gap and we wanted to change that.”  To protect themselves, a Philadelphia Premises Liability Lawyer may be considered.


Story first appeared in USA TODAY.

The messy soap opera playing out at The Philadelphia Inquirer reads like a Harvard Business School case study of how not to run a company.


• The only two members of the management committee that runs the newspaper's parent company — two of its six wealthy owners — are at war.

• The paper's publisher and editor were at war until the publisher abruptly fired the editor last week, triggering a firestorm. Actually, they still are at war.

• The Inquirer and the Daily News, its sister paper, are at war with the company's dominant website, philly.com.

• The daughter of one of those dueling management committee members runs that website.

• The longtime companion of the other management committee member is the city editor of the Inquirer and a staunch ally of the now-fired editor.

• One of the management committee members and another of the owners have filed a suit seeking to reinstate the editor and kick the publisher to the curb.

• A petition to bring back the editor has been signed by scores of distinguished journalists. On Tuesday, Teamsters who work for the paper picketed their employer.

• And the company's human resources department has directed the staff not to talk about all of this astonishing turmoil. That's right: A newspaper company is telling its staff to stiff-arm reporters.

It's not so long ago that this battlefield, the Inquirer, was one of the nation's very top newspapers. But newspapers everywhere have been buffeted by the digital era, and the Inquirer has taken more than its share of hits.

It has had five owners over the past seven years. Circulation and advertising revenue have plummeted. The staff has been severely cut. Yet it's still a vital force in its hometown, a vibrant city confronting a daunting array of social problems. Philly needs a strong Inky. People living in Philadelphia Apartments get the paper religiously.

And hopes were high when the latest owner, Interstate General Media, purchased the Inquirer, the Daily News and philly.com in April 2012 and installed Bill Marimow as editor of the Inquirer.  Many of it's readers living in Old City Apartments.

Marimow, a highly respected journalist, won a couple of Pulitzer Prizes at the Inquirer and, after stops at the Baltimore Sun and NPR, returned to the Inquirer in the top newsroom spot in 2006. But when the papers were sold yet again four years later, the new owners demoted Marimow, explaining they wanted someone with more digital chops.

Marimow is known as a rigorous traditional journalist with a commitment to hard-edged watchdog reporting. And, yes, it's true that he has rarely been confused with Steve Jobs. Rather than stay at the paper as a reporter, he decamped to teach journalism at Arizona State University. (Disclosure: Marimow is a friend of mine and a fellow Philly guy.)

But then the paper was sold again. And when management committee members Lewis Katz, a parking magnate and former owner of the New Jersey Nets, and George Norcross, a South Jersey businessman and political power, asked him to once again run his hometown paper, Marimow said yes.  More people in Center City Apartments were wondering how this new turmoil was going to affect the articles that they read.

But there were signs of trouble right away. Robert Hall, then COO of the Inky's parent company but soon to become CEO and the paper's publisher, unleashed a torrent of "scathingly critical" comments at Marimow and warned he would "watch over" him, according to the lawsuit filed by Katz and fellow owner H.F. "Gerry" Lenfest seeking to restore Marimow to the helm. (Hall says the suit doesn't capture the conversation accurately.)

To no one's surprise, Marimow and Hall had their differences. Hall was pushing for a lot of changes that Marimow didn't want to make (he did make some of them). But according to one knowledgeable source, trouble began in earnest when Marimow met with Norcross early this year. Norcross presented the editor with some research strongly suggesting that The Inquirer sharply cut back on editorials, perhaps running them just once or twice a week, and reduce its roster of local columnists. Marimow said no.

Norcross isn't a guy who likes to be told no. After that, the source said, Marimow found himself under unrelenting pressure from Hall.

The Norcross-Marimow relationship certainly didn't improve last May after philly.com enlisted the state's governor, Tom Corbett, to write a column. Marimow hated the idea. But the paper has no control over the site, which leans toward linkbait rather than news. So he had the paper do a story about Corbett's column that contained this embarrassing quote from website chief Lexie Norcross: "Considering that the Inquirer and Daily News slam (Corbett) every day, I think it's actually equal, giving him a chance to speak."  Students in University City Apartments were intrigued by the underlying fighting between the paper and the website.

Endgame arrived on Monday, Oct. 7, when Hall abruptly fired Marimow. The final straw, apparently was Marimow's refusal to fire five editors Hall ordered him to get rid of. In an ugly, widely leaked e-mail to the owners justifying his action, Hall was brutally critical of Marimow and the editors he wouldn't sack.

In an interview, Hall said he and the owners had been pushing Marimow for months to move more rapidly on, among other things, a redesign of the paper and implementing new approaches suggested by research. "It was time to make a change," he said. "We need to move a lot quicker."

For his part, Marimow says, "It's heartening to me to have two people with the integrity and public commitment of Gerry Lenfest and Lewis Katz working to assure the integrity of the Inquirer and the Daily News are preserved. I think it's tragic for the Philadelphia community that this has resulted in open warfare."

And so the paper is in limbo — one reporter says the newsroom feels like a rebel province that needed to be put down. And while the whole sorry scenario is terrible for the journalists, it's even worse for the Philadelphia region, which desperately needs a news outlet relentlessly reporting on its pressing problems, not one transfixed by its own melodrama. A Philadelphia Business Lawyer continues to watch the story closely.

Tuesday, October 15, 2013


Story first appeared in the Boston Business Journal.

CSC ServiceWorks announced Tuesday it has entered an agreement to acquire Mac-Gray, a provider of laundry facilities management services for multi-family and academic housing, for $524 million cash.  A Commercial Real Estate Attorney Boston  is watching the story closely.

CSC is acquiring Mac-Gray (NYSE: TUC) for $21.25 per share, a 42 percent premium over the Waltham, Mass., company's Monday closing price, and folding it into its wholly owned subsidiary, CSC Fenway Inc., which is part of CSC's Spin Holdco Inc. subsidiary. The companies announced the deal in a news release, Tuesday morning.

Based in Plainview, N.Y., CSC also provides laundry services to multi-family housing and commercial clients, as well as air-pump vending services at convenience stores and gas stations.

"After a careful and thorough evaluation process, the Mac-Gray board has determined that the all-cash transaction with CSC maximizes value for our shareholders," Mac-Gray Chairman Thomas Bullock said in a statement. "The Board strongly believes that this transaction achieves that result, providing a significant premium for our shareholders."

Founded in 1927, Mac-Gray had 2012 revenue of $322.1 million.

The merger is expected to close in the first half of 2014.


Story first appeared in the Business Insider.
Gallup is out with its latest batch of "well-being" data, and a new city has fallen to the lowest spot in the rankings.

This year, Charleston, W.Va. ranked lowest on the pollster's index of well-being in metropolitan areas. It displaced Huntington-Ashland, W.Va.-Ky.-Ohio, which came in last place the previous two years.

The index ranks well-being by averaging scores in six categories: Life evaluation, emotional health, work environment, physical health, healthy behaviors, and access to basic necessities.

No.11 Utica-Rome, N.Y.
Overall score: 63.4/100

The metro area ranked 176th overall, four spots higher than its place at No.180 in 2011. It scored highest in healthy behavior (at No.65), which measures lifestyle habits like smoking, exercise frequency, diet, and consumption of fruits and vegetables.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

No.10 Spartanburg, S.C.
Overall score: 63.4/100

Spartanburg was not ranked in 2011. It ranked No.176 of 189 metro areas in terms of life evaluation, a self-evaluation of one's current personal wellbeing and expected personal well-being in five years.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.9 Rockford, Ill.
Overall score: 63.1/100

Rockford dropped 26 spots to No.181 this year. It fared best in terms of physical health — which measures sick days, obesity, rest, health problems, energy, flu, colds, and headaches — coming in at No.129.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.8 Evansville, Ind.-Ky.
Overall score: 63.1/100

Evansville ranked No.182 of 189 metro areas. It dropped significantly on the work environment index — which measures participants' perception on their work experience including job satisfaction, treatment, and office environment and interactions — from No.10 to No.159.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.7 Bakersfield, Calif.
Overall score: 63.0/100

Bakersfield dropped significantly on the emotional health index this year, from 75 to 175. The index measures participants' daily experiences of smiling, happiness, laughing, sadness, anger, stress, and worry.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.6 Fort Smith, Ark.-Okla.
Overall score: 62.9/100

The metro area ranked 187th in the categories of life evaluation, physical health, and healthy behavior. It fared best in work environment, ranking No.12 — an 88-spot jump from 2011.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.5 Hickory-Lenoir-Morganton, N.C.
Overall score: 62.7/100

The metro area ranked last in terms of life evaluation, a self-evaluation of one's current personal wellbeing and expected personal wellbeing in five years. It fared best in terms of work environment, ranking 75th.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.4 Beaumont-Port Arthur, Texas
Overall score: 62.5/100

The metro area dropped 19 places between 2011 and 2012. It fared worst in terms of work environment, ranking 188th; the index measures participants' perception of their work experience including job satisfaction, treatment, and office environment and interactions.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.3 Mobile, Ala.
Overall score: 62.4/100

Mobile dropped six spots in this year's ranking. It ranked highest in terms of healthy behavior, at No.116. The index looks at lifestyle habits like smoking, exercise frequency, diet, and consumption of fruits and vegetables.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.2 Huntington-Ashland, W.Va.-Ky.-Ohio
Overall score: 61.2/100

Huntington-Ashland ranked last on the 2011 index. It came in last in terms of physical health, and ranked highest (95th) on the work environment index, which measures participants' perception of their work experience including job satisfaction and office environment.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index

No.1 Charleston, W.Va.
Overall score: 60.8/100

Charleston dropped seven spots, coming in last in the 2012 well-being index. It dropped 44 spots in the work environment category and 17 spots in terms of emotional health, to last place.

Results are based on phone interviews with a random sample of 353,563 adults in the U.S. Metro areas are based on the Metropolitan Statistical Areas defined by the U.S. Office of Management and Budget.

Source: Gallup Well-Being Index


Story first appeared in The Detroit News.

The two of us are the CEOs, respectively, of a company that offers staffing solutions to a diverse array of companies throughout the country and of the Small Business Association of Michigan. From where we sit, we have a strong sense of the expectations and concerns shared by businesses of all sizes, both here in the Great Lakes State and all across America. While both small and large businesses have made great strides in recent years, they still express frustration over a distinct lack of policy certainty emanating from our elected leaders in Washington.

The message that is constantly being conveyed to us is that if lawmakers could find a way to come together on the major fiscal challenges facing the country today — namely our soaring national debt — they feel as though the full potential of the economy would become unleashed. We agree that if policymakers begin to address our unsustainable national debt, business leaders will be armed with the confidence they need in order to thrive.

Slowing the growth of our unsustainable national debt will take a comprehensive approach, one that looks to all parts of the budget and both sides of the accounting ledger for solutions. On the revenue side, we are both pleased that one of our elected leaders pushing the hardest for fundamental tax reform is our fellow Michiganian Rep. Dave Camp, chairman of the House Ways and Means Committee.

We have been following Camp as he attempts to pressure his colleagues into helping him undertake a true re-write of the tax code, which, right now, is outdated and horribly inefficient.

Each year, individuals and corporations waste countless hours and resources on navigating the code’s confusing maze of rules and regulations. Comprehensive and pro-growth tax reform would benefit all Americans in the long run by making the code simpler and fairer — not to mention more conducive to economic growth.

By “more conducive to economic growth,” what we mean is this: With our current code, there are so many deductions, exemptions and preferences — well over $1 trillion per year in lost revenue — that individuals and companies face all kinds of perverse incentives to lower their tax liabilities rather than to grow their business and help boost the economy. Collectively, incentivizing such choices at the individual or corporate level distort our economy and put a drag on growth.

Moreover, many of the code’s scores of preferences expire each year and take a Congressional action to extend. Right now, it’s hard to depend on Congress to take action on much of anything, and, as such, it is impossible for businesses to confidently make concrete plans about when exactly to make a new investment in equipment or personnel – certainly not when the policy environment is so in flux.

This is why we’re both strong supporters of the “blank slate” approach to tax reform favored by Rep. Camp and Senate Finance Committee Chairman Max Baucus, in which all preferences are eliminated from the code, marginal rates are dropped and the bar for a tax preference to be added back in is very, very high.

While we will support efforts to reform the tax code as best we can, we know that tax reform alone will not alleviate all of our fiscal woes. Any viable debt deal must include structural changes to our increasingly-costly entitlement programs, as well as intelligent cuts to wasteful or low-priority spending programs. Each of these areas of the budget must be addressed if our massive debt burden – larger than at any point in the last 60 years as a share of the economy – is to get under control. In addition to reducing the threat of a debt-fueled fiscal crisis, real progress towards a comprehensive deficit-reduction agreement would do wonders to instill confidence in the business sector and aid economic growth over the long-term.

This fall presents a host of opportunities for Washington to find areas of common ground on these tough issues. We feel it is critical to let our representatives in the nation’s capital know that crafting a pro-growth deal to reduce the deficit is both desirable and attainable, which is why we are both members of the Campaign to Fix the Debt. The Campaign was founded to help Congress and the President enact a plan to gradually reduce the national debt as a share of the economy – a plan that would let the American people know Washington has clear goals and policy objectives centered on restoring order to our nation’s fiscal house.

Here in Michigan and across the nation, we’re on the road to economic recovery. But we’re not there yet. Let’s get where we need to be by fixing the tax code and fixing the debt.

Thursday, October 10, 2013


Story first appeared USA TODAY.

Is Men's Wearhouse the right fit for rival Jos. A Bank Clothiers?

The retailer -- still recovering from the June ouster of co-founder George ("You're gonna like the way you look") Zimmer -- spurned an unsolicited $2.3 billion bid from Jos. A Bank Wednesday, rejecting, at least for now, a deal that would combine the USA's leading men's specialty retailers.

Men's Wearhouse shares rocketed 28% to $45.03 Wednesday, while Jos. A. Bank's jumped 6.4% to $44.33.

Bank made the bid in a Sept. 17 phone call. It may have to tailor a more suitable offer. Richard Jaffe, retail analyst at Stiflel, values Men's Wearhouse at $52 a share. Houston-based Men's Wearhouse says the $48-a-share offer "significantly undervalues'' the company.

A merger would offer significant operational synergies, compelling products and brands across several price points, Jaffe said in a note to clients Wednesday. Bank would benefit from Men's Wearhouse's strong tuxedo rental business, fashionable Joseph Abboud line and the managerial expertise of Zimmer's successor, Doug Ewert, Jaffe says.

Jos. A. Bank -- best known for its "buy 1, get 2" (or more) free marketing campaigns -- said in June that it was considering acquisitions and it was storing up capital for a possible deal. But in September, the company reported fiscal second-quarter net income sank 39%. Bank sells men's tailored and casual clothing, sportswear and footwear and operates 623 stores in 44 states and the District of Columbia.

Men's Wearhouse runs 1,239 stores under its signature name as well as Moores and K&G.

While smaller than its target, Jos. A. Bank has higher profit margins and a bit more upscale clientele, notes James Gellert, CEO of Rapid Ratings, an independent credit rating agency. Gellert says a merger would make sense -- whether Bank winds up as a suitor or is acquired by Men's Wearhouse.

"Any time you take two companies in a similar business, there should be cost savings in the supply chain,'' he says."This has the makings of a reasonable deal."

Zimmer, who opened his first Texas store in 1973 and had been the face of the company's marketing efforts, was ousted by his board of directors in a dispute over the direction of the company. According to recent filings, he remains one of its biggest shareholders, with a 3.7% stake. But both Zimmer and the company exchanged some harsh words following his departure.

Shoppers might not benefit from a Wearhouse-Bank merger, says Jerry Reisman, an M&A expert with law firm Reisman, Peirez,Reisman & Capobianco.

"Jos A. Bank and Men's Warehouse now compete for the same customer and often in the same or close by malls, keeping prices competitive and low and causing each to try and out sell the other at lower prices,'' Reisman says. "The merger would certainly be a loss to the consumer who has benefited from the competition and lower prices driven by competition."

Word of a potential merger propelled shares of another retailer. Destination XL Group, the largest chain selling big and tall menswear, gained 1.5% to $6.50.

Tuesday, October 8, 2013


Story first appeared in USA TODAY.

Joanne Jacobsen says she did everything right when she was planning for retirement.

"I've been planning my retirement since I was in my 30s," says the 63-year-old Venice, Fla., resident. "I'm pretty good at doing a budget. I knew what I would get from my company, and I knew what I would get from Social Security."

What she did not plan on was her former employer ending health insurance benefits for retirees. "An extra $6,000 to $10,000 a year was not factored in," she says.

Jacobsen is among a group of retirees who have seen their former companies either end health benefits for retirees or increase their premiums. She went to Capitol Hill two weeks ago to testify about the trend. She says she worked for Verizon for 30 years before she was laid off in 2002. She now works in real estate.

"Retirees no longer have any sense of security, whether they retired last week or 20 years ago," she says.

According to the Employee Benefit Research Institute, only 17.7% of employees today offer retiree health benefits, down from 29% in 1997. Also, according to the EBRI report, while many employers have dropped the benefits for future retirees, those that continue to offer benefits have raised premiums or reduced benefits.

But, financial planners say, while losing benefits can cause a major shock to a retiree's finances, there are ways to lessen the impact.

"The reality is, just as with any phase of life, it is impossible to plan for everything," says Dana Anspach, founder of Sensible Money in Scottsdale, Ariz., and author of Control Your Retirement Destiny. "To a certain degree you have to have flex money in retirement –- funds that can be redirected when/if unexpected things happen."

Jacobsen, originally from Massachusetts, testified at a U.S. Senate Special Committee on Aging hearing chaired by Sen. Bill Nelson, D-Fla., on "The Retirement Crisis." She says several of her former co-workers at Verizon who also retired to Florida, are in the same predicament. One, she says, now has to rent out her Florida vacation condo to pay for the insurance her former employer no longer provides.

Steve Kreisberg, director of collective bargaining for the American Federation of State, County and Municipal Employees, said the health care benefits are being withdrawn in both the public and private sectors.

"If somebody has worked a career, and been promised retiree health care, there are moral and legal obligations," he says. "We are going through that right now with the city of Detroit. The city is seeking to substantially reduce retiree health care benefits."

Kreisberg says the city of Detroit, which has filed for bankruptcy protection, has about 20,000 retirees. "Some of them are eligible for Medicare, some are not," he says. There are similar issues in Los Angeles, Illinois and Connecticut, he says. "It's been happening with increasing frequency."

The options, for retirees who lose their health care: Medicare, for those who are eligible, he says. "For those not eligible, fortunately we have the Affordable Care Act. That is literally a godsend to these employees who have lost coverage. They would be people who cannot get coverage. Pre-existing conditions would put it out of reach."

There are other options, says Anspach. For retirees who have company-provided or company-supplemented insurance and want to plan for the possibility of their company reducing benefits in the future, their best option is to price private insurance such as a Medicare Advantage Plan or Medicare Supplement plan, and then build that potential expense into their retirement budget, she says.

Larry Rosenthal, president of Rosenthal Wealth Management Group in Northern Virginia, agrees that retirees can better prepare if they have the cash reserves and have a line item in their financial plan.

"Corporations are still trying to do more with less, and wherever they can cut, they cut," he says. "People can try to get prepared for something like this."

He says people have to budget rising health care costs or unanticipated future costs of health care. "You take a couple that's 70 years old," he says. "All of a sudden they get a letter saying their expenses are going up $5,000 a year. That could blow a hole in somebody's budget.

"There's really no solution after the fact," he says, "other than you've got to make spending choices. Now, instead of three vacations a year, take two. Go out to dinner get one entrée instead of two."

"That's why it's important to run a financial plan from a cash-flow perspective — to make sure you plan for the unexpected."

Added Anspach: "For retirees who find themselves in a situation with unexpected bills, one option is to take a look around the house for valuables that can be sold. Many people have gold jewelry that is rarely worn, or perhaps collectibles or antiques that have value.

"For those who are still planning, we advise they head into retirement with an emergency fund — money that was not considered 'available' for retirement income in their plan," Anspach says. "This emergency fund is there to be used for sudden unexpected expenses."

Jacobsen said it bothers her that companies are getting away with withdrawing health benefits and pensions, especially the companies that are doing well financially.

"I'm not sad, I'm mad," says Jacobsen. "You can't work 30,40, 50 years and then have the rug pulled out from under you. They dare doing it because the court system is letting them do it."

Friday, October 4, 2013

Rio Replacing Train Drivers

Story first appeared on the Bloomberg News.

A mine worker watches a haul truck from his transit vehicle in the pit at Rio Tinto Group's West Angelas iron ore mine in Pilbara, Australia. Photographer: Ian Waldie/Bloomberg

Train drivers employed by Rio Tinto Group to haul iron ore across Australia’s outback make about the same money as surgeons in the U.S. It’s little wonder the mining company will replace them with robot locomotives.

The 400-plus workers in the remote Pilbara region who earn about A$240,000 ($224,000) a year probably are the highest-paid train drivers in the world, according to U.K.-based transport historian Christian Wolmar. Australia’s decade-long mining boom has sucked up skilled workers, raising wages for engineers to drivers at Rio, the second-largest exporter of the mineral, and its closest competitors, Vale SA (VALE) and BHP Billiton Ltd.

The three companies that control about 59 percent of the $145 billion-a-year global iron ore trade are automating to bolster margins and squeeze out extra capacity as they boost supply to a record to feed steel mills in China, the biggest buyer. The push by Rio (RIO), which aims to move about 290 million metric tons on its rail network by next year, is expected to be the biggest driver for cost cuts in its iron ore unit after currency swings, according to Deutsche Bank AG.

“All producers are chasing better margins and stronger returns,” said Chris Drew, an analyst in Sydney with Royal Bank of Canada. “Rio is ahead of the competition in terms of automation of trucks and trains,” Drew said in an interview after touring its ore operations in the mostly arid Pilbara, home to Western Australia’s biggest deposits for export.
Seaborne Glut

The pace of automation is picking up as the seaborne market is poised for at least four years of gluts. The price of ore, which rose as much as eightfold in the past decade as China added $6.8 trillion to its gross domestic product, will drop to $80 a ton in 2015, according to a Goldman Sachs Group Inc. forecast. It closed yesterday at $131.40 a ton.

Rio, which last year approved spending of $7.2 billion to expand the iron ore operations, is aiming to have the world’s first, fully automated, long-distance and heavy-haul rail system operating in 2015. Its automated rail will have 1,500 kilometers (930 miles) of track, 10,000 wagons and individual train sets 2.3 kilometers long, according to Credit Suisse Group AG. The company is spending $518 million on the program that was announced last year.

“You need to have quite a significant amount of scale” in fleet and volumes to benefit from automation technology, said Evy Hambro, manager of BlackRock Inc. (BLK)’s $7.7 billion World Mining Fund.

Regulators in Canada and the U.S. are reviewing rules for transporting hazardous materials after a runaway train carrying crude oil derailed and exploded on July 6 in Lac-Megantic, Quebec, killing 47 people and incinerating 30 buildings. The train was operated by a single engineer, who parked the train for the night and left it unattended.
Laser Detectors

Rio’s rail, port and truck movements are all watched over from a control center in the Western Australia state capital of Perth, 1,500 kilometers to the southeast, that has about 250 controllers working three shifts a day. The rail automation is part of the company’s push to use technology to improve productivity and safety and wring out extra capacity from existing assets, Simon Prebble, general manager for Rio’s automated trains project, said in an interview yesterday.

The trains have on-board systems that check speed, signals and operate the brake, Prebble said. Rio has installed a new radio-based network to communicate with the trains as well as close-circuit television at every public level crossing, he said. “We also have an obstruction detection system which uses laser scanners to continually look for any obstructions.”
Earnings Driver

The competitiveness of some iron ore mines in the Pilbara as well as some future projects is set to improve with the adoption of the new technologies on trucks and trains, Australia’s Bureau of Resources and Energy Economics said yesterday in a report.

Iron ore will remain the dominant earnings driver for BHP (BHP) and Rio as rising production offsets falling prices, Citigroup Inc. said in a Sept. 13 report. The mineral accounted for 78 percent of Rio’s earnings before interest, depreciation and amortization last year, and 92 percent for Vale, according to data compiled by Bloomberg. BHP had 43 percent Ebitda from iron ore in fiscal 2013, the data show.

“It’s going to provide a healthy return on investment for Rio,” Adrian Wood, a Sydney-based analyst with Macquarie Group Ltd., said by phone. “They’re trying to squeeze out those extra few tons a year by automating it.”

Rio’s Ebitda margin per ton of ore is forecast to drop 43 percent to $43.99 in 2015 from $70.01 in 2013, with BHP’s set to fall 42 percent to $40.68 and Vale by 61 percent to $23.11, according to Goldman Sachs.
Shave Costs

Rio also plans to automate about 40 percent of its Pilbara truck fleet by 2016. The goal is to reduce costs to $15.60 a ton by 2020, from $23.10 a ton in the first half of this year, Paul Young, a Sydney-based analyst with Deutsche Bank said in a report after touring operations last month, citing Rio data. Automation is set to help shave $1.90 a ton off costs and boost output by 20 million tons, or 5 percent, he said.

Each train driver earns about A$240,000 a year, according to Credit Suisse. Surgeons based in the U.S. earned a mean annual wage of $230,540 last year, according to data from the Bureau of Labor Statistics. New York state lawyers on average earned $151,000, according to the data. Rio spokesman Bruce Tobin declined to comment on train drivers’ salaries and the potential cost savings from the company’s automation drive.

“The position we’ve taken is that you’re never going to win the argument against technology,” said Gary Wood, Western Australia district secretary for the Construction, Forestry, Mining and Energy Union, which covers the drivers. “We’re going to work to be involved the protection of as many jobs as possible as a result of any changes in technology.”
Ironing Out Bugs

Rio may be able to cut its wage bill for train drivers by about A$100 million annually should it reduce train driver numbers by 400, CIMB Australia Ltd. analyst Michael Evans said last month in a report following the tour. Total net operating costs for all units in 2012 were $37.5 billion.

The automation is a long-term project that won’t produce quick results, said Tim Schroeders, portfolio manager at Pengana Capital Ltd. in Melbourne.

“The type of work does lend itself to automation but ironing out the bugs and integrating the driver-operated machinery, understanding scheduling, will take some time,” Schroeders said in a phone interview. “Realistically, it’s not going to change the mining business significantly in the next three to five years.”

The miners, which began driving down costs last year after the 10-year China-led commodity price boom began to peak, are also seeking to cut the number of truck drivers, with Rio’s biggest iron ore mine now almost entirely operated by driverless trucks, according to CIMB.
Conveyor Belts

Vale is building the $20 billion Serra Sul project and will be the first to fully replace in-mine trucks with conveyor belts 23 miles long and building a second railway through the Amazon to cut costs, according to the Rio de Janeiro-based company. BHP, the world’s biggest miner, started a trial of 12 driverless trucks at its Jimblebar iron ore mine this year and opened its own remote operation center in Perth in July.

“Once Rio has cracked it, I wouldn’t expect BHP to be that far behind,” Paul Phillips, a Melbourne-based fund manager with Perennial Growth Management Pty that holds BHP shares. “Vale has slightly different issues in that they have a multi-user railway, to try and automate that for a single-user iron ore operation, it gets much harder because you have the interaction with the other players.”

Thursday, October 3, 2013

The 10 Most Dangerous Cities In America

Story first appeared on The Wall Street Journal.

After falling for five consecutive years, the number of violent crimes across the U.S. rose 1.2% in 2012. Based on data published by the FBI, the increase was even greater in some of America’s largest cities.

According to the FBI, violent crime includes murder, nonnegligent manslaughter, rape, robbery and aggravated assault. In some cases, the cities with the highest violent crime rate, including Flint, Mich., and Oakland, Calif., had high rates in all four categories. However, most of the most violent cities tend to do very poorly only in a few categories.

From 24/7 Wall St., based on the FBI Uniform Crime Report, the cities on the following pages are the 10 most dangerous cities in America.

10. Cleveland

Violent crimes per 100,000: 1,383.8

Population: 393,781

2012 murders: 84

Poverty rate: 34.3%

Percent of adults with high-school diploma: 77%

More than 825 robberies were reported in Cleveland for every 100,000 residents last year, the second highest robbery rate in the nation behind only Oakland. The total number of robberies in the city rose from 3,156 in 2011 to 3,252 in 2012. Cleveland also had the nation’s second highest burglary rate in 2012, with close to 2,500 burglaries per 100,000 residents. Unlike robbery, burglary doesn't involve force or coercion and is not considered a violent crime. Recently, the highly publicized discovery of three women that had been missing for roughly a decade and held captive within the city led to extensive criticism of the Cleveland Police Department. Cleveland is one of the nation’s poorest large cities with a median household income of just $25,731 in 2011—barely over half the national median.

9. Baltimore

Violent crimes per 100,000: 1,405.7

Population: 625,474

2012 murders: 219

Poverty rate: 25.1%

Percent of adults with high-school diploma: 80.5%

There were 219 murders in Baltimore in 2012, more than all but five other major cities both in absolute terms and per capita. In addition, the city’s robbery rate of 576.4 cases per 100,000 people was the ninth highest in the country. Despite remaining one of the most violent cities, city officials noted that crime rates have been declining. While the total number of murders increased, total gun crime fell by 6% compared with 2011, according to the Baltimore Police Department. In addition, the city’s property crime rate of 4,660.3 cases per 100,000 residents was lower than any of the top cities for violent crime.

8. New Haven, Conn.

Violent crimes per 100,000: 1,439.2

Population: 129,934

2012 murders: 17

Poverty rate: 30.1%

Percent of adults with high-school diploma: 78.4%

There were 766 robberies in New Haven in 2011, or 589.1 cases per 100,000 residents, the eighth highest rate among all cities considered that year. In 2012, the number of robberies in the city jumped to 844. At 649.6 robberies per 100,000 residents, this was one of the highest rates recorded in 2012. But while both robberies and aggravated assaults rose last year, the number of murders declined from 34 in 2011 to just 17 in 2012. Gun violence remains a concern for the community. Recently, police began reaching out to known gang members on probation or parole to offer help to members looking to earn a high school diploma or otherwise improve their lives. As of 2011, just 78.4% of New Haven residents over 25 had a high school diploma, much lower than the 85.9% rate nationwide.

7. Birmingham, Ala.

Violent crimes per 100,000: 1,517.8

Population: 213,266

2012 murders: 67

Poverty rate: 32%

Percent of adults with high-school diploma: 81.3%

Birmingham had among the 10 highest murder and aggravated assault rates at 31.4 cases per 100,000 people and 954.2 cases per 100,000 residents, respectively, in 2012. The city also had 6,934.1 property crimes per 100,000 people in 2012, higher than all but four other cities. This included 2,205.7 burglaries per 100,000, the sixth highest of all cities. City residents are in a far worse economic position than the nation as a whole. The median household income in Birmingham was just $28,646 in 2011, far lower than the $50,502 across the U.S. Also, 32% of the population lived below the poverty line that year, compared with just under 16% nationwide.

6. Stockton, Calif.

Violent crimes per 100,000: 1,548

Population: 299,105

2012 murders: 71

Poverty rate: 25.8%

Percent of adults with high-school diploma: 75.1%

The number of violent crimes reported in Stockton rose from 4,155 in 2011 to 4,630 in 2012. This was partly due to the increase in the number of robberies, from 1,323 in 2011 to 1,556 last year, and the increase in the number of aggravated assaults, from 2,684 in 2011 to 2,913 in 2012. As a result of this uptick in crime, Stockton had some of the highest incidences of murder, robbery and aggravated assault in the nation. Stockton also holds the dubious distinction of being the largest city in U.S. history, by population, to enter bankruptcy. In the city proper, the unemployment rate was 18.3% in 2012, more than 10 percentage points above the national rate last year.

5. Memphis, Tenn.

Violent crimes per 100,000: 1,750

Population: 657,436

2012 murders: 133

Poverty rate: 27.2%

Percent of adults with high-school diploma: 83.4%

Memphis had the third highest rate of aggravated assault in 2012, with 1,151.9 cases per 100,000 residents. This was up from the 1,032.3 cases per 100,000 in 2011. The city’s murder rate of 20.2 per 100,000 people and robbery rate of 514.4 per 100,000 people were also up from 2011. The high levels of crime has people in the Memphis area feeling uneasy. According to a recent Gallup survey, roughly 43% of Memphis area residents reported feeling unsafe walking at night, the highest percentage of all the 50 largest metropolitan areas in the country and significantly higher than the 28% across the U.S.

4. St. Louis

Violent crimes per 100,000: 1,776.5

Population: 318,667

2012 murders: 113

Poverty rate: 27%

Percent of adults with high-school diploma: 83.9%

There were 1,120.6 aggravated assaults per 100,000 people in St. Louis in 2012, higher than all but three other cities. Moreover, the murder rate of 35.5 cases per 100,000 was the fifth highest of all cities. Although St. Louis’s violent crime was still among the highest in the country, it has improved. There were 80 less violent crimes per 100,000 people in 2012 compared with 2011—the best improvement of any city on this list, with the drop mostly attributable to 106 less robberies per 100,000 people in 2012 compared with the previous year. Law-enforcement officials attributed some of the drop to an increased police presence in high-crime neighborhoods.

3. Oakland, Calif.

Violent crimes per 100,000: 1,993.1

Population: 399,487

2012 murders: 126

Poverty rate: 21%

Percent of adults with high-school diploma: 79.9%

There were 1,085.9 robberies per 100,000 residents in Oakland in 2012, higher than any other city. This was also significantly higher than the 851.2 robberies per 100,000 just a year earlier. The rates of murder and aggravated assaults also increased in 2012 compared with 2011. Violent crime was not the only issue in Oakland, either—there were 6,594 property crimes per 100,000 residents in 2012, more than all but eight other cities, and up from 5,287.9 in 2011. Crime in the city has increased ever since the city’s police department went through a round of layoffs in 2010 due to $30.5 million deficit.

2. Detroit

Violent crimes per 100,000: 2,122.6

Population: 707,096

2012 murders: 386

Poverty rate: 40.9%

Percent of adults with high-school diploma: 77.4%

Detroit’s murder rate of 54.2 per 100,000 residents was the second highest in the country last year. The homicide rate in Detroit, which included 386 criminal murders and an additional 25 justifiable homicides, reached the highest level in nearly 40 years. In addition, the city’s aggravated assault rate of 1,320.8 cases per 100,000 people was also the second highest in the U.S., although this was an improvement from the 1,333.6 cases per 100,000 residents in 2011. Detroit has struggled economically in recent years. The city’s 2012 unemployment rate was a whopping 18.6%, much higher than the 8.1% across the nation last year. The median household income of $25,193 was less than half the national median for 2011.

1. Flint, Mich.

Violent crimes per 100,000: 2,729.5

Population: 101,632

2012 murders: 63

Poverty rate: 40.6%

Percent of adults with high-school diploma: 82.9%

With a staggering 2,729.5 violent crimes per 100,000 residents, no city had a higher violent crime rate than Flint. The city of just 101,632 people had 63 total murders and 1,930 aggravated assaults, both the highest relative to the city’s population. Flint also had nationwide highs in burglary rates and arson per 100,000 people. The sheriff of Genesee County, where Flint is located, proposed a plan to create a violent crime mobile response unit that would cost $3 million. However, Gov. Rick Snyder rejected the plan because he believed resources would be better “integrated into the ongoing efforts to make Flint safer.” Like Detroit, Flint has suffered economically in recent years. The median household income was just $23,380 in 2011, the second-lowest of all 555 cities measured by the U.S. Census Bureau.

States With The Worst Health Coverage

Story first appeared on USA TODAY.

Last year, just under 15% of the U.S. population did not have health insurance coverage. But as different stages of the Affordable Care Act roll out over the next few years — and more Americans become insured — this rate is likely to fall.

For now though, health insurance remains out of reach for many Americans. In states
such as Florida and Alaska, more than one in five residents are without insurance. And an
estimated 22.5% of Texans didn't have health insurance in 2012.

Based on data recently released by the Census Bureau, 24/7 Wall St. reviewed the states with the lowest rates of health insurance coverage in the U.S. in 2012. People 65 and older are automatically eligible for Medicare. Nationally, 15.5% of the population is covered by this program. Several of the states with lower overall coverage rates have disproportionately fewer residents over 65, and as a result they have lower rates of Medicare coverage.

REPORT: 24/7 Wall St. look at USA's richest and poorest states

The opposite is also true. In Florida, where 20.1% of the population is without health
insurance, it has the the second-highest proportion of residents covered by Medicare. The other large public health insurance program, Medicaid, covers Americans who cannot afford coverage. Roughly 18% of the population is covered under the program.

Many of the states with the lowest health insurance coverage have relatively low median household income and high poverty rates. But, like Medicare, there does not appear to be a strong relationship between high Medicaid coverage and lower overall rates of uninsured residents.

In an interview with 24/7 Wall St., Peter Cunningham, senior fellow at Center for
Studying Health System Change, explained that Medicare and Medicaid can
impact a state's health insurance coverage rate. Where Medicaid plays a small role, "it's really the variation in the rates of employer-provided private insurance coverage that drives the variation in uninsured rates," Cunningham said.

In fact, more than 65% of the U.S. population is covered through private health insurance, and the vast majority of that is through employers. All of the states with the lowest overall health insurance coverage rates had among the lowest rates of employer-provided insurance.

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These states have low rates of employer-provided insurance, Cunningham explained,
because of the industries that are common to these states. Most of these states have
lower proportions of higher-paying jobs or unionized manufacturing jobs, in which
employers tend to provide insurance. In fact, all but one of the 10 worst states had below the national average manufacturing employment. "We all talk about the decline of American manufacturing, but it's still the case that in a lot of states, the traditional manufacturing jobs still play a pretty big role."

INSURANCE: Exchanges open Tuesday, here's what to do

Cunningham also explained that states with high uninsurance rates are typically poorer because lower-wage jobs are much less likely to provide health insurance coverage. Cunningham gave the example of Florida. "The economy in Florida is based on tourism. A lot of the service and hospitality sector jobs don't pay a lot and don't offer health benefits. It's a very different economy than states that have much lower uninsured rates." Florida had the lowest rate of employer-provided health insurance in the country.

POLITICS: House approves Obamacare delay, shutdown looms

Based on the Census Bureau's 2012 American Community Survey, 24/7 Wall St.
reviewed the 10 states with the lowest percentage of the population covered by a health
insurance plan. We also reviewed a variety of additional data from the ACS for 2012,
including age distribution, poverty, income, and the proportion of residents covered by
private insurance, Medicaid and Medicare. We also reviewed 2012 average unemployment rates from the U.S. Bureau of Labor Statistics. These are the 5 states with the worst health coverage.

5. Georgia
• Pct. without health insurance (2012): 18.4% (tied-5th highest)• Unemployment rate (2012): 9.0% (9th highest)
• Poverty rate: 19.2% (6th highest)
• Pct. aged 65 and over: 11.5% (4th lowest)
Last year 43.8% of unemployed workers in the U.S. did not have health insurance, while in Georgia, 53.6% of the unemployed were uninsured. However, Gov. Nathan Deal, an outspoken opponent of the Affordable Care Act, has elected not to expand Medicaid or set up a state-controlled insurance exchange. The state's Insurance Commissioner Ralph Hudgens drew scrutiny last month when he stated that Georgia was doing "everything in [its] power to be an obstructionist."

4. Florida
• Pct. without health insurance (2012): 20.1%
• Unemployment rate (2012): 8.6% (12th highest)
• Poverty rate: 17.1% (17th highest)
• Pct. aged 65 and over: 18.2% (the highest)
Florida is one of just four states where at least a fifth of the population didn't have
health insurance in 2012. While the state's relatively large elderly population means
that a disproportionately high percentage of Floridians were covered under Medicare,
the younger adult population were much more likely to be without insurance than other
states. As many as 28.8% of those between the ages of 18 and 64 didn't have health
coverage compared to just over 20% nationally. The New York Times reported that, in
defiance of the Affordable Care Act, Florida's government has been reluctant to offer
its residents information on the the federal insurance exchanges that will allow
residents to shop for the most affordable plan.

3. Alaska
• Pct. without health insurance (2012): 20.5%
• Unemployment rate (2012): 7% (22nd lowest)
• Poverty rate: 10.1% (2nd lowest)
• Pct. aged 65 and over: 8.5% (the lowest)
Although Alaska is one of the nation's wealthiest states, with a median income of
$67,712 in 2012, it also has a relatively large number of residents who were uninsured.
This may be due in part to the seasonal nature of much of Alaska's workforce — such
workers often either do not receive insurance from their employers or do not keep their
insurance after their work has ended. Last year, 21.4% of workers who were employed
did not have health insurance, one of the highest rates in the nation. But for Alaskans
hoping to obtain health insurance under the Affordable Care Act, premiums in the state
will be higher than anywhere else in the nation, exempting for Wyoming.

2. Nevada
• Pct. without health insurance (2012): 22.2%
• Unemployment rate (2012): 11.1% (the highest)
• Poverty rate: 16.4% (19th highest)
• Pct. aged 65 and over: 13.0% (11th lowest)
Nevada minors were the most likely in the country to lack health insurance. An
estimated 16.6% were not covered, more than double the national rate. In general, the
likelihood of not having health insurance is much higher for those without a high school
diploma. In Nevada, due to a poor graduation rate, the chances of this happening are
significantly worse. Nevada also has the largest portion in the nation of households
earning under $25,000 per year without health insurance. Under the Affordable Care
Act in Nevada, those earning under 400% of the national poverty rate will be eligible
for tax credits. Nevada will likely be one state relying on this provision the most. The
state also has the highest proportion of residents employed in service jobs, which are
less likely than many jobs to provide health benefits.

1. Texas
• Pct. without health insurance (2012): 22.5%
• Unemployment rate (2012): 6.8% (17th lowest)
• Poverty rate: 17.9% (11th highest)
• Pct. aged 65 and over: 10.9% (3rd lowest)
Not only did Texas have the highest rate of uninsured people in 2012, but the state also
had among the highest portion of uninsured children, elderly, and unemployed people. Additionally, over 30% of adults under 65 were uninsured in the state. Lawmakers have been opposed to the Affordable Care Act, with Texas Sen. Ted Cruz speaking for over 20 hours in an attempt to block the law from taking effect.

The Government Shutdown and Home Loans for Homebuyers

Story first appeared on RiverbankFinance.com.

Article By Anthony Bird CEO of Riverbank Finance in Grand Rapids Michigan:

Buying a home can have many challenges from critical underwriters to conservative appraisers however, on the long list of things that can go wrong with a home loan you would not expect a government shutdown to be a factor. As of 12:00 AM today on October 1st, 2013 the Federal government has now shut down due to a failure of Congress to pass a Continuing Resolution. With over 800,000 Federal employees being furloughed, this may mean home loan delays for home buyers.
Government Shutdown Causing Delays in Home Loan Approvals.  This could effect a Grand Rapids Mortgage Refinancing.

While the federal government may not be directly involved with the home loan process, there are several indirect factors that the Federal government has to help with to close a mortgage loan.  Large government bodies may all be suffering from furloughed employees and backups in processing approvals. These delays could affect all loan types including FHA Loans, USDA Loans, VA Loans, and even Conventional Loans.
Why will Home Loans be delayed during the Government Shutdown?

Regardless if your bank or mortgage company has stated that delays will not happen, this may not be the case. Delays in third party verifications may cause delays in real estate closings if income, identities or flood zones cannot be verified.

A common verification for any home loan approval is income verification through a 4506-T IRS tax transcript. A standard mortgage process for all mortgage companies and banks, is to obtain an IRS verification of income so that underwriters and quality control teams can verify that the income a mortgage loan applicant has provided is correct and accurate. The IRS has announced that they will be furloughing non-essential personnel including those whom process tax transcripts. If the income cannot be verified through the IRS, the loan will not close on time.

If a borrower cannot fully document their Social Security Number by providing documents such as a Social Security Card, a bank or mortgage company may process a SSA-89 Form for Social Security Number (SSN) Verification. This document is submitted through the Operations Field Officer at the Social Security Administration and processed as a verification of SSN. According to the Social Security Administration’s Shutdown Contingency plan issued on Sept 27th, this will be one of the many activities that will be discontinued.

Another example of possible mortgage delays due to the government shutdown is flood insurance coverage verified through FEMA.  FEMA is the government agency that sets the flood zones maps. If lenders cannot verify that homes are not in a flood zone then they may not allow a home loan to close.

List of Government Agencies Affected By the Government Shutdown:

    Housing and Urban Development (HUD)
    Federal Housing Administration (FHA which insures FHA Loans) (This may effect a Grand Rapids Mortgage.)
    Fannie Mae (FNMA a conventional mortgage buyer)
    Freddie Mac (FHLMC a conventional mortgage buyer)
    Veteran’s Administration (VA for VA Loans)
    Internal Revenue Service (IRS which verifies income on tax returns)
    United States Department of Agriculture (USDA for Rural Development Loans)
    Social Security Administration (SSA which verifies Social Security Numbers)
    Federal Emergency Management Agency (FEMA which helps with flood insurance)
    Department of Education (DOE verifies minimum student loan payments)

This list of government agencies that will be affected by the government shutdown, provides critical services to fund, verify, insure and close mortgage loans. A furlough of employees could mean long turn times and delays in real estate closings.

Will FHA Loans be delayed?

FHA Loans, a popular mortgage program for First Time Homebuyers, should not be significantly impacted as long as the government shutdown is brief. HUD has issued a memo to banks and lenders explaining that daily operations will be continued. The FHA will continue to endorse single family loans, however with furloughed employees the process may take longer. Only limited FHA staff will be available to responds to questions emails and loan scenarios which may also cause delays. FHA connection will still be open and available to request FHA case numbers and transfer requests. Overall, business should continue as usual for FHA loans providing that they do not run out of commitment authority during the shutdown period. Delays may be expected on third party verifications.

Will VA Loans be delayed?

The Department of Veterans Affairs (VA) has issued a statement explaining that business should continue as usual for VA Loans however 1/3 of the VA Benefits Employees will be furloughed.  The Veterans Benefits Administrations has 7,252 employees, of their 21,237, which will be furloughed during the shutdown.  Even with the limited staff, the VA encourages banks and lenders to continue to originate loans for homebuyers.  Veteran’s Certificates of Eligibility (COE) will still be available to request online through the webLGY. Manual COEs will still be processed and researched through the Atlanta Eligibility Center. Appraisals may still be ordered and processed through the Veterans Information Portal. Delays may be expected on third party verifications.

Will USDA Rural Development Loans be delayed?

USDA Rural Development Loans may be delayed throughout the Government Shutdown. There are no updates from the USDA at this time, however it is likely that they will not issue Conditional Commitments for home loans until a continuing resolution is passed by Congress. This may be a major setback to USDA mortgages as no updates are available.

The overwhelming and increasing popularity of USDA home loans has already created a backlog of 4-5 weeks for processing once a loan has been sent to the USDA for a conditional commitment in some areas such as Michigan in their Traverse City and Mason offices. USDA Home loan pre-approvals and originations will still continue with banks and mortgage lenders, however homebuyers and real estate agents should be cautioned about possible delays. Additional details about USDA Rural Housing delays may soon be available.
Will Conventional Loans be delayed?

Conventional loans are not directly handled through government agencies until after a loan’s funding by a banks or mortgage company. Once a home loan is funded by an institution, it may then be repackaged as a Mortgage Backed Security (MBS) and sold by Fannie Mae and Freddie Mac. Conventional Mortgage loans should not be directly delayed through the government shutdown however third party verifications may cause minor delays.
Will Homebuyers be affected during the Federal Government Shutdown?

Chances are that Congress will quickly pass a resolution to re-fund the Federal Government within three days, however if this does not happen, you may see delays in mortgage loan funding for any home loan type. During this time of uncertainty, it is a wise plan to expect delays and plan accordingly. The details of individual delays may not be immediately available until an issue occurs. Homebuyers and sellers should be vigilant in requesting updates from their loan officers and real estate agents as well as work closely with them to ensure a quick and smooth real estate closing. Unforeseen issues may arise such as IRS transcript verification delays, government insuring delays or even flood insurance delays.

What can I do to ensure my home loan closes quickly?

While many of the factors that could delay your home loan are simply out of your control, there are step you may take to ensure your loan is moving forward as quickly as possible. It is recommended that you keep a great line of communication with your loan officer and real estate agent during the government shutdown.  If any documents or requirements are needed for loan approval, be sure to provide the documentation as soon as possible so further delays are not created by you.

The best advice for a homebuyer buying a home during the government shutdown is simply to be patient. Delays in a home purchase would undoubtedly be frustrating, however, there is little a homebuyer or seller can do if the delays are due to the government shutdown. Contingency plans are now in place by all government agencies to reduce delays. Remember, you are not alone in waiting as there are over 60,000 government home loans closed monthly.

The first reaction is to look for whom is to blame and react by pushing them to help move your loan towards closing. It is not your real estate agent nor your loan officer’s fault for the government shutdown, so do not shoot the messenger.  We can all agree that Congress has some major issues on their hands, so let’s all hope they do their jobs quickly and get the Federal Government back in business.

Frequently Asked Questions about the Government Shutdown

How long will a government shutdown last?

While this is not the first government shut down that we have had, this is the first government shutdown in the past 17 years. Other government shutdowns are typically over within a few days, while others have lasted up to three weeks (21 days).

Is the Entire Federal Government Shutdown?

No. The government shutdown will affect only non-essential personnel which is estimated at 800,000 of the 3 million Federal Government employees.  On the list of those that do not have to worry about their paychecks are military personnel, the president and of course Congress (they write the laws – why wouldn’t they get their paychecks right?).

Will I still get my Mail?

Yes; the US Postal Service (USPS) will still continue to deliver mail throughout the Government Shutdown. While the USPS is essentially ran by the federal government, it is its own separate entity.
Will Universities and Schools be closed?

No however federally funded programs such as Pell Grants and Federal Student Loans could directly affect schools, according to the U.S. Department of Education, if the shutdown should last more than one week. Some schools receive as much as 20% of their funding from Federal programs which could cause major funding issues for schools if congress does not pass a resolution.

Will National Parks and National Museums be closed?

Yes; visitors to National Parks and Museums will be told to leave immediately and then entrances will be sealed off.  The @USCONGRESS Twitter page tweeted at 12:00 AM, “Due to a lapse in government funding, this account will not be active until further notice.” Hours before this, they made it clear that Visitor Centers would also be closed, “If there’s a lapse in gov’t. funding, the Capitol Visitor Center will be closed beginning 10/1 & all tours will be suspended.”

Campers at Yellowstone, the Grand Canyon, Joshua Tree and other National Parks have already been asked to leave and travelers at hotels within the parks will be given up to two days to remove their items and exit. National Museums and Presidential Museums such as the Smithsonian, National Zoos and even the Gerald R. Ford Museum will be closed and denying visitors.

Locally, the Gerald R. Ford Presidential Museum in Grand Rapids, MI was closed and will not reopen until the shutdown is ended. This has already affected the World’s Largest Art Festival, Artprize, in Grand Rapids, with several top exhibits are behind pushed to the curb as visitors will not be allowed to enter.

For more information on a Home Loan Grand Rapids, contact Riverbank Finance today.

Tuesday, October 1, 2013

Wal-Mart Unveils Giant Warehouse

Story first appeared in USA TODAY.

Wal-Mart is opening fulfillment centers to increase product selection online and to ship packages quicker and cheaper.

al-Mart Stores unveiled its largest ever warehouse dedicated to filling online orders Tuesday as the world's biggest retailer steps up competition with web rival Amazon.com.

The warehouse, based in Bethlehem, Pa., will be more than 1 million square feet and employ over 350 full-time staff when it opens in the first quarter of 2014. Another new online fulfillment center, based in Fort Worth, Tex., is 800,000 square feet and employs 275 full-time staff. It began shipping orders last week, Wal-Mart said.

Wal-Mart is opening new fulfillment centers so it can increase its product selection online and ship packages to customers more quickly and cheaply. Massive selection and the convenience of two-day delivery have helped Amazon become the dominant online retailer, but Wal-Mart is trying to catch up now.

"Wal-Mart is vastly expanding its number of products and improving speed of delivery to the customer," said Joel Anderson, CEO of Walmart.com.

Wal-Mart will have more than 5 million stock-keeping units, or SKUs, on sale online heading into this holiday season, more than double the number a year ago, he noted. That compares to about 125,000 SKUs in a typical Wal-Mart Supercenter.

The addition of the Bethlehem, Pa.,fulfillment center will help Wal-Mart offer more next-day delivery of online orders to customers in the Northeast of the U.S., including the New York metropolitan area, Anderson added.

In the past two years, Walmart.com has sped up delivery by 15% while reducing costs by 10% by routing online orders either to some Wal-Mart retail stores or through one of the company's more than 130 existing distribution centers.

Walmart expects sales from its e-commerce business to top $10 billion globally this year.

Government Shutdown Begins as Deadlocked Congress Flails

 Story first appeared in Business Week.
Government Shutdown Begins as Deadlocked Congress Flails
The U.S. government began its first partial shutdown in 17 years, idling as many as 800,000 federal employees, closing national parks and halting some services after Congress failed to break a partisan deadlock by a midnight deadline.
Congressional leaders have scheduled no further negotiations on spending legislation, raising concerns among some lawmakers that the shutdown could bleed into the more consequential fight over how to raise the U.S. debt limit to avoid a first-ever default after Oct. 17.
Chances of a last-minute deal -- seen so often in past fiscal fights -- evaporated shortly before midnight as the House stood firm on its call to delay major parts of President Barack Obama’s health-care law for a year. Senate Democrats were equally firm in refusing to concede and planned a morning vote to reject the House’s call for formal talks.
“It is embarrassing that these people who were elected to represent the country are representing the Tea Party,” Senate Majority Leader Harry Reid, a Nevada Democrat, said after midnight. “This is an unnecessary blow to America.”
House Speaker John Boehner, speaking after 1 a.m. in Washington, called on Senate Democrats to come to the negotiating table.
“Let’s resolve our differences,” Boehner, an Ohio Republican told reporters. “The House has voted to keep the government open, but we also want basic fairness for all Americans under Obamacare.”
Lost Output
A partial federal government shutdown would cost the U.S. at least $300 million a day in lost economic output at the start, according to IHS Inc. (IHS) That’s a fraction of the country’s $15.7 trillion economy, and the effects probably will grow over time as skittish consumers and businesses stay on the sidelines.
“You don’t get to extract a ransom for doing your job, for doing what you’re supposed to be doing anyway or just because there’s a law there you don’t like,” Obama said at the White House yesterday. “Time’s running out.”
U.S. stocks have fallen on concern that the political showdown over government spending will hurt economic growth, with the Standard & Poor’s 500 Index (SPX) slipping 1.7 percent during the past six trading sessions.
Futures on the S&P 500 rose 0.2 percent as of 3:09 p.m. in Tokyo, signaling that U.S. equities may reverse a two-day slide. The MSCI Asia Pacific Index of stocks gained 0.3 percent as confidence among Japanese manufacturers reached an almost six-year high, adding to a 6.2 percent rally last quarter.
Essential Operations
Treasury 10-year yields rose 3 basis points to 2.64 percent, as the U.S. government shutdown became official. The S&P GSCI Index of commodities fell 0.3 percent for a third day of losses, with crude losing 0.3 percent to near a three-month low of $102.03 a barrel.
During the partial government shutdown, many essential government operations will cease. Internal Revenue Service call centers will close and more than 90 percent of Environmental Protection Agency workers will stay home. National parks and museums will be shuttered.
Other services will continue uninterrupted. Social Security and Medicare benefits will be paid. U.S. troops will remain at their posts around the world and will be paid under a bill Obama signed yesterday. Air-traffic controllers and airport security screeners will keep working.
Health-Law Enrollment
The shutdown comes on the first day of enrollment in the exchanges mandated under Obama’s Affordable Care Act, itself at the heart of the fight. Enrollment will continue today despite the shutdown, because it’s paid for out of mandatory funding not affected by the lapse, U.S. officials said.
In the end, the final hours before the shutdown were marked by a combination of legislative procedure and partisan vitriol. House Republicans said they would appoint members to a committee meant to negotiate a compromise between the Republican and Democratic positions -- something several rounds of votes didn’t accomplish.
“I’d be surprised if it went for weeks,” said Senator Bob Casey, a Pennsylvania Democrat. “But I don’t think it’s just going to resolve itself in a day or two.”
Before midnight, the U.S. Office of Management and Budget issued guidance to agencies, telling them how to go forward when money ran out at midnight in Washington.
Boehner, who said he didn’t want a shutdown, kept bringing bills backed by hard-liners in his party to the floor for votes. Twice yesterday, the House voted to send a bill delaying Obamacare to the Senate. Twice, the Senate rejected the House plans.
Confrontational Strategy
Republicans remained divided between a group that says the party’s confrontational strategy is doomed and a faction railing against Obama’s refusal to negotiate.
“I would like see some road in which Barack Obama is actually participating in the process,” said Representative Tim Huelskamp, a Kansas Republican.
Congress and Obama have been at loggerheads on fiscal policy since Republicans won control of the House. They took several disputes to the brink, including a potential government shutdown in April 2011, the debt ceiling in August 2011 and the expiration of tax cuts in December 2012.
In each case, lawmakers reached an agreement to prevent the worst possible outcome. Most recently, the House passed a tax bill Jan. 1, hours after income tax rate increases took effect.
Cruz Uprising
Boehner and House Majority Leader Eric Cantor, a Virginia Republican, tried to avoid this fight, offering a first proposal last month that would have let the Senate send a spending bill without conditions right to Obama.
They faced an uprising from Republicans, urged on by Senator Ted Cruz of Texas, who insisted on language that would defund Obamacare.
The House scaled back its demands twice, each time running into a party-line objections from Senate Democrats and Obama, who increasingly saw the spending bill as a prelude to the debt-ceiling negotiations.
“These Tea Party people are insatiable when it comes to confrontation and shutting down the government,” said Senator Richard Durbin of Illinois, the chamber’s second-ranking Democrat. “This has got to come to an end. We can’t continue to lurch from one crisis to another.”
The House’s final volley, passed last night, would have delayed for one year the mandate that individuals purchase health insurance and would end government contributions to the health insurance of lawmakers, congressional staff members and political appointees.
Fighting Corners
Democrats see a path out of this crisis. They want Boehner to allow the House to vote on the Senate’s version of the spending measure, which would extend government funding through Nov. 15 and exclude any Obamacare conditions.
Republicans said they want to force Obama to accept some concessions on his signature health-care law.
Some strategists expect the shutdown to drive both parties deeper into their respective fighting corners as they assess the economic and political fallout, hardening positions at least temporarily before a resolution can be reached.
“It’s clear that there are rising concerns within the House Republican caucus about how all of this is being handled, but I believe that for right now, the insurgents have the upper hand and they’re not going to go away without a fight,” said Democratic communications consultant Jim Manley of Washington-based Quinn Gillespie & Associates LLC, a former top aide to Reid.
Deal Prerequisite
Nor do Democrats have any interest in compromising with Republicans until their internal fighting about what strategy to pursue subsides.
At the same time, many Republicans have come to believe that shutting the government for a brief time is a prerequisite for any deal.
“It would be better for Republicans if there were no shutdown, but in many ways it can be a useful way to lance the boil,” before the fight over raising the debt ceiling, said Republican strategist John Feehery, also of Quinn Gillespie. He was a top aide to former House Speaker Dennis Hastert of Illinois.
“The debt limit is much more important, and hopefully the shutdown can release some of the pressure and helps them get to a broader agreement,” Feehery said. “That remains to be seen.”