originally appeared in The Wall Street Journal:
The cards that many Americans swiped to bring Christmas cheer this year known as deferred-interest credit cards, could deliver a lump of coal in 2013.
Personal-finance experts are warning consumers that a failure to pay off just a few dollars of their purchases on some credit cards from Apple Inc., Wal-Mart Stores Inc. and other big-name retailers can leave them with major finance charges later on.
The deferred-interest credit cards offered by those stores allow customers to pay for purchases interest-free for a set period. But borrowers who fail to pay off their initial purchases in full by the end of the promotional period must pay interest on the original amount that they charged—even the parts they have already paid off.
The backdated interest is often at rates as high as 25%.
Deferred-interest credit cards are one of the worst abuses by credit-card lenders, according to a staff attorney for the National Consumer Law Center, which in the past has pushed for a ban on deferred-interest cards.
Under the programs, a borrower who bought a $1,000 computer with one of these cards who has even just a few dollars remaining at the end of their deferred-interest period could conceivably wind up having to pay hundreds of dollars in interest charges.
Such cards, which have been around for years, are pitched by retailers including Amazon.com Inc., Office Depot Inc. and Home Depot Inc. The programs give merchants a way to entice consumers to spend, and give consumers the ability to make a big-ticket purchase without having to pay anything up front.
The National Consumer Law Center, which has long called for a ban on deferred-interest cards, plans to urge the U.S. Consumer Financial Protection Bureau, the agency launched in 2011 to monitor credit cards, mortgages and other financial products for abusive practices, to propose rules that would restrict lenders from offering the programs. The group argues that legislation passed in 2009 known as the CARD Act intended to curb deferred-interest programs but regulators failed to do so when issuing the specific rules for carrying out the law's provisions.
A spokeswoman for CFPB declined to comment on whether such cards are on its agenda but said the agency has received consumer complaints about deferred-interest programs. She declined to say how many complaints it has received.
Lenders who offer the programs on behalf of retailers say they can benefit consumers by giving them a window of time to pay off purchases without finance charges.
General Electric Co., whose finance arm is one of the biggest issuers of store credit cards, says it takes steps to ensure transparency on the terms and conditions of its programs, which include cards marketed to customers of Amazon, Wal-Mart and others.
All billing statements for deferred-interest programs include details about the promotion, including the minimum principal payments borrowers are required to make each month, the expiration date and amount of interest that has accrued, a GE spokeswoman said. She added that two months prior to the expiration of the promotional period, consumers are alerted that the clock is ticking.
GE said the vast majority of borrowers pay off their balances before the promotional periods end.
The Amazon card, which offers six, 12 or 24 months of deferred-interest financing depending on the dollar amount spent or items a customer purchases when opening the card. Customers who don't pay off their balances in full incur a 25.99% standard APR on the full amount charged from the purchase date, according to the fine print included on the Web page advertising the card.
CardHub.com, a credit-card comparison website, cited the Amazon card along with several others for lacking transparent policies on how interest is charged in a study released earlier this year.
Amazon didn't respond to requests for comment.
"Deferred interest in my opinion should be outlawed," according to the chief executive officer of Evolution Finance, which owns CardHub.com. He says deferred-interest cards hide the true cost of financing.
CardHub.com's study found that more than 80% of major retailers offer customers financing options, and of those more than 60% offer a deferred-interest plan.
Apple, another retailer on CardHub.com.'s list of worst offenders, offers a deferred-financing card through Barclaycard, the credit-card division of Barclays PLC. The bank currently offers no-interest financing for six, 12 or 18 months depending on the size of a customer's purchase. The standard rate that applies after the promotional period ends is 22.99% on the amount they charged when they first opened the account as well as new purchases made going forward, according to online terms and conditions for the card.
Spokeswomen for Apple and Barclaycard declined to discuss the programs.
A research scientist in Cedar Rapids, Iowa, said he has a deferred-interest credit card through Apple, Best Buy Co. and Lowe's Cos. I've never had any issues, I only get these if I can pay it off, according to the scientist.
He uses his Lowe's card to buy supplies for home-improvement projects and the Best Buy card, which he is currently paying off, to buy a new TV.
Overall, I think it's a great deal for an astute consumer who knows what they're doing and can pay them off, he said. However, he said the contracts aren't well written and can be confusing.
A leading consumer-credit expert agrees deferred-interest plans can benefit consumers who know they have the money to pay off their balances before the promotional period ends. However, she recommends consumers consider opening a general-purpose credit card direct through a bank.
Many credit-card issuers today offer promotional 0% financing for as long as 18 months when first opening an account. The difference is such cards don't retroactively charge interest to past balances a consumer has paid off. Rather, the interest rate is applied only to any balance left at that time and new purchases made going forward.
It's a little more of a safety net just in case you can't pay the entire thing off, according to the consumer-credit expert. It still requires planning and forethought. But if there's a purchase you need to make and it's going to take a year to pay it off that could be a good strategy.
Friday, December 28, 2012
Thursday, December 27, 2012
Washington DC Could Get Another Look for Statehood
Story first appeared on Los Angeles Times.
Retiring Sen. (I-Conn.) has introduced the New Columbia Admissions Act to put the issue of Statehood for the District of Columbia on the front burner on Capitol Hill.
Washington DC Intellectual Property Lawyer awaits more information on this.
It is long past time to give these American citizens who have chosen Washington as their home full participation in our democracy, he said in introducing the bill this week.
The District’s lack of a vote in Congress has long been a sore point in the city, which features Taxation without representation on its license plates. D.C. residents pay federal taxes and can vote for president but have no senator, and only a nonvoting delegate in the House.
A Washington DC Class Action Lawyer would love to see this bill go through.
In 1993, the House rejected a bill to make the district a state. The idea faced resistance from a number of Republicans because the strongly Democratic district would probably elect two Democratic senators and a Democratic member of the House if it became a state.
A bill that would have added two seats to the House -- one for the District of Columbia and another for Republican-leaning Utah -- died in 2010 after a measure was attached to it that would have weakened D.C. gun laws.
Washington DC Contracts Lawyer agree that the move would be favorable.
A statehood bill introduced last year by a Democrat, the district’s House delegate, has languished in committee in the Republican-controlled chamber.
But lately, the District has been gaining a bit more respect from members of Congress. A defense bill includes a Norton-sought provision that would direct the Pentagon to display the D.C. and territorial flags whenever the flags of the 50 states are displayed. The provision grew out of a complaint from a D.C. couple upset that state flags were flown for each of the graduates at a Naval Station Great Lakes graduation ceremony, but not the home flag of their son.
Washington DC Complex Litigation Lawyer would like to see this happen quickly.
Although he is leaving the Senate, the first D.C. statehood bill to be introduced in the chamber since 1993 is co-sponsored by Democratic Sens. of California, Illinois and Washington state.
After having had the great privilege of serving here for 24 years, I will soon leave Congress, he said.
Retiring Sen. (I-Conn.) has introduced the New Columbia Admissions Act to put the issue of Statehood for the District of Columbia on the front burner on Capitol Hill.
Washington DC Intellectual Property Lawyer awaits more information on this.
It is long past time to give these American citizens who have chosen Washington as their home full participation in our democracy, he said in introducing the bill this week.
The District’s lack of a vote in Congress has long been a sore point in the city, which features Taxation without representation on its license plates. D.C. residents pay federal taxes and can vote for president but have no senator, and only a nonvoting delegate in the House.
A Washington DC Class Action Lawyer would love to see this bill go through.
In 1993, the House rejected a bill to make the district a state. The idea faced resistance from a number of Republicans because the strongly Democratic district would probably elect two Democratic senators and a Democratic member of the House if it became a state.
A bill that would have added two seats to the House -- one for the District of Columbia and another for Republican-leaning Utah -- died in 2010 after a measure was attached to it that would have weakened D.C. gun laws.
Washington DC Contracts Lawyer agree that the move would be favorable.
A statehood bill introduced last year by a Democrat, the district’s House delegate, has languished in committee in the Republican-controlled chamber.
But lately, the District has been gaining a bit more respect from members of Congress. A defense bill includes a Norton-sought provision that would direct the Pentagon to display the D.C. and territorial flags whenever the flags of the 50 states are displayed. The provision grew out of a complaint from a D.C. couple upset that state flags were flown for each of the graduates at a Naval Station Great Lakes graduation ceremony, but not the home flag of their son.
Washington DC Complex Litigation Lawyer would like to see this happen quickly.
Although he is leaving the Senate, the first D.C. statehood bill to be introduced in the chamber since 1993 is co-sponsored by Democratic Sens. of California, Illinois and Washington state.
After having had the great privilege of serving here for 24 years, I will soon leave Congress, he said.
Increase Company Audits on Illegal Immigrants
Story first appeared on usatoday.com.
Customs Enforcement and U.S. Immigration has reached its highest number yet of companies audited for illegal immigrants on payrolls this past fiscal year.
Audits of employer forms increased from 250 in fiscal year 2007 to more than 3,000 in 2012. From fiscal years 2009 to 2012, the total amount of fines grew to nearly $13 million from $1 million. The number of company managers arrested has increased to 238, according to data provided by ICE.
The investigations of companies have been one of the pillars of President Obama's immigration policy.
When Obama recently spoke about addressing immigration reform in his second term, he said any measure should contain penalties for companies that purposely hire illegal immigrants. It's not a new stand, but one he will likely highlight as his administration launches efforts to revamp the U.S. immigration system.
One state that is experiencing increased enforcement of immigration laws is North Carolina; find a top Raleigh Immigration Lawyer.
Our goal is compliance and deterrence, said a special agent in charge at ICE's Seattle office. The majority of the companies we do audits on end up with no fines at all, but again it's part of the deterrence method. If companies know we're out there, looking across the board, they're more likely to bring themselves into compliance.
While the administration has used those numbers to bolster their record on immigration enforcement, advocates say the audits have pushed workers further underground by causing mass layoffs and disrupted business practices.
When the ICE audit letter arrived at Belco Forest Products, management wasn't entirely surprised. Two nearby businesses in Shelton, a small timber town on a bay off Washington state's Puget Sound, had already been investigated.
Even Midwest states are encountering I-9, visa and immigration matters within the workplace, for help with immigration in Ohio visit Columbus Immigration Lawyer.
But the 2010 inquiry became a months-long process that cost the timber company experienced workers and money. It was fined $17,700 for technicalities on their record keeping.
What I don't like is the roll of the dice, said chief financial officer. Why do some companies get audited and some don't? Either everyone gets audited or nobody does. Level the playing field.
Belco was one of 339 companies fined in fiscal year 2011 and one of thousands audited that year.
Employers are required to have their workers fill out an I-9 form that declares them authorized to work in the country. Currently, an employer needs only to verify that identifying documents look real.
The audits, part of a $138 million worksite enforcement effort, rely on ICE officers scouring over payroll records to find names that don't match Social Security numbers and other identification databases.
The audits don't make any sense before a legalization program, an immigration policy analyst at the Economic Policy Institute, a Washington, D.C., think tank. You're leaving the whole thing up to an employer's eyesight and subjective judgment, that's the failure of the law. There's no verification at all. Then you have the government making a subjective judgment about subjective judgment.
An AP review of audits that resulted in fines in fiscal year 2011 shows that the federal government is fining industries across the country reliant on manual labor and that historically have hired immigrants. The data provides a glimpse into the results of a process affecting thousands of companies and thousands of workers nationwide.
Over the years, ICE has switched back-and-forth between making names of the companies fined public or not. Lately, ICE has emphasized its criminal investigations of managers, such as a manager in Maine sentenced to home arrest for knowingly hiring illegal immigrants or a manager of an Illinois hiring firm who got 18 months in prison.
Many employers also wonder how ICE picks the companies it probes.
Geography is not a factor. The size of the company is not a factor. And the industry it's in is not a factor. We can audit any company anywhere of any size, he said. He added ICE auditors follow leads from the public, other employers, employees and do perform some random audits.
But ICE auditors hit ethnic stores, restaurants, bakeries, manufacturing companies, construction, food packaging, janitorial services, catering, dairies and farms. The aviation branch of corporate giant GE, franchises of sandwich shop Subway and a subsidiary of food product company Heinz were among some of the companies with national name recognition. GE was fined $2,000.
In fiscal year 2011, the most recent year reviewed by AP, the median fine was $11,000. The state with the most workplaces fined was Texas with 63, followed by New Jersey with 37.
The lowest fine was $90 to a Massachusetts fishing company. The highest fine was $394,944 to an employment agency in Minneapolis, according to the data released to AP through a public records request.
A Subway spokesman said the company advises franchise owners to follow the law. A Heinz spokesman declined comment.
He didn't have specifics on what percentage of fines come from companies having illegal immigrants on their payroll, as opposed to technical paperwork fines in recent years.
A former deputy director at ICE who now runs a consulting firm, said she'd like to see the burden of proving the legality of a company's workforce go from the employer to the government. She'd like to see a type of program, such as E-Verify, be implemented with the I-9 employment form. E-Verify is a voluntary and free program for private employers that checks a workers eligibility.
At the end of the day, the fine is the least of it, she said. Usually the company will spend more on legal fees. But it is a huge headache for the company to lose workers.
The agency should go after more criminal charges and focus on companies that treat workers inhumanely, she said.
Customs Enforcement and U.S. Immigration has reached its highest number yet of companies audited for illegal immigrants on payrolls this past fiscal year.
Audits of employer forms increased from 250 in fiscal year 2007 to more than 3,000 in 2012. From fiscal years 2009 to 2012, the total amount of fines grew to nearly $13 million from $1 million. The number of company managers arrested has increased to 238, according to data provided by ICE.
The investigations of companies have been one of the pillars of President Obama's immigration policy.
When Obama recently spoke about addressing immigration reform in his second term, he said any measure should contain penalties for companies that purposely hire illegal immigrants. It's not a new stand, but one he will likely highlight as his administration launches efforts to revamp the U.S. immigration system.
One state that is experiencing increased enforcement of immigration laws is North Carolina; find a top Raleigh Immigration Lawyer.
Our goal is compliance and deterrence, said a special agent in charge at ICE's Seattle office. The majority of the companies we do audits on end up with no fines at all, but again it's part of the deterrence method. If companies know we're out there, looking across the board, they're more likely to bring themselves into compliance.
While the administration has used those numbers to bolster their record on immigration enforcement, advocates say the audits have pushed workers further underground by causing mass layoffs and disrupted business practices.
When the ICE audit letter arrived at Belco Forest Products, management wasn't entirely surprised. Two nearby businesses in Shelton, a small timber town on a bay off Washington state's Puget Sound, had already been investigated.
Even Midwest states are encountering I-9, visa and immigration matters within the workplace, for help with immigration in Ohio visit Columbus Immigration Lawyer.
But the 2010 inquiry became a months-long process that cost the timber company experienced workers and money. It was fined $17,700 for technicalities on their record keeping.
What I don't like is the roll of the dice, said chief financial officer. Why do some companies get audited and some don't? Either everyone gets audited or nobody does. Level the playing field.
Belco was one of 339 companies fined in fiscal year 2011 and one of thousands audited that year.
Employers are required to have their workers fill out an I-9 form that declares them authorized to work in the country. Currently, an employer needs only to verify that identifying documents look real.
The audits, part of a $138 million worksite enforcement effort, rely on ICE officers scouring over payroll records to find names that don't match Social Security numbers and other identification databases.
The audits don't make any sense before a legalization program, an immigration policy analyst at the Economic Policy Institute, a Washington, D.C., think tank. You're leaving the whole thing up to an employer's eyesight and subjective judgment, that's the failure of the law. There's no verification at all. Then you have the government making a subjective judgment about subjective judgment.
An AP review of audits that resulted in fines in fiscal year 2011 shows that the federal government is fining industries across the country reliant on manual labor and that historically have hired immigrants. The data provides a glimpse into the results of a process affecting thousands of companies and thousands of workers nationwide.
Over the years, ICE has switched back-and-forth between making names of the companies fined public or not. Lately, ICE has emphasized its criminal investigations of managers, such as a manager in Maine sentenced to home arrest for knowingly hiring illegal immigrants or a manager of an Illinois hiring firm who got 18 months in prison.
Many employers also wonder how ICE picks the companies it probes.
Geography is not a factor. The size of the company is not a factor. And the industry it's in is not a factor. We can audit any company anywhere of any size, he said. He added ICE auditors follow leads from the public, other employers, employees and do perform some random audits.
But ICE auditors hit ethnic stores, restaurants, bakeries, manufacturing companies, construction, food packaging, janitorial services, catering, dairies and farms. The aviation branch of corporate giant GE, franchises of sandwich shop Subway and a subsidiary of food product company Heinz were among some of the companies with national name recognition. GE was fined $2,000.
In fiscal year 2011, the most recent year reviewed by AP, the median fine was $11,000. The state with the most workplaces fined was Texas with 63, followed by New Jersey with 37.
The lowest fine was $90 to a Massachusetts fishing company. The highest fine was $394,944 to an employment agency in Minneapolis, according to the data released to AP through a public records request.
A Subway spokesman said the company advises franchise owners to follow the law. A Heinz spokesman declined comment.
He didn't have specifics on what percentage of fines come from companies having illegal immigrants on their payroll, as opposed to technical paperwork fines in recent years.
A former deputy director at ICE who now runs a consulting firm, said she'd like to see the burden of proving the legality of a company's workforce go from the employer to the government. She'd like to see a type of program, such as E-Verify, be implemented with the I-9 employment form. E-Verify is a voluntary and free program for private employers that checks a workers eligibility.
At the end of the day, the fine is the least of it, she said. Usually the company will spend more on legal fees. But it is a huge headache for the company to lose workers.
The agency should go after more criminal charges and focus on companies that treat workers inhumanely, she said.
Sunday, December 23, 2012
Is President Obama Really A Socialist? Let's Analyze Obamanomics
originally appeared in Forbes:
President Obama says that income taxes must be raised on the rich because they don’t pay their fair share. The indisputable facts from official government sources say otherwise.
The CBO reports based on official IRS data that in 2009 the top 1% of income earners paid 39% of all federal income taxes, three times their share of income at 13%. Yet, the middle 20% of income earners, the true middle class, paid just 2.7% of total federal income taxes on net that year, while earning 15% of income. That means the top 1% paid almost 15 times as much in federal income taxes as the entire middle 20%, even though the middle 20% earned more income.
Moreover, the official data, as reported by CBO and the IRS, show that the bottom 40% of income earners, instead of paying some income taxes to support the federal government, were paid cash by the IRS equal to 10% of federal income taxes as a group on net.
Any normal person would say that such an income tax system is more than fair, or maybe that “the rich” pay more than their fair share. So why does President Obama keep saying that the rich do not pay their fair share? Is he ignorant? Wouldn’t somebody in his Administration whisper to him that he is peddling nonsense?
The answer is that to President Obama this is still not fair because he is a Marxist. To a Marxist, the fact that the top 1% earn more income than the bottom 99% is not fair, no matter how they earn it, fairly or not. So it is not fair unless more is taken from the top 1% until they are left only with what they “need,” as in any true communist system. Paying anything less is not their “fair” share. That is the only logical explanation of President Obama’s rhetoric, and it is 100% consistent with his own published background.
Notice that Obama keeps saying that “the rich,” a crass term implying low class social envy, don’t “need” the Bush tax cuts. That is reminiscent of the fundamental Marxist principle, From each according to his ability, to each according to his need.
Good tax policy is not guided by “need.” It is guided by what is needed to establish the incentives to maximize economic growth. The middle class, working people and the poor are benefited far more by economic growth than by redistribution. That is shown by the entire 20th century, where the standard of living of American workers increased by more than 7 times, through sustained, rapid economic growth.
But President Obama’s tax policy of increasing all tax rates on savings and investment will work exactly contrary to such economic growth. It is savings and investment which creates jobs and increases productivity and wages. Under capitalism, capital and labor are complementary, not adversarial, exactly contrary to the misunderstanding of Marxists. More capital investment increases the demand for labor, bidding up wages to the level of worker productivity, which is enhanced by the capital investment.
Increasing marginal tax rates on savings and investment, however, will mean less of it, not more. That will mean fewer jobs, and lower wages, just as we have experienced so far under President Obama, with median household incomes (hello middle class) declining by 7.3% (a month’s worth of wages) during his first term, even faster after the recession supposedly ended in 2009. That will only get worse in Obama’s unearned second term, which can only be explained as “democracy failure” analogous to “market failure.”
If the tax increases are limited to those who earn $1 million or more, I don’t know if that alone will be enough to create a recession, as I am certain would be the result with Obama’s original policy of targeting couples making over $250,000 a year, and singles making over $200,000.
But there is so much in the Obama economic program that is contractionary. His second term promises enormous new regulatory burdens and barriers. The EPA is shutting down the coal industry, and Interior will join with it to sharply constrain oil production further, despite Obama’s duplicitous campaign rhetoric taking credit for the production produced by the policies and efforts of others. I expect Obama’s EPA to burden natural gas fracking until it goes the way of the coal industry as well, stealing new found prosperity for many Americans. All of this will sharply raise energy prices, which will be another effective tax on the economy.
Moreover, President Obama has said that a priority in his second term will be global warming, even though global temperatures have not been increasing for 16 years now, and the developing world led by Brazil, Russia, India and China (the BRIC countries), which are contributing to “greenhouse gases” at a much greater accelerating rate than the U.S., have rejected sacrificing any slice of their economies to that ideological phantom. While even the Democrat Congress of Obama’s first term failed to adopt “cap and trade,” EPA is advancing with global warming regulations that will cost the economy trillions in still another effective tax.
Then there are the onrushing regulatory burdens of Obamacare, including the employer mandate, which will require all businesses with 50 employees or more to buy the most expensive health insurance available. That will be an effective tax on employment. As Obamacare forces up the cost of health insurance, that will be still another effective tax increase on all employers already providing health coverage. Hundreds of regulations still in the pipeline under the “Dodd-Frank” legislation are already forcing the financial sector to contract, and threaten the business and consumer credit essential to full recovery.
In addition, few are adequately considering the longer term contractionary effects of the Fed’s current policy mischief. For years now, businesses and investments have been launched all over the country based on the near zero interest rates, and even below zero real rates, that Fed policies have perpetuated, along with the easy free money . When those rates inevitably rise back to normal, most likely after these Fed policies have resparked inflation, the basis for those businesses and investments will be gone, and many if not most will go into liquidation, which will be highly contractionary as well.
However, I am certain in any event that the Obama tax increases will result in less revenue rather than more. Obama has been proposing to increase the capital gains tax rate by 58% on the nation’s job creators, investors and successful small businesses, counting his Obamacare tax increases that take effect on January 1 as well the expiration of the Bush tax cuts. While his misleading talking points say there will be no tax increases for 97% of small businesses, that counts every Schedule C filed for every part time or hobby sole proprietorship, however marginal the earnings. The small businesses that would bear President Obama’s originally proposed tax increases earn 91% of all small business income, and employ 54% of the total private sector U.S. work force, as reported in Investors Business Daily on November 9.
Over the last 45 years, every time capital gains tax rates have been raised, revenues have fallen, and every time they have been cut, revenues have increased. The capital gains rate was raised 4 times from 1968 to 1975, climbing from 25% to 35%. The 25% rate produced real capital gains revenues in 1968 of $40.6 billion in 2000 dollars. By 1975, at the higher rate, capital gains revenues had plummeted to $19.6 billion in constant 2000 dollars, less than half as much.
After the capital gains rate was cut from 35% to 20% from 1978 to 1981, capital gains revenues had tripled by 1986 compared to 1978. Then the capital gains rate was raised by 40% in 1987 to 28%. By 1991, capital gains revenues had collapsed to $34.4 billion, down from $92.9 billion in 1986, in constant 2000 dollars adjusted for inflation.
Obama’s capital gains tax increase next year will reduce capital gains revenues again as well.
President Obama says that income taxes must be raised on the rich because they don’t pay their fair share. The indisputable facts from official government sources say otherwise.
The CBO reports based on official IRS data that in 2009 the top 1% of income earners paid 39% of all federal income taxes, three times their share of income at 13%. Yet, the middle 20% of income earners, the true middle class, paid just 2.7% of total federal income taxes on net that year, while earning 15% of income. That means the top 1% paid almost 15 times as much in federal income taxes as the entire middle 20%, even though the middle 20% earned more income.
Moreover, the official data, as reported by CBO and the IRS, show that the bottom 40% of income earners, instead of paying some income taxes to support the federal government, were paid cash by the IRS equal to 10% of federal income taxes as a group on net.
Any normal person would say that such an income tax system is more than fair, or maybe that “the rich” pay more than their fair share. So why does President Obama keep saying that the rich do not pay their fair share? Is he ignorant? Wouldn’t somebody in his Administration whisper to him that he is peddling nonsense?
The answer is that to President Obama this is still not fair because he is a Marxist. To a Marxist, the fact that the top 1% earn more income than the bottom 99% is not fair, no matter how they earn it, fairly or not. So it is not fair unless more is taken from the top 1% until they are left only with what they “need,” as in any true communist system. Paying anything less is not their “fair” share. That is the only logical explanation of President Obama’s rhetoric, and it is 100% consistent with his own published background.
Notice that Obama keeps saying that “the rich,” a crass term implying low class social envy, don’t “need” the Bush tax cuts. That is reminiscent of the fundamental Marxist principle, From each according to his ability, to each according to his need.
Good tax policy is not guided by “need.” It is guided by what is needed to establish the incentives to maximize economic growth. The middle class, working people and the poor are benefited far more by economic growth than by redistribution. That is shown by the entire 20th century, where the standard of living of American workers increased by more than 7 times, through sustained, rapid economic growth.
But President Obama’s tax policy of increasing all tax rates on savings and investment will work exactly contrary to such economic growth. It is savings and investment which creates jobs and increases productivity and wages. Under capitalism, capital and labor are complementary, not adversarial, exactly contrary to the misunderstanding of Marxists. More capital investment increases the demand for labor, bidding up wages to the level of worker productivity, which is enhanced by the capital investment.
Increasing marginal tax rates on savings and investment, however, will mean less of it, not more. That will mean fewer jobs, and lower wages, just as we have experienced so far under President Obama, with median household incomes (hello middle class) declining by 7.3% (a month’s worth of wages) during his first term, even faster after the recession supposedly ended in 2009. That will only get worse in Obama’s unearned second term, which can only be explained as “democracy failure” analogous to “market failure.”
If the tax increases are limited to those who earn $1 million or more, I don’t know if that alone will be enough to create a recession, as I am certain would be the result with Obama’s original policy of targeting couples making over $250,000 a year, and singles making over $200,000.
But there is so much in the Obama economic program that is contractionary. His second term promises enormous new regulatory burdens and barriers. The EPA is shutting down the coal industry, and Interior will join with it to sharply constrain oil production further, despite Obama’s duplicitous campaign rhetoric taking credit for the production produced by the policies and efforts of others. I expect Obama’s EPA to burden natural gas fracking until it goes the way of the coal industry as well, stealing new found prosperity for many Americans. All of this will sharply raise energy prices, which will be another effective tax on the economy.
Moreover, President Obama has said that a priority in his second term will be global warming, even though global temperatures have not been increasing for 16 years now, and the developing world led by Brazil, Russia, India and China (the BRIC countries), which are contributing to “greenhouse gases” at a much greater accelerating rate than the U.S., have rejected sacrificing any slice of their economies to that ideological phantom. While even the Democrat Congress of Obama’s first term failed to adopt “cap and trade,” EPA is advancing with global warming regulations that will cost the economy trillions in still another effective tax.
Then there are the onrushing regulatory burdens of Obamacare, including the employer mandate, which will require all businesses with 50 employees or more to buy the most expensive health insurance available. That will be an effective tax on employment. As Obamacare forces up the cost of health insurance, that will be still another effective tax increase on all employers already providing health coverage. Hundreds of regulations still in the pipeline under the “Dodd-Frank” legislation are already forcing the financial sector to contract, and threaten the business and consumer credit essential to full recovery.
In addition, few are adequately considering the longer term contractionary effects of the Fed’s current policy mischief. For years now, businesses and investments have been launched all over the country based on the near zero interest rates, and even below zero real rates, that Fed policies have perpetuated, along with the easy free money . When those rates inevitably rise back to normal, most likely after these Fed policies have resparked inflation, the basis for those businesses and investments will be gone, and many if not most will go into liquidation, which will be highly contractionary as well.
However, I am certain in any event that the Obama tax increases will result in less revenue rather than more. Obama has been proposing to increase the capital gains tax rate by 58% on the nation’s job creators, investors and successful small businesses, counting his Obamacare tax increases that take effect on January 1 as well the expiration of the Bush tax cuts. While his misleading talking points say there will be no tax increases for 97% of small businesses, that counts every Schedule C filed for every part time or hobby sole proprietorship, however marginal the earnings. The small businesses that would bear President Obama’s originally proposed tax increases earn 91% of all small business income, and employ 54% of the total private sector U.S. work force, as reported in Investors Business Daily on November 9.
Over the last 45 years, every time capital gains tax rates have been raised, revenues have fallen, and every time they have been cut, revenues have increased. The capital gains rate was raised 4 times from 1968 to 1975, climbing from 25% to 35%. The 25% rate produced real capital gains revenues in 1968 of $40.6 billion in 2000 dollars. By 1975, at the higher rate, capital gains revenues had plummeted to $19.6 billion in constant 2000 dollars, less than half as much.
After the capital gains rate was cut from 35% to 20% from 1978 to 1981, capital gains revenues had tripled by 1986 compared to 1978. Then the capital gains rate was raised by 40% in 1987 to 28%. By 1991, capital gains revenues had collapsed to $34.4 billion, down from $92.9 billion in 1986, in constant 2000 dollars adjusted for inflation.
Obama’s capital gains tax increase next year will reduce capital gains revenues again as well.
Wednesday, December 19, 2012
Fall of oil exec Roger Parker marked by risky bets gone bad
originally appeared in The Denver Post:
Roger Parker appeared to have it all in 2007. He lived in a historic, $9 million mansion in Cherry Hills Village amid Denver's business and sporting elite. He golfed with John Elway. He traveled by private jet to gamble in Las Vegas and golf in Palm Springs.
Also that year, Parker completed the deal of his career. The chief executive of Denver-based Delta Petroleum sold a $684 million, one-third stake in the growing company to Tracinda Corp., owned by billionaire investor Kirk Kerkorian.
The transaction would be Parker's undoing, marking the start of a remarkable downfall. It played out, friends say, as a close business associate discovered that Parker, then married, was having an affair with his wife.
Parker and Delta struggled with risky bets gone bad. Tracinda forced Parker out after about a year and eventually took Delta into bankruptcy. It pursued Parker for more than $7 million from an unpaid loan but recently found just $46 in his retirement account and $10,000 in his brokerage account.
On Nov. 27, the U.S. Securities and Exchange Commission accused Parker of tipping off his close friend and another, as-yet-unidentified friend ahead of the Tracinda deal, allowing them to reap hundreds of thousands of dollars in ill-gotten gains. His lifestyle included use of private charter jet services as well as many other exclusive memberships.
Two Cherry Hills homes — one Parker bought in 2004 for $9 million and the one it replaced, recently signed over to his ex-wife — are for sale.
An attorney for Parker did not respond to requests for comment for this story. He has not yet responded to the SEC's claims.
Interviews with friends, associates and businessmen, as well as scores of public documents, paint a picture of Parker, 51, as ambitious and aggressive, someone who set out early on a path toward multimillion-dollar success and social prominence.
He achieved both — with the help of a network of well-placed friends — but he took big risks along the way, spent lavishly and seldom settled for second-best.
Roger was a guy who thinks it all works out in spades, according to Delta's former chief operating officer. At one point, he speculated aloud he would be worth $200 million someday.
Fast success
Parker was a standout student at the University of Colorado business-school program in mineral land management. It trained students to be the property-acquisition brains behind the geologic science that identified potentially drillable resources.
But the 1980s, with the petroleum industry tanking, wasn't the best time to aspire to be an oilman.
There were no jobs, recruiting was down 80 percent, and the only ones likely to find a job after the collapse were those with experience, or new grads, according to an associate who graduated with Parker in 1983. But Roger got involved from the start. While we were all in school, he was getting a feel for the business, getting connections and experience. Parker found fast success from hard work.
Only a couple years out of school, he had the big house, all the trappings of success, according to one source.
That happened at Ampet Inc., a small oil-and-gas company formed by Parker mentor and a family friend, a Breckenridge attorney, and his lawyer father, Parker's parents were investors in the business.
The younger Parker and the junior partner would remain business associates for years, beginning with Parker's seat as executive vice president of Ampet while still a student at CU, records show.
While Parker worked at Ampet, his business partner and an associate formed Delta Petroleum in 1984. Parker was first listed on Delta documents as secretary in 1987.
Golf friendships
Two months later, Parker's father, was nominated to the U.S. District Court bench in New Mexico by President Ronald Reagan.
The elder Parker eventually served as federal chief judge in New Mexico until 2003. Along the way, he invested in oil and gas — including Delta — and as of 2010 was drawing royalties on several Colorado wells, some in the range of $500,000 to $1 million, according to financial-disclosure records required of all federal judges.
Roger Parker's relationships reach deep into Denver's business community and stretch across years.
Boisterous in laughter and quick with a joke, Parker was often found hanging with pals at Elway's, in part because of a friendship with the former Broncos quarterback. Both exceptional golfers, Elway and Parker sometimes partnered in charity events, friends said.
Efforts to reach Elway through the Denver Broncos were unsuccessful.
One of Parker's closest friends is a CU graduate in mineral land management with Parker.
The two are avid golfers — with memberships at Cherry Hills and Castle Pines, among others — and big boosters of CU's athletic program, forming the elite Buff Club Cabinet with others including Van Gilder.
The CU graduate has found a level of success that eluded his friend. He recently sold his Cordillera Energy Partners III for $2.8 billion to the company where he started, Apache Corp. Efforts to reach the college friend for comment were unsuccessful.
Drive for status
Parker, twice divorced, enjoyed living large, primarily through houses, golf-club memberships and jets, friends say.
His drive for status was evident in a years-long pursuit of a home at the very pinnacle of Denver society.
Parker sold his first Cherry Hills house and moved into a two-story Tudor he built in 2001 next to the Cherry Hills Country Club. He borrowed $1.6 million to build it and borrowed another $9 million on it over the years. But friends said he was disappointed with the outcome.
In 2004, Parker bought a $9 million mansion from old-money oilman's family along the exclusive Cherry Hills Park Drive. Next door lived the Broncos head coach, and across the street was their legendary money manager.
But Parker was unable to sell the Tudor home, and it remains on the market. The mansion he bought from the oil family — one of the oldest in that area — also is for sale.
Parker acquired a quarter interest in use of a Citation 10 jet, and he sold half of that to Delta.
On a golf trip to Palm Springs, Parker and friends stopped in Las Vegas — the Bellagio and Venetian were among his favorite haunts — to play the tables. Parker believed he could break the house in blackjack, one associate said.
Parker isn't flashy, most comfortable wearing shorts and tennis shoes, driving an SUV, listening to Aerosmith and drinking rum and Coke, friends said.
Parker often does business with friends. One of those is Denver power broker and Parker's personal and business attorney. Earlier this year, Parker pledged 100,000 shares in Prospect Global Energy as collateral to his attorney's law firm for personal legal help, state corporation filings show. At the time, the shares were worth $1 million. Today, they're valued at $167,000.
His attorney who is not representing Parker in the SEC's insider-trading case, would not comment for this story.
One of the attoney's sons, is vice chairman and co-founder of the Denver company, which mines potash.
A Prospect investor who founded Hexagon Investments in 1992, also is a friend of Parker's. He would eventually loan $24.7 million into Parker's latest venture, Recovery Energy, according to financial filings. Efforts to reach the investor for comment were unsuccessful.
Lucrative introduction
Parker was introduced to Kerkorian by a former chauffeur who entered the oil-and-gas business after marrying the former Denver Post owner. The chauffeur, now a Las Vegas resident, had done business with Delta as far back as 2003.
For the introduction — and the resulting sale of a 35 percent ownership share of the Denver company — Davis landed about $5 million worth of Delta shares. Kerkorian would allege later in a settled lawsuit that Parker had secretly arranged contracts and business arrangements for Davis as part of the deal.
Tracinda bought in at $19 a share — Parker had pushed off an initial $17 bid and pressed for more — on New Year's Eve 2007. The $684 million purchase pushed the company stock up 19 percent in one day. It would eventually hit $24.78 from $15.51, when the Tracinda deal was announced.
The SEC alleges in its civil suit that in the months and days before the Tracinda investment was firm and made public, he sent dozens of text messages about it to his business associate. Insiders said Parker didn't even tell some of his closest board members and company executives about the impending deal.
In a related case, his business associate was indicted on criminal insider-trading charges that he allegedly made about $86,000 on the information. He has pleaded not guilty. The SEC alleges that another unnamed individual who is friends with him and Parker racked up a $730,000 payday on Delta stock.
The government has not accused Parker of profiting from the information.
Delta and Parker had encountered the SEC before. In 2006 and 2007 — prior to the Tracinda deal — the government investigated alleged backdating of stock options that were awarded to Parker and other executives. The SEC later dropped its inquiry, and a pair of shareholder suits alleging the practice were settled.
Margin call
Following the merger, it didn't take long before Parker's business plan — a no-hedge, keep-drilling approach — would weigh on Delta's books and, eventually, its stock price.
Several company insiders say Parker's steadfast refusal to hedge some of the company's natural-gas and oil assets against a potential price drop was its most critical undoing. Typically, energy companies hedge by agreeing to sell a portion of their future production at a set price or range.
Delta's former COO and chief geologist, said Delta could have hedged through 2015 but didn't. We'd still be around today if it had.
When shares in Delta dropped below $4 in November 2008, it triggered a margin call on Parker's brokerage account because he had pledged shares as collateral for loans.
Tracinda loaned Parker $7.5 million to cover the shortfall. It said in legal filings it wanted Parker to pay attention to Delta instead of his failing personal finances.
By January 2009, the situation was, in one insider's viewpoint, desperate. He was the eternal optimist of gas prices coming right back, the insider said. They didn't.
By May 2009, Kerkorian had had enough. Three board members asked Parker to resign as chairman and CEO. Parker couldn't get along with new co-chairman Daniel Taylor, a Kerkorian board appointee.
Parker left with a severance payday of about $7 million.
New venture
Parker wasn't unemployed for long.
With the help of friends, he staged a comeback through a new venture, Recovery Energy.
While Reiman was the money lender, the oil-and-gas properties that made up Recovery's inventory came from Davis. Van Gilder provided the office space.
Parker paid for much of it with shares in the new company, a tactic he had used before.
Filings show the company's production and revenues followed a downward trend. Revenues in 2010 were $9.76 million but only $8.36 million in 2011. Oil and gas production in the second quarter of 2012 was down 24 percent from 2011.
Interest expenses in 2011 almost equaled the value of the oil and gas the company produced.
Parker engaged in an unusual practice with his Recovery shares that may have been intended to land a bigger payday or ward off a creditor such as Tracinda.
Normally, executives try to obtain the shares they are granted as quickly as possible, a process known as vesting. Parker, however, amended his employment agreement 14 times over more than two years to push back the date when his Recovery shares would vest and come into his possession.
Tracinda in late August won a judgment for the $7.5 million loan — now $7.7 million — against Parker, who argued he'd been shorted about $5 million in an effort to sell the last of his Delta stock in 2009.
Tracinda has been following Parker with garnishment orders to collect — first on his pension account and then his securities account. Total garnered: $10,745.
It followed with a garnishment order at Recovery for Parker's salary, roughly $21,000 a month, and is making a grab at about 1.3 million of Parker's Recovery shares.
Parker resigned from Recovery on Nov. 14, just ahead of another garnishment effort by Tracinda. SEC notices show his business partner began selling Recovery stock heavily just after.
Two weeks later, the SEC named Parker a co-defendant in its insider-trading lawsuit against another associate.
Friends said he left town on a trip when the case was about to be made public.
Roger Parker appeared to have it all in 2007. He lived in a historic, $9 million mansion in Cherry Hills Village amid Denver's business and sporting elite. He golfed with John Elway. He traveled by private jet to gamble in Las Vegas and golf in Palm Springs.
Also that year, Parker completed the deal of his career. The chief executive of Denver-based Delta Petroleum sold a $684 million, one-third stake in the growing company to Tracinda Corp., owned by billionaire investor Kirk Kerkorian.
The transaction would be Parker's undoing, marking the start of a remarkable downfall. It played out, friends say, as a close business associate discovered that Parker, then married, was having an affair with his wife.
Parker and Delta struggled with risky bets gone bad. Tracinda forced Parker out after about a year and eventually took Delta into bankruptcy. It pursued Parker for more than $7 million from an unpaid loan but recently found just $46 in his retirement account and $10,000 in his brokerage account.
On Nov. 27, the U.S. Securities and Exchange Commission accused Parker of tipping off his close friend and another, as-yet-unidentified friend ahead of the Tracinda deal, allowing them to reap hundreds of thousands of dollars in ill-gotten gains. His lifestyle included use of private charter jet services as well as many other exclusive memberships.
Two Cherry Hills homes — one Parker bought in 2004 for $9 million and the one it replaced, recently signed over to his ex-wife — are for sale.
An attorney for Parker did not respond to requests for comment for this story. He has not yet responded to the SEC's claims.
Interviews with friends, associates and businessmen, as well as scores of public documents, paint a picture of Parker, 51, as ambitious and aggressive, someone who set out early on a path toward multimillion-dollar success and social prominence.
He achieved both — with the help of a network of well-placed friends — but he took big risks along the way, spent lavishly and seldom settled for second-best.
Roger was a guy who thinks it all works out in spades, according to Delta's former chief operating officer. At one point, he speculated aloud he would be worth $200 million someday.
Fast success
Parker was a standout student at the University of Colorado business-school program in mineral land management. It trained students to be the property-acquisition brains behind the geologic science that identified potentially drillable resources.
But the 1980s, with the petroleum industry tanking, wasn't the best time to aspire to be an oilman.
There were no jobs, recruiting was down 80 percent, and the only ones likely to find a job after the collapse were those with experience, or new grads, according to an associate who graduated with Parker in 1983. But Roger got involved from the start. While we were all in school, he was getting a feel for the business, getting connections and experience. Parker found fast success from hard work.
Only a couple years out of school, he had the big house, all the trappings of success, according to one source.
That happened at Ampet Inc., a small oil-and-gas company formed by Parker mentor and a family friend, a Breckenridge attorney, and his lawyer father, Parker's parents were investors in the business.
The younger Parker and the junior partner would remain business associates for years, beginning with Parker's seat as executive vice president of Ampet while still a student at CU, records show.
While Parker worked at Ampet, his business partner and an associate formed Delta Petroleum in 1984. Parker was first listed on Delta documents as secretary in 1987.
Golf friendships
Two months later, Parker's father, was nominated to the U.S. District Court bench in New Mexico by President Ronald Reagan.
The elder Parker eventually served as federal chief judge in New Mexico until 2003. Along the way, he invested in oil and gas — including Delta — and as of 2010 was drawing royalties on several Colorado wells, some in the range of $500,000 to $1 million, according to financial-disclosure records required of all federal judges.
Roger Parker's relationships reach deep into Denver's business community and stretch across years.
Boisterous in laughter and quick with a joke, Parker was often found hanging with pals at Elway's, in part because of a friendship with the former Broncos quarterback. Both exceptional golfers, Elway and Parker sometimes partnered in charity events, friends said.
Efforts to reach Elway through the Denver Broncos were unsuccessful.
One of Parker's closest friends is a CU graduate in mineral land management with Parker.
The two are avid golfers — with memberships at Cherry Hills and Castle Pines, among others — and big boosters of CU's athletic program, forming the elite Buff Club Cabinet with others including Van Gilder.
The CU graduate has found a level of success that eluded his friend. He recently sold his Cordillera Energy Partners III for $2.8 billion to the company where he started, Apache Corp. Efforts to reach the college friend for comment were unsuccessful.
Drive for status
Parker, twice divorced, enjoyed living large, primarily through houses, golf-club memberships and jets, friends say.
His drive for status was evident in a years-long pursuit of a home at the very pinnacle of Denver society.
Parker sold his first Cherry Hills house and moved into a two-story Tudor he built in 2001 next to the Cherry Hills Country Club. He borrowed $1.6 million to build it and borrowed another $9 million on it over the years. But friends said he was disappointed with the outcome.
In 2004, Parker bought a $9 million mansion from old-money oilman's family along the exclusive Cherry Hills Park Drive. Next door lived the Broncos head coach, and across the street was their legendary money manager.
But Parker was unable to sell the Tudor home, and it remains on the market. The mansion he bought from the oil family — one of the oldest in that area — also is for sale.
Parker acquired a quarter interest in use of a Citation 10 jet, and he sold half of that to Delta.
On a golf trip to Palm Springs, Parker and friends stopped in Las Vegas — the Bellagio and Venetian were among his favorite haunts — to play the tables. Parker believed he could break the house in blackjack, one associate said.
Parker isn't flashy, most comfortable wearing shorts and tennis shoes, driving an SUV, listening to Aerosmith and drinking rum and Coke, friends said.
Parker often does business with friends. One of those is Denver power broker and Parker's personal and business attorney. Earlier this year, Parker pledged 100,000 shares in Prospect Global Energy as collateral to his attorney's law firm for personal legal help, state corporation filings show. At the time, the shares were worth $1 million. Today, they're valued at $167,000.
His attorney who is not representing Parker in the SEC's insider-trading case, would not comment for this story.
One of the attoney's sons, is vice chairman and co-founder of the Denver company, which mines potash.
A Prospect investor who founded Hexagon Investments in 1992, also is a friend of Parker's. He would eventually loan $24.7 million into Parker's latest venture, Recovery Energy, according to financial filings. Efforts to reach the investor for comment were unsuccessful.
Lucrative introduction
Parker was introduced to Kerkorian by a former chauffeur who entered the oil-and-gas business after marrying the former Denver Post owner. The chauffeur, now a Las Vegas resident, had done business with Delta as far back as 2003.
For the introduction — and the resulting sale of a 35 percent ownership share of the Denver company — Davis landed about $5 million worth of Delta shares. Kerkorian would allege later in a settled lawsuit that Parker had secretly arranged contracts and business arrangements for Davis as part of the deal.
Tracinda bought in at $19 a share — Parker had pushed off an initial $17 bid and pressed for more — on New Year's Eve 2007. The $684 million purchase pushed the company stock up 19 percent in one day. It would eventually hit $24.78 from $15.51, when the Tracinda deal was announced.
The SEC alleges in its civil suit that in the months and days before the Tracinda investment was firm and made public, he sent dozens of text messages about it to his business associate. Insiders said Parker didn't even tell some of his closest board members and company executives about the impending deal.
In a related case, his business associate was indicted on criminal insider-trading charges that he allegedly made about $86,000 on the information. He has pleaded not guilty. The SEC alleges that another unnamed individual who is friends with him and Parker racked up a $730,000 payday on Delta stock.
The government has not accused Parker of profiting from the information.
Delta and Parker had encountered the SEC before. In 2006 and 2007 — prior to the Tracinda deal — the government investigated alleged backdating of stock options that were awarded to Parker and other executives. The SEC later dropped its inquiry, and a pair of shareholder suits alleging the practice were settled.
Margin call
Following the merger, it didn't take long before Parker's business plan — a no-hedge, keep-drilling approach — would weigh on Delta's books and, eventually, its stock price.
Several company insiders say Parker's steadfast refusal to hedge some of the company's natural-gas and oil assets against a potential price drop was its most critical undoing. Typically, energy companies hedge by agreeing to sell a portion of their future production at a set price or range.
Delta's former COO and chief geologist, said Delta could have hedged through 2015 but didn't. We'd still be around today if it had.
When shares in Delta dropped below $4 in November 2008, it triggered a margin call on Parker's brokerage account because he had pledged shares as collateral for loans.
Tracinda loaned Parker $7.5 million to cover the shortfall. It said in legal filings it wanted Parker to pay attention to Delta instead of his failing personal finances.
By January 2009, the situation was, in one insider's viewpoint, desperate. He was the eternal optimist of gas prices coming right back, the insider said. They didn't.
By May 2009, Kerkorian had had enough. Three board members asked Parker to resign as chairman and CEO. Parker couldn't get along with new co-chairman Daniel Taylor, a Kerkorian board appointee.
Parker left with a severance payday of about $7 million.
New venture
Parker wasn't unemployed for long.
With the help of friends, he staged a comeback through a new venture, Recovery Energy.
While Reiman was the money lender, the oil-and-gas properties that made up Recovery's inventory came from Davis. Van Gilder provided the office space.
Parker paid for much of it with shares in the new company, a tactic he had used before.
Filings show the company's production and revenues followed a downward trend. Revenues in 2010 were $9.76 million but only $8.36 million in 2011. Oil and gas production in the second quarter of 2012 was down 24 percent from 2011.
Interest expenses in 2011 almost equaled the value of the oil and gas the company produced.
Parker engaged in an unusual practice with his Recovery shares that may have been intended to land a bigger payday or ward off a creditor such as Tracinda.
Normally, executives try to obtain the shares they are granted as quickly as possible, a process known as vesting. Parker, however, amended his employment agreement 14 times over more than two years to push back the date when his Recovery shares would vest and come into his possession.
Tracinda in late August won a judgment for the $7.5 million loan — now $7.7 million — against Parker, who argued he'd been shorted about $5 million in an effort to sell the last of his Delta stock in 2009.
Tracinda has been following Parker with garnishment orders to collect — first on his pension account and then his securities account. Total garnered: $10,745.
It followed with a garnishment order at Recovery for Parker's salary, roughly $21,000 a month, and is making a grab at about 1.3 million of Parker's Recovery shares.
Parker resigned from Recovery on Nov. 14, just ahead of another garnishment effort by Tracinda. SEC notices show his business partner began selling Recovery stock heavily just after.
Two weeks later, the SEC named Parker a co-defendant in its insider-trading lawsuit against another associate.
Friends said he left town on a trip when the case was about to be made public.
Monday, December 17, 2012
Honeywell CEO in the Middle of Fiscal Cliff Standoff
originally appeared in The Wall Street Journal:
Honeywell International Inc. HON +1.00% chief executive David Cote gives the orders at the $48 billion industrial giant, but lately he has been taking directives from President Barack Obama and congressional Republicans, in hopes of finding a fiscal-cliff solution.
At a recent White House meeting with several CEOs, Mr. Obama told Mr. Cote, seated across from him, "Tell Republicans you will give them cover for tax increases if they want tough entitlement reform."
A few days later on Capitol Hill, House Republican whip Kevin McCarthy told the Honeywell chief, "Tell the White House the impact that failing to cut spending will have on the market."
Mr. Cote (pronounced KOH-tee) is the business executive most in the middle of the fiscal-cliff debate. He and senior White House adviser Valerie Jarrett talk or email several times at all hours every day. At the other end of Pennsylvania Avenue, he visits congressional offices a couple of days weekly, bringing along other corporate titans and a newly funded CEO campaign for a deficit compromise.
Mr. Cote's role shows a big change from last year's messy and inconclusive debt-ceiling debate: Business leaders aren't sitting on the sidelines this time. "We're not confident that our guys can govern anymore," says Mr. Cote, who switches out of the jeans he typically wears into a suit and tie when summoned by lawmakers.
He has received signals from both parties of possible compromises on the fiscal-cliff issues, about which Mr. Obama and House Speaker John Boehner met Thursday. Earlier in the day, Mr. Cote said he was getting "worried" that a sizable, credible deal was looking more difficult. His fear: It might be replaced by an "anemic deal requiring this country to keep fighting over these issues while the rest of the world becomes more competitive."
Mr. Cote's efforts are stirring controversy. To show his personal commitment to a fiscal deal, he says he would be willing to pay income tax at 39.6%—the highest rate in the Clinton administration—instead of the current top rate of 35%, or to lose deductions, provided significant cuts are made in entitlement programs such as Medicare.
Small businesses on the right and safety-net groups on the left scoff that Mr. Cote, whose total direct compensation was $25 million last year, can afford to be magnanimous.
Small businesses are more sensitive to personal tax rates—the rates at which many are taxed, via their owners' personal returns. That helps explain why small business is more closely aligned than big business with the GOP opposition to raising personal tax rates for anyone.
"A higher income-tax rate on us means we can't invest in new equipment or personnel," says Albert Macre, an owner of Triple Play Café in Steubenville, Ohio. "Maybe if I were making five to 10 million dollars a year like the big CEOs, I would be willing to pay higher taxes too."
Rep. Dave Camp, the Michigan Republican who heads the House Ways and Means Committee, says Mr. Cote "has tried to put pressure on the president and on us to get a deal...but I don't agree with all the policy specifics he's advocating." Mr. Camp says he told Mr. Cote the CEOs will be less effective in helping get a deal so long as they focus on higher tax rates, which "aren't the way to get Republicans to buy in."
Mr. Cote's efforts could benefit his business. Absent a cliff deal, deep cuts in federal spending on defense and many other programs will kick in. Success in averting them could help Honeywell, an aerospace and defense contractor that draws 10% of its $38 billion in annual sales from the government.
Mr. Cote also is getting on a first-name basis with power players and earning good will, goals that can take companies millions in campaign cash and lobbying fees to achieve.
"I'm being accused of all kinds of nefarious motives just because I'm a CEO," says Mr. Cote. He also concedes his cause diverts a lot of time from his job but says he tries to make it up from his personal time. In any case, "the best for my shareholders is a robust economy," he says, "which can't happen if the country is gridlocked over debt."
Whatever their motives, Mr. Cote and fellow big-business leaders are bringing some financial muscle to the table. They have funded an organization called "Fix the Debt," set up last summer by a bipartisan group to push for a comprehensive fiscal solution. While it can't contribute to campaigns, it can run glowing ads for members who face political consequences.
Mr. Cote is far from the only CEO pushing for a fiscal deal or willing to see tax rates go higher. But he is a central player. "People on both sides of the aisle are sending messages through Dave," says Senate Finance Committee Chairman Max Baucus (D., Mont.). "He's become an active participant…while warning that companies will continue to hoard cash and cut jobs if we fall off the fiscal cliff."
Mr. Cote says he doesn't "want to get dragged into being just a messenger…I tell each side what I think helps resolve this big problem for our economy."
His new role has been a "revelation," he says, on how dysfunctional Washington is. "I meet people on both sides I like and find reasonable, but they aren't working together."
A onetime cod fisherman, Mr. Cote became a General Electric Co. GE +1.04% executive and was in the running to succeed CEO Jack Welch 12 years ago. Once Mr. Cote realized he wouldn't get the top spot, he moved first to TRW Inc. and then to Honeywell in 2002, where he is credited with leading a turnaround.
He also made the company more of a political player. Its political giving has grown. Roughly 60% went to Republicans and 40% to Democrats in the 2012 election cycle, according to the nonpartisan Center for Responsive Politics.
President Obama named Mr. Cote to the Simpson-Bowles deficit-cutting commission in 2010. The role, Mr. Cote says, impressed him with the depth not only of the country's fiscal but its political problems. Commission co-chairman Alan Simpson recalls a day after months of partisan warfare when Mr. Cote took off his coat and told the group: "Who are you people? Is this the way you do the nation's business? I'd fire all of you."
During the bitter fight over raising the debt ceiling in the summer of 2011, Mr. Cote signed a letter with about 450 other CEOs urging the president and Congress to compromise for the good of the economy. He says the effort fell flat without any follow-up. The debt fight helped set the stage for the fiscal cliff by dictating mandatory spending cuts in January 2013 unless a bipartisan "supercommittee" could agree on deficit reductions, which it couldn't.
This year, with fiscal uncertainty hanging over the economy, Mr. Cote took steps to protect Honeywell from economic weakness. He says he started letting 300 job openings go unfilled each month and cut capital spending 15%, allowing $5 billion to pile up in corporate coffers.
On July 17, he hosted a dinner at Honeywell's Washington office for Mr. Simpson, a former Wyoming GOP senator, and Erskine Bowles, the Democratic former White House chief of staff who co-led the deficit-reduction commission with Mr. Simpson. Also there was Sen. Mark Warner (D., Va.), who was an entrepreneur before running for office.
"How can CEOs make something happen?" Mr. Cote recalls asking. After hearing two hours of debate, he summed up: engagement, money and message. Mr. Cote said he would recruit fellow CEOs and ask each for $1 million in corporate donations to Fix the Debt.
Sen. Warner questioned whether he could accomplish that before Congress returned after the November election. "Mark, you're dealing with CEOs now," Mr. Cote says he replied. "It will be done by Friday."
Mr. Cote started recruiting the heads of big corporations. By week's end, he says, he had raised $12 million. It has since grown to about $43 million.
"Our role is pretty simple: to make sure that every political leader understands the consequences of the fiscal cliff," says Caterpillar Inc. CAT +0.24% CEO Douglas Oberhelman. "If solved, companies will pour jobs and capital into the economy; if not, our economy remains fragile."
Mr. Cote sought a message that would resonate with his peers. His answer: calling for a "market-credible" plan to cut $4 trillion over 10 years from what the national debt would otherwise climb to. "We liked Dave's term," Mr. Oberhelman says. "It shows that this budget deal must address the short and long term to the financial markets."
Once legislators returned after the election, Mr. Cote and the CEOs descended on the Capitol to meet with them. Mr. Cote was in demand by both parties.
When the president invited a few CEOs to discuss the fiscal cliff three weeks ago, the staff seated Mr. Cote directly across from Mr. Obama. Afterward, Mr. Cote did on-camera interviews on the North Lawn.
In late November he led an entourage of CEOs for a flurry of meetings on Capitol Hill. This time, the Republicans told him to deliver a message. Senate Republican Leader Mitch McConnell told him, "You need to tell the president that we're willing to do tax reform if he does significant entitlement reform."
On the House side, Mr. Cote chatted with Republican whip Mr. McCarthy in his office, where they bonded over their interest in history. Mr. McCarthy showed him a window that survived a fire set by the British during the War of 1812.
When they joined the CEO group for a meeting with Speaker Boehner, Mr. Cote observed that "there's a lot of money on the sidelines waiting to be invested," with some estimates of $1 trillion on corporate balance sheets that could be released if CEOs had certainty on the country's fiscal condition.
Some economists are skeptical. "CEOs aren't passing up profitable opportunities waiting for a fiscal deal," says Dean Baker, co-director of the liberal-leaning Center for Economic Policy and Research. He estimates that a new law would spur "modest" investment by U.S. companies of about $30 billion to $40 billion over the next year.
The CEO meetings in Washington got the attention of opponents on the left and right. Small-business groups such as the National Federation of Independent Business launched their own campaigns; some owners pushed for and got separate sessions with House Republicans, who criticized the president for holding a second meeting with big-company CEOs.
Liberal groups, including Campaign for Community Change and Social Security Works, protested outside a hotel where Fix the Debt held a conference last week. They called Mr. Cote "an odd choice for spokesman" with his "retirement assets of more than $78 million and his company's pension underfunded by $2.8 billion." (Mr. Cote says Honeywell's pension will be 85% funded at year-end, with company contributions of more than $5 billion since 2009.)
At the same time as Mr. Cote prods lawmakers to deal with the fiscal cliff, he and his executives are preparing for a possible tumble off it. At Honeywell's Morris Township, N.J., headquarters on Monday, Mr. Cote, wearing jeans and drinking Diet Mountain Dew, led his team through semiannual planning under the assumption there will be no deal and the automatic spending cuts will kick in.
"For months, we've been teeing up our businesses with that assumption," he says, in his office filled with Boston Red Sox mementos and hunting and fishing trophies.
Mr. Cote then flew back to Washington to press more politicians to act. But signs of frustration were starting to show. "Everything they need to know, they know," he said as he boarded a company plane. "I can keep talking about a market-credible fiscal plan…but it's time to say, 'You are the leaders—lead.' "
In Sen. Bob Corker's office, the Tennessee Republican told Mr. Cote that the unity among corporate leaders would evaporate when the "platitudes turn to specifics," particularly on tax changes. "At some point, the CEOs will become divided and fight each other," he said.
Mr. Cote stuck to his script: "If we keep putting the business community off, we wait, we don't invest, we cut jobs."
Through it all, Mr. Cote doesn't make a point of his party preference. One Republican senator suspects Mr. Cote is an independent. Democratic Sen. Baucus expressed surprise when he learned Mr. Cote is a Republican.
Mr. Bowles has urged Mr. Obama to put Mr. Cote in his cabinet for the next term, as Treasury or Commerce secretary. Mr. Cote says he plans to stay at Honeywell. Speaking of his fling with Washington politics, he says, "I can't wait to get out of here and back to my day job."
Honeywell International Inc. HON +1.00% chief executive David Cote gives the orders at the $48 billion industrial giant, but lately he has been taking directives from President Barack Obama and congressional Republicans, in hopes of finding a fiscal-cliff solution.
At a recent White House meeting with several CEOs, Mr. Obama told Mr. Cote, seated across from him, "Tell Republicans you will give them cover for tax increases if they want tough entitlement reform."
A few days later on Capitol Hill, House Republican whip Kevin McCarthy told the Honeywell chief, "Tell the White House the impact that failing to cut spending will have on the market."
Mr. Cote (pronounced KOH-tee) is the business executive most in the middle of the fiscal-cliff debate. He and senior White House adviser Valerie Jarrett talk or email several times at all hours every day. At the other end of Pennsylvania Avenue, he visits congressional offices a couple of days weekly, bringing along other corporate titans and a newly funded CEO campaign for a deficit compromise.
Mr. Cote's role shows a big change from last year's messy and inconclusive debt-ceiling debate: Business leaders aren't sitting on the sidelines this time. "We're not confident that our guys can govern anymore," says Mr. Cote, who switches out of the jeans he typically wears into a suit and tie when summoned by lawmakers.
He has received signals from both parties of possible compromises on the fiscal-cliff issues, about which Mr. Obama and House Speaker John Boehner met Thursday. Earlier in the day, Mr. Cote said he was getting "worried" that a sizable, credible deal was looking more difficult. His fear: It might be replaced by an "anemic deal requiring this country to keep fighting over these issues while the rest of the world becomes more competitive."
Mr. Cote's efforts are stirring controversy. To show his personal commitment to a fiscal deal, he says he would be willing to pay income tax at 39.6%—the highest rate in the Clinton administration—instead of the current top rate of 35%, or to lose deductions, provided significant cuts are made in entitlement programs such as Medicare.
Small businesses on the right and safety-net groups on the left scoff that Mr. Cote, whose total direct compensation was $25 million last year, can afford to be magnanimous.
Small businesses are more sensitive to personal tax rates—the rates at which many are taxed, via their owners' personal returns. That helps explain why small business is more closely aligned than big business with the GOP opposition to raising personal tax rates for anyone.
"A higher income-tax rate on us means we can't invest in new equipment or personnel," says Albert Macre, an owner of Triple Play Café in Steubenville, Ohio. "Maybe if I were making five to 10 million dollars a year like the big CEOs, I would be willing to pay higher taxes too."
Rep. Dave Camp, the Michigan Republican who heads the House Ways and Means Committee, says Mr. Cote "has tried to put pressure on the president and on us to get a deal...but I don't agree with all the policy specifics he's advocating." Mr. Camp says he told Mr. Cote the CEOs will be less effective in helping get a deal so long as they focus on higher tax rates, which "aren't the way to get Republicans to buy in."
Mr. Cote's efforts could benefit his business. Absent a cliff deal, deep cuts in federal spending on defense and many other programs will kick in. Success in averting them could help Honeywell, an aerospace and defense contractor that draws 10% of its $38 billion in annual sales from the government.
Mr. Cote also is getting on a first-name basis with power players and earning good will, goals that can take companies millions in campaign cash and lobbying fees to achieve.
"I'm being accused of all kinds of nefarious motives just because I'm a CEO," says Mr. Cote. He also concedes his cause diverts a lot of time from his job but says he tries to make it up from his personal time. In any case, "the best for my shareholders is a robust economy," he says, "which can't happen if the country is gridlocked over debt."
Whatever their motives, Mr. Cote and fellow big-business leaders are bringing some financial muscle to the table. They have funded an organization called "Fix the Debt," set up last summer by a bipartisan group to push for a comprehensive fiscal solution. While it can't contribute to campaigns, it can run glowing ads for members who face political consequences.
Mr. Cote is far from the only CEO pushing for a fiscal deal or willing to see tax rates go higher. But he is a central player. "People on both sides of the aisle are sending messages through Dave," says Senate Finance Committee Chairman Max Baucus (D., Mont.). "He's become an active participant…while warning that companies will continue to hoard cash and cut jobs if we fall off the fiscal cliff."
Mr. Cote says he doesn't "want to get dragged into being just a messenger…I tell each side what I think helps resolve this big problem for our economy."
His new role has been a "revelation," he says, on how dysfunctional Washington is. "I meet people on both sides I like and find reasonable, but they aren't working together."
A onetime cod fisherman, Mr. Cote became a General Electric Co. GE +1.04% executive and was in the running to succeed CEO Jack Welch 12 years ago. Once Mr. Cote realized he wouldn't get the top spot, he moved first to TRW Inc. and then to Honeywell in 2002, where he is credited with leading a turnaround.
He also made the company more of a political player. Its political giving has grown. Roughly 60% went to Republicans and 40% to Democrats in the 2012 election cycle, according to the nonpartisan Center for Responsive Politics.
President Obama named Mr. Cote to the Simpson-Bowles deficit-cutting commission in 2010. The role, Mr. Cote says, impressed him with the depth not only of the country's fiscal but its political problems. Commission co-chairman Alan Simpson recalls a day after months of partisan warfare when Mr. Cote took off his coat and told the group: "Who are you people? Is this the way you do the nation's business? I'd fire all of you."
During the bitter fight over raising the debt ceiling in the summer of 2011, Mr. Cote signed a letter with about 450 other CEOs urging the president and Congress to compromise for the good of the economy. He says the effort fell flat without any follow-up. The debt fight helped set the stage for the fiscal cliff by dictating mandatory spending cuts in January 2013 unless a bipartisan "supercommittee" could agree on deficit reductions, which it couldn't.
This year, with fiscal uncertainty hanging over the economy, Mr. Cote took steps to protect Honeywell from economic weakness. He says he started letting 300 job openings go unfilled each month and cut capital spending 15%, allowing $5 billion to pile up in corporate coffers.
On July 17, he hosted a dinner at Honeywell's Washington office for Mr. Simpson, a former Wyoming GOP senator, and Erskine Bowles, the Democratic former White House chief of staff who co-led the deficit-reduction commission with Mr. Simpson. Also there was Sen. Mark Warner (D., Va.), who was an entrepreneur before running for office.
"How can CEOs make something happen?" Mr. Cote recalls asking. After hearing two hours of debate, he summed up: engagement, money and message. Mr. Cote said he would recruit fellow CEOs and ask each for $1 million in corporate donations to Fix the Debt.
Sen. Warner questioned whether he could accomplish that before Congress returned after the November election. "Mark, you're dealing with CEOs now," Mr. Cote says he replied. "It will be done by Friday."
Mr. Cote started recruiting the heads of big corporations. By week's end, he says, he had raised $12 million. It has since grown to about $43 million.
"Our role is pretty simple: to make sure that every political leader understands the consequences of the fiscal cliff," says Caterpillar Inc. CAT +0.24% CEO Douglas Oberhelman. "If solved, companies will pour jobs and capital into the economy; if not, our economy remains fragile."
Mr. Cote sought a message that would resonate with his peers. His answer: calling for a "market-credible" plan to cut $4 trillion over 10 years from what the national debt would otherwise climb to. "We liked Dave's term," Mr. Oberhelman says. "It shows that this budget deal must address the short and long term to the financial markets."
Once legislators returned after the election, Mr. Cote and the CEOs descended on the Capitol to meet with them. Mr. Cote was in demand by both parties.
When the president invited a few CEOs to discuss the fiscal cliff three weeks ago, the staff seated Mr. Cote directly across from Mr. Obama. Afterward, Mr. Cote did on-camera interviews on the North Lawn.
In late November he led an entourage of CEOs for a flurry of meetings on Capitol Hill. This time, the Republicans told him to deliver a message. Senate Republican Leader Mitch McConnell told him, "You need to tell the president that we're willing to do tax reform if he does significant entitlement reform."
On the House side, Mr. Cote chatted with Republican whip Mr. McCarthy in his office, where they bonded over their interest in history. Mr. McCarthy showed him a window that survived a fire set by the British during the War of 1812.
When they joined the CEO group for a meeting with Speaker Boehner, Mr. Cote observed that "there's a lot of money on the sidelines waiting to be invested," with some estimates of $1 trillion on corporate balance sheets that could be released if CEOs had certainty on the country's fiscal condition.
Some economists are skeptical. "CEOs aren't passing up profitable opportunities waiting for a fiscal deal," says Dean Baker, co-director of the liberal-leaning Center for Economic Policy and Research. He estimates that a new law would spur "modest" investment by U.S. companies of about $30 billion to $40 billion over the next year.
The CEO meetings in Washington got the attention of opponents on the left and right. Small-business groups such as the National Federation of Independent Business launched their own campaigns; some owners pushed for and got separate sessions with House Republicans, who criticized the president for holding a second meeting with big-company CEOs.
Liberal groups, including Campaign for Community Change and Social Security Works, protested outside a hotel where Fix the Debt held a conference last week. They called Mr. Cote "an odd choice for spokesman" with his "retirement assets of more than $78 million and his company's pension underfunded by $2.8 billion." (Mr. Cote says Honeywell's pension will be 85% funded at year-end, with company contributions of more than $5 billion since 2009.)
At the same time as Mr. Cote prods lawmakers to deal with the fiscal cliff, he and his executives are preparing for a possible tumble off it. At Honeywell's Morris Township, N.J., headquarters on Monday, Mr. Cote, wearing jeans and drinking Diet Mountain Dew, led his team through semiannual planning under the assumption there will be no deal and the automatic spending cuts will kick in.
"For months, we've been teeing up our businesses with that assumption," he says, in his office filled with Boston Red Sox mementos and hunting and fishing trophies.
Mr. Cote then flew back to Washington to press more politicians to act. But signs of frustration were starting to show. "Everything they need to know, they know," he said as he boarded a company plane. "I can keep talking about a market-credible fiscal plan…but it's time to say, 'You are the leaders—lead.' "
In Sen. Bob Corker's office, the Tennessee Republican told Mr. Cote that the unity among corporate leaders would evaporate when the "platitudes turn to specifics," particularly on tax changes. "At some point, the CEOs will become divided and fight each other," he said.
Mr. Cote stuck to his script: "If we keep putting the business community off, we wait, we don't invest, we cut jobs."
Through it all, Mr. Cote doesn't make a point of his party preference. One Republican senator suspects Mr. Cote is an independent. Democratic Sen. Baucus expressed surprise when he learned Mr. Cote is a Republican.
Mr. Bowles has urged Mr. Obama to put Mr. Cote in his cabinet for the next term, as Treasury or Commerce secretary. Mr. Cote says he plans to stay at Honeywell. Speaking of his fling with Washington politics, he says, "I can't wait to get out of here and back to my day job."
Friday, December 14, 2012
More churches are selling properties to developers
originally appeared in The Wall Street Journal:
When a new resident moved into a new 3,000-square-foot condo in Seattle's Capitol Hill neighborhood in August, he was looking forward to living with its 30-foot ceilings, polished-marble floors and 20-foot-tall stained-glass windows. One thing he didn't anticipate, however, was people knocking on his front door to ask what time services were or to speak to the pastor.
According to the new tenant, a 50-year-old technology executive at Amazon, people still thought it was a church because of its exterior, they didn't realize it had been transformed into a home.
Some of the most attractive Philadelphia apartments are bargains even in a hot rental market like Philadelphia.
The apartment, which he bought for about $1 million, sits inside a former Christian Science Church that was converted into 12 townhouses earlier this year and renamed the Sanctuary.
The building is one of a number of church-to-home luxury conversions popping up around the country. As dozens of churches close or move to different quarters each year, they're finding second lives as condo developments and townhouses.
The conversion process is growing more common as shrinking congregations and shifting demographics have made it difficult for some congregations to stay afloat financially. According to a March report from CoStar Group, CSGP -0.60% a real-estate research firm, 138 church-owned properties across the country were sold by banks last year, compared with 24 three years earlier.
The Roman Catholic Church, for example, has closed hundreds of churches in recent years. In 2000, there were 19,236 Roman Catholic parishes across the U.S.; that figure fell to 17,644 by 2012, according to the Center for Applied Research in the Apostolate, a nonprofit research organization that compiles church statistics. United Methodists have seen the number of churches shrink by about 7% over the past decade or so, with 300 to 400 churches closing or merging each year. In 2000, United Methodists had 35,537 churches, compared with 33,069 in 2011.
The Seattle church where the new resident now lives was built around 1908 as First Church of Christ, Scientist, and counted about 800 regular attendees in its heyday. But by 2006, its congregation had dwindled to about 25 people, so the congregation relocated and sold off the church property for $1.3 million.
Architects have found creative ways to convert these historic buildings—which often have 40- or 50-foot-high ceilings, few or no interior walls and stained-glass windows—into homes and apartments that will sell for millions of dollars.
But it isn't an easy process: Not only do the structures need intensive interior reconstruction and upgrades to meet modern building codes, but they often have been granted landmark status, further complicating renovations.
The good news with churches is that you have 40-foot-tall ceilings, but the bad news is that you have 40-foot ceilings, says Continuum Company's chief executive and developer, who in the early 1980s renovated an 1846 Greek Revival-style church in Manhattan's Greenwich Village to create 15 co-op units. And because churches are usually landmarks, you can't change the facade, he adds. Most big urban renovations cost about $10 million and can take two to four years, or in the case of the Seattle project, about $12 million over a five-year period.
In the Boston area, more than a dozen churches have been converted to residential projects over the past decade or so. That's in part because there has been a steady supply. The Archdiocese of Boston closed 76 parishes in the metro area under a 2004 consolidation plan, selling 38 of those for just over $73 million. (To signify that a church is no longer a church, the archbishop signs a decree that relegates the building to profane use.)
One of the churches closed was a Tudor-style church called St. Aidan's in Brookline, Mass., where John F. Kennedy and Robert Kennedy were both baptized. It reopened in 2009 as a residential project. The church's stone facade and slate roof were preserved, but the interior walls were reframed to support two additional floors. The church was converted into nine high-end condo units that each sold for between $1 million and $1.8 million.
Many of the units in St. Aidan's have two-story windows, granite countertops and double-height living rooms with overlooking balconies. Some units also have exposed wooden trusses from the church as well as the church's original dentil molding.
Those rarefied architectural details are a major attraction for many occupants of church-to-home conversions. A research engineer for Boeing recently moved into a 2,900-square-foot, two-bedroom townhouse in the former Christian Science church in Seattle with his fiancée. We figured that a place would hold its value more if it was unique, like a piece of art, he says. And it's pretty hard to replicate a 100-year-old church.
He and his fiancée love to entertain in their four-story townhouse, which has 35-foot-high ceilings. The dining table sits underneath two 20-foot-tall stained-glass windows. It's the perfect space to play music, he says of the space. Whatever you play sounds like it's live, like you're in a concert hall as opposed to listening through a stereo.
In the guest bedroom, there's a skylight that looks onto the church's main stained-glass dome. The couple installed an electric blind over the skylight so they can surprise guests with it when they visit.
People who live in church conversions say that they easily find uses for some of the more unusual artifacts. An automotive executive and his wife bought a converted 1920s Presbyterian church in 2007. It's now a 3,463-square-foot home 20 minutes outside Denver. They say that their four granddaughters like to come over and ring the steeple bell, pulling a rope hanging in the home's foyer. We have a tradition of ringing it on New Year's, he adds.
He and his wife eat breakfast every morning in a nook where the altar used to sit. The couple sleeps in the choir loft, which overlooks the space. When you're in bed, you're in the center of the church, which is a great feeling. There are exposed wooden beams remaining from the original structure throughout the home, and one wooden pew from the church sits in the living room, along with more plush couches. Despite its novelty, the pew is often the last seat chosen by guests.
Developers of church projects say they are sometimes hesitant to convert sacred structures into commercial enterprises. the developer of a late-19th-century Baptist church in Watertown, Mass., into eight condo units, says he had mixed feelings about buying the property in 2003 for $1.4 million, especially because it was located in the same town where his family had lived since emigrating from Armenia in the early 1900s. While the sale allowed the congregation to move to a more suitable location, it was also a move away from a special place, he says. But I have very good feelings about saving a historic building.
The developer spent about $9 million on renovating the property, which includes eight units in the church, two units in the former rectory and four townhouse units he built on the church's former parking lot. Of the eight units in the church, five have sold for between $700,000 and $1.5 million. The four townhouse units sold for around $1 million each, and the two units in the former rectory sold for about $700,000 each. The developer says he tried to build units with modern amenities, such as dishwashers, cellulose insulation in the walls and laundry rooms with washers and dryers, while also retaining some of the unique architectural elements of the church, such as its wooden trusses and paneled ceilings. Some of the units on the second floor have living and dining areas with 36-foot-high ceilings.
Our unit isn't churchy at all, but it definitely feels unique and different and not boring, according to a fundraiser who moved into a three-bedroom condo there. She says that she has, however, experienced some backlash in the community over living in a former church. The cable guy had a hissy fit about having to install cable in a church, she says. He acted like the world was ending because people were now living inside churches.
Although it's still relatively rare in the U.S., the adaptive reuse of churches has become a popular practice in other countries, like the U.K. In 2006, the Royal Institution of Chartered Surveyors found that since 2001, about 500 churches in London alone had been converted into homes. In other countries, such as Germany and Russia, people still regard the concept of living in a church as disrespectful, says Bart Kellerhuis of Utrecht-based firm Zecc Architects, which has done several church-to-home conversions in the Netherlands.
One of challenges in such conversions is reducing the vast space of a church into something more livable. Living spaces can feel overwhelmingly grand, and heating costs can be considerable.
A couple in Chicago paid $600,000 for a former Lutheran church in Chicago's Humboldt Park neighborhood last year, says it is virtually impossible to keep the room where he they sleep warm. The roof isn't insulated, making it hard to heat the 3,500-square-foot space with a 39-foot ceiling.
We don't keep the heat running, otherwise we'd owe thousands of dollars in heating bills, he says, an information-technology specialist for Blue Cross Blue Shield of Illinois. But even if we did, the heat would just rise and escape through the roof. The fact is that this structure wasn't built for continuous habitation.
When a new resident moved into a new 3,000-square-foot condo in Seattle's Capitol Hill neighborhood in August, he was looking forward to living with its 30-foot ceilings, polished-marble floors and 20-foot-tall stained-glass windows. One thing he didn't anticipate, however, was people knocking on his front door to ask what time services were or to speak to the pastor.
According to the new tenant, a 50-year-old technology executive at Amazon, people still thought it was a church because of its exterior, they didn't realize it had been transformed into a home.
Some of the most attractive Philadelphia apartments are bargains even in a hot rental market like Philadelphia.
The apartment, which he bought for about $1 million, sits inside a former Christian Science Church that was converted into 12 townhouses earlier this year and renamed the Sanctuary.
The building is one of a number of church-to-home luxury conversions popping up around the country. As dozens of churches close or move to different quarters each year, they're finding second lives as condo developments and townhouses.
The conversion process is growing more common as shrinking congregations and shifting demographics have made it difficult for some congregations to stay afloat financially. According to a March report from CoStar Group, CSGP -0.60% a real-estate research firm, 138 church-owned properties across the country were sold by banks last year, compared with 24 three years earlier.
The Roman Catholic Church, for example, has closed hundreds of churches in recent years. In 2000, there were 19,236 Roman Catholic parishes across the U.S.; that figure fell to 17,644 by 2012, according to the Center for Applied Research in the Apostolate, a nonprofit research organization that compiles church statistics. United Methodists have seen the number of churches shrink by about 7% over the past decade or so, with 300 to 400 churches closing or merging each year. In 2000, United Methodists had 35,537 churches, compared with 33,069 in 2011.
The Seattle church where the new resident now lives was built around 1908 as First Church of Christ, Scientist, and counted about 800 regular attendees in its heyday. But by 2006, its congregation had dwindled to about 25 people, so the congregation relocated and sold off the church property for $1.3 million.
Architects have found creative ways to convert these historic buildings—which often have 40- or 50-foot-high ceilings, few or no interior walls and stained-glass windows—into homes and apartments that will sell for millions of dollars.
But it isn't an easy process: Not only do the structures need intensive interior reconstruction and upgrades to meet modern building codes, but they often have been granted landmark status, further complicating renovations.
The good news with churches is that you have 40-foot-tall ceilings, but the bad news is that you have 40-foot ceilings, says Continuum Company's chief executive and developer, who in the early 1980s renovated an 1846 Greek Revival-style church in Manhattan's Greenwich Village to create 15 co-op units. And because churches are usually landmarks, you can't change the facade, he adds. Most big urban renovations cost about $10 million and can take two to four years, or in the case of the Seattle project, about $12 million over a five-year period.
In the Boston area, more than a dozen churches have been converted to residential projects over the past decade or so. That's in part because there has been a steady supply. The Archdiocese of Boston closed 76 parishes in the metro area under a 2004 consolidation plan, selling 38 of those for just over $73 million. (To signify that a church is no longer a church, the archbishop signs a decree that relegates the building to profane use.)
One of the churches closed was a Tudor-style church called St. Aidan's in Brookline, Mass., where John F. Kennedy and Robert Kennedy were both baptized. It reopened in 2009 as a residential project. The church's stone facade and slate roof were preserved, but the interior walls were reframed to support two additional floors. The church was converted into nine high-end condo units that each sold for between $1 million and $1.8 million.
Many of the units in St. Aidan's have two-story windows, granite countertops and double-height living rooms with overlooking balconies. Some units also have exposed wooden trusses from the church as well as the church's original dentil molding.
Those rarefied architectural details are a major attraction for many occupants of church-to-home conversions. A research engineer for Boeing recently moved into a 2,900-square-foot, two-bedroom townhouse in the former Christian Science church in Seattle with his fiancée. We figured that a place would hold its value more if it was unique, like a piece of art, he says. And it's pretty hard to replicate a 100-year-old church.
He and his fiancée love to entertain in their four-story townhouse, which has 35-foot-high ceilings. The dining table sits underneath two 20-foot-tall stained-glass windows. It's the perfect space to play music, he says of the space. Whatever you play sounds like it's live, like you're in a concert hall as opposed to listening through a stereo.
In the guest bedroom, there's a skylight that looks onto the church's main stained-glass dome. The couple installed an electric blind over the skylight so they can surprise guests with it when they visit.
People who live in church conversions say that they easily find uses for some of the more unusual artifacts. An automotive executive and his wife bought a converted 1920s Presbyterian church in 2007. It's now a 3,463-square-foot home 20 minutes outside Denver. They say that their four granddaughters like to come over and ring the steeple bell, pulling a rope hanging in the home's foyer. We have a tradition of ringing it on New Year's, he adds.
He and his wife eat breakfast every morning in a nook where the altar used to sit. The couple sleeps in the choir loft, which overlooks the space. When you're in bed, you're in the center of the church, which is a great feeling. There are exposed wooden beams remaining from the original structure throughout the home, and one wooden pew from the church sits in the living room, along with more plush couches. Despite its novelty, the pew is often the last seat chosen by guests.
Developers of church projects say they are sometimes hesitant to convert sacred structures into commercial enterprises. the developer of a late-19th-century Baptist church in Watertown, Mass., into eight condo units, says he had mixed feelings about buying the property in 2003 for $1.4 million, especially because it was located in the same town where his family had lived since emigrating from Armenia in the early 1900s. While the sale allowed the congregation to move to a more suitable location, it was also a move away from a special place, he says. But I have very good feelings about saving a historic building.
The developer spent about $9 million on renovating the property, which includes eight units in the church, two units in the former rectory and four townhouse units he built on the church's former parking lot. Of the eight units in the church, five have sold for between $700,000 and $1.5 million. The four townhouse units sold for around $1 million each, and the two units in the former rectory sold for about $700,000 each. The developer says he tried to build units with modern amenities, such as dishwashers, cellulose insulation in the walls and laundry rooms with washers and dryers, while also retaining some of the unique architectural elements of the church, such as its wooden trusses and paneled ceilings. Some of the units on the second floor have living and dining areas with 36-foot-high ceilings.
Our unit isn't churchy at all, but it definitely feels unique and different and not boring, according to a fundraiser who moved into a three-bedroom condo there. She says that she has, however, experienced some backlash in the community over living in a former church. The cable guy had a hissy fit about having to install cable in a church, she says. He acted like the world was ending because people were now living inside churches.
Although it's still relatively rare in the U.S., the adaptive reuse of churches has become a popular practice in other countries, like the U.K. In 2006, the Royal Institution of Chartered Surveyors found that since 2001, about 500 churches in London alone had been converted into homes. In other countries, such as Germany and Russia, people still regard the concept of living in a church as disrespectful, says Bart Kellerhuis of Utrecht-based firm Zecc Architects, which has done several church-to-home conversions in the Netherlands.
One of challenges in such conversions is reducing the vast space of a church into something more livable. Living spaces can feel overwhelmingly grand, and heating costs can be considerable.
A couple in Chicago paid $600,000 for a former Lutheran church in Chicago's Humboldt Park neighborhood last year, says it is virtually impossible to keep the room where he they sleep warm. The roof isn't insulated, making it hard to heat the 3,500-square-foot space with a 39-foot ceiling.
We don't keep the heat running, otherwise we'd owe thousands of dollars in heating bills, he says, an information-technology specialist for Blue Cross Blue Shield of Illinois. But even if we did, the heat would just rise and escape through the roof. The fact is that this structure wasn't built for continuous habitation.
AAA Forecasts More Americans Will Travel This Holiday and Spend More
originally appeared on CNBC:
More travelers will take to the roads and skies this holiday season and spend a little more on travel than a year ago, AAA said in a new forecast released Thursday. (Read more: America's Most Popular Holiday Destination Is... ?)
AAA projects 93.3 million Americans will travel 50 miles or more from home during the year-end holiday period defined as December 22 to January 1. That's up 1.6 percent from the 91.8 million people who traveled during the same time last year.
Primary economic indicators all show modest improvement from last year and AAA is projecting an increase in the number of Americans stuffing their stockings with airline tickets and hotel reservations, said AAA's President and in a prepared statement.
Highlights From AAA's 2012-2013 Year-End Holiday Travel Forecast
Ninety percent of travelers (84.4 million) will travel by car, representing 26.7 percent of the total U.S. population, or one in four Americans.
Holiday air travel is forecast to rise 4.5 percent to 5.6 million travelers from 5.4 million in 2011.
Median spending is expected to increase about 6 percent to $759, compared to $718 in 2011 with transportation costs consuming about 29 cents of every travel dollar.
Average distance traveled is expected to increase to 760 miles round-trip from 726 miles
The national average price of gasoline, meanwhile, is forecast to slowly drop through the end of the year and average between $3.20-3.40 a gallon by New Year's Day. While AAA does not expect gas prices to have a major impact on travel volume, fuel-cost savings could mean consumers have more money to spend on holiday shopping, dining and entertainment if prices drop through December as expected.
Airfares Down, Hotel Rates Rise
Those traveling by air will find lower airfares this holiday season, according to AAA. For the year-end holiday period, the average lowest round-trip rate is $203 for the top 40 U.S. air routes, a 3 percent decline from last year's rate of about $209.28.
Hotel rates for AAA Three Diamond properties are expected to increase 2 percent from a year ago — $129 per night compared to $126 last year. AAA Two Diamond hotels will be 3 percent higher, or an average of $95 per night compared to about $92.23 in 2011.
More travelers will take to the roads and skies this holiday season and spend a little more on travel than a year ago, AAA said in a new forecast released Thursday. (Read more: America's Most Popular Holiday Destination Is... ?)
AAA projects 93.3 million Americans will travel 50 miles or more from home during the year-end holiday period defined as December 22 to January 1. That's up 1.6 percent from the 91.8 million people who traveled during the same time last year.
Primary economic indicators all show modest improvement from last year and AAA is projecting an increase in the number of Americans stuffing their stockings with airline tickets and hotel reservations, said AAA's President and in a prepared statement.
Highlights From AAA's 2012-2013 Year-End Holiday Travel Forecast
Ninety percent of travelers (84.4 million) will travel by car, representing 26.7 percent of the total U.S. population, or one in four Americans.
Holiday air travel is forecast to rise 4.5 percent to 5.6 million travelers from 5.4 million in 2011.
Median spending is expected to increase about 6 percent to $759, compared to $718 in 2011 with transportation costs consuming about 29 cents of every travel dollar.
Average distance traveled is expected to increase to 760 miles round-trip from 726 miles
The national average price of gasoline, meanwhile, is forecast to slowly drop through the end of the year and average between $3.20-3.40 a gallon by New Year's Day. While AAA does not expect gas prices to have a major impact on travel volume, fuel-cost savings could mean consumers have more money to spend on holiday shopping, dining and entertainment if prices drop through December as expected.
Airfares Down, Hotel Rates Rise
Those traveling by air will find lower airfares this holiday season, according to AAA. For the year-end holiday period, the average lowest round-trip rate is $203 for the top 40 U.S. air routes, a 3 percent decline from last year's rate of about $209.28.
Hotel rates for AAA Three Diamond properties are expected to increase 2 percent from a year ago — $129 per night compared to $126 last year. AAA Two Diamond hotels will be 3 percent higher, or an average of $95 per night compared to about $92.23 in 2011.
Business leaders warn as cliff nears
originally appeared in USA Today:
Business leaders are getting more worried about the fiscal cliff, and urging Congress and President Obama to make a deal before the New Year triggers a series of tax increases and spending cuts that would likely put the nation back in a recession.
The Business Roundtable released a letter signed by 158 chief executives of companies with more than $7.3 trillion in sales and 16 million workers, saying congressional Republicans need to make concessions on revenue, and Democrats need to give ground on entitlements such as Medicare and Social Security.
At the same time, the National Federation of Independent Business said a survey of its members showed a huge drop in confidence after the November election, as the cliff drew closer.
The NFIB survey of business confidence fell almost six points to 87.5, the lowest score since 2009 and far below stock market expectations for 92.5. The drop is a sign that business owners are losing confidence as Congress moves closer to raising taxes on couples making more than $250,000 a year, even though less than 5% of business owners make that much, said UBS economist Drew Matus. Only 9% expect better conditions in six months, compared with 49% who expect things to get worse, the NFIB said.
The United States will suffer significant negative economic, employment, and social consequences for going over the fiscal cliff, the CEOs said in a letter to congressional leaders. In many cases, the damage will be long-lasting, if not permanent. But it does not have to happen.
The chief executive of USA TODAY parent Gannett, was one of the CEOs who signed the letter.
The NFIB survey showed declines in nine out of 10 indicators of confidence, with a slight uptick in hiring plans for early next year, the federation said.
Marginal investments may not be undertaken as the increase in taxes moves some investment from the yes to the no column. The debate is whether that marginal investment is a significant source of innovation or employment.
The survey was more bearish than other indicators of business confidence recently. Moody's Analytics' weekly survey of business confidence, released Monday, said confidence rose slightly but remains at a low level. About a third of respondents expect the economy to get worse in the next few months, Moody's reported. In Moody's survey, government officials were the most pessimistic about the economy.
Like investors, businesses appear to believe that policymakers will come to terms before pushing the economy back into recession, Moody's chief economist wrote in a report. However, business sentiment appears very fragile and likely to turn sour quickly if policymakers do fall short.
Small business owners created 19,000 new jobs in November, payroll processing company ADP reported on Dec. 5.
Business leaders are getting more worried about the fiscal cliff, and urging Congress and President Obama to make a deal before the New Year triggers a series of tax increases and spending cuts that would likely put the nation back in a recession.
The Business Roundtable released a letter signed by 158 chief executives of companies with more than $7.3 trillion in sales and 16 million workers, saying congressional Republicans need to make concessions on revenue, and Democrats need to give ground on entitlements such as Medicare and Social Security.
At the same time, the National Federation of Independent Business said a survey of its members showed a huge drop in confidence after the November election, as the cliff drew closer.
The NFIB survey of business confidence fell almost six points to 87.5, the lowest score since 2009 and far below stock market expectations for 92.5. The drop is a sign that business owners are losing confidence as Congress moves closer to raising taxes on couples making more than $250,000 a year, even though less than 5% of business owners make that much, said UBS economist Drew Matus. Only 9% expect better conditions in six months, compared with 49% who expect things to get worse, the NFIB said.
The United States will suffer significant negative economic, employment, and social consequences for going over the fiscal cliff, the CEOs said in a letter to congressional leaders. In many cases, the damage will be long-lasting, if not permanent. But it does not have to happen.
The chief executive of USA TODAY parent Gannett, was one of the CEOs who signed the letter.
The NFIB survey showed declines in nine out of 10 indicators of confidence, with a slight uptick in hiring plans for early next year, the federation said.
Marginal investments may not be undertaken as the increase in taxes moves some investment from the yes to the no column. The debate is whether that marginal investment is a significant source of innovation or employment.
The survey was more bearish than other indicators of business confidence recently. Moody's Analytics' weekly survey of business confidence, released Monday, said confidence rose slightly but remains at a low level. About a third of respondents expect the economy to get worse in the next few months, Moody's reported. In Moody's survey, government officials were the most pessimistic about the economy.
Like investors, businesses appear to believe that policymakers will come to terms before pushing the economy back into recession, Moody's chief economist wrote in a report. However, business sentiment appears very fragile and likely to turn sour quickly if policymakers do fall short.
Small business owners created 19,000 new jobs in November, payroll processing company ADP reported on Dec. 5.
Homebuilding looking up
originally appeared in Zacks Equity Research:
KB Home, one of the leading homebuilding companies in the U.S., recently acquired lands for 100 luxury homes in the sought after community of Playa Vista in Westside, Los Angeles. The construction of homes will start in spring.
The company intends to build three story detached homes of 2,800 square feet. The homes will have four bedrooms and three and half baths. The company also intends to build single floor condominium homes of 2,000 square feet with private elevator access for each home.
For simple or more complex bathroom remolding projects, consider an outstanding bathroom remodel grand rapids company that does quick, professional work.
Owing to its operational business model KBnxt, KB Home always begins construction only after a purchase agreement is executed. As such, the consumers buying KB homes in Playa Vista will get the liberty to plan their homes according to their preference.
This process also helps the company turn over its inventory more quickly than its peers, thereby supplying capital for reinvestment. In the long run, this reduces the risk of unsold inventory leading to higher returns on invested capital.
Playa Vista is one of the most sought after luxurious communities in Westside, Los Angeles. The acquisition of land in Los Angeles’ Westside is in line with KB Home’s strategic shift in its geographic footprint. The focus is to place the communities in highly desirable land-constrained submarkets that enable it to sell larger, higher-priced homes, thus driving a strong increase in average selling price.
The rising demand for new homes has led to a favorable situation in the housing market, where inventory levels are dropping and prices are moving up. The demand has been particularly strong for luxury homes. Toll Brothers, Inc., another leading luxury homebuilder in the US, has been witnessing strong overall growth over the past few quarters.
Therefore, building adequate number of new homes is necessary in order to maintain the required level of inventory to meet the growing demand for homes. Acquiring lots and lands in the Playa Vista community will help the company to capitalize on the increasing housing demand.
With housing market recovery gaining momentum, KB Home believes its strategic initiatives including overhead reduction, margin expansion, and land investments in higher-priced, better-located communities; and increasing backlog will help it achieve profitability in the upcoming quarters. Though we have faith in KB Home’s strategic initiatives, we believe that it may take time to achieve sustainable profitability as the housing market recovery process is erratic and uneven.
We currently have a Neutral recommendation on KB Home. The stock carries a Zacks #3 Rank (a short-term Hold rating).
KB Home, one of the leading homebuilding companies in the U.S., recently acquired lands for 100 luxury homes in the sought after community of Playa Vista in Westside, Los Angeles. The construction of homes will start in spring.
The company intends to build three story detached homes of 2,800 square feet. The homes will have four bedrooms and three and half baths. The company also intends to build single floor condominium homes of 2,000 square feet with private elevator access for each home.
For simple or more complex bathroom remolding projects, consider an outstanding bathroom remodel grand rapids company that does quick, professional work.
Owing to its operational business model KBnxt, KB Home always begins construction only after a purchase agreement is executed. As such, the consumers buying KB homes in Playa Vista will get the liberty to plan their homes according to their preference.
This process also helps the company turn over its inventory more quickly than its peers, thereby supplying capital for reinvestment. In the long run, this reduces the risk of unsold inventory leading to higher returns on invested capital.
Playa Vista is one of the most sought after luxurious communities in Westside, Los Angeles. The acquisition of land in Los Angeles’ Westside is in line with KB Home’s strategic shift in its geographic footprint. The focus is to place the communities in highly desirable land-constrained submarkets that enable it to sell larger, higher-priced homes, thus driving a strong increase in average selling price.
The rising demand for new homes has led to a favorable situation in the housing market, where inventory levels are dropping and prices are moving up. The demand has been particularly strong for luxury homes. Toll Brothers, Inc., another leading luxury homebuilder in the US, has been witnessing strong overall growth over the past few quarters.
Therefore, building adequate number of new homes is necessary in order to maintain the required level of inventory to meet the growing demand for homes. Acquiring lots and lands in the Playa Vista community will help the company to capitalize on the increasing housing demand.
With housing market recovery gaining momentum, KB Home believes its strategic initiatives including overhead reduction, margin expansion, and land investments in higher-priced, better-located communities; and increasing backlog will help it achieve profitability in the upcoming quarters. Though we have faith in KB Home’s strategic initiatives, we believe that it may take time to achieve sustainable profitability as the housing market recovery process is erratic and uneven.
We currently have a Neutral recommendation on KB Home. The stock carries a Zacks #3 Rank (a short-term Hold rating).
Service jobs heading offshore
originally appeared in USA Today:
The strike that crippled two of the nation's busiest shipping ports was settled this week, but the offshoring of service jobs — is expected to continue to grow as a trend across the USA.
The eight-day walkout by clerical workers at the ports of Los Angeles and Long Beach largely centered on the outsourcing of their jobs overseas and elsewhere in the U.S., says a spokesman for the International Longshore and Warehouse Union. Shippers denied outsourcing jobs, but the tentative settlement restricts the practice, according to the Associated Press.
Yet service companies have been sending jobs abroad in large numbers the past decade to cut labor costs — a trend that accelerated in the recession and is expected to continue the next few years before slowing after 2016. About 663,000 large-company jobs in information technology, human resources, finance and purchasing — the category that includes the port workers — have been offshored since 2002, according to The Hackett Group.
By 2016, the consulting firm estimates, another 375,000 jobs in the sectors will be moved abroad. More than a third of the U.S. jobs in those industries in 2002 will have moved offshore by 2016.
Most workers are employed directly by companies that previously used U.S. staffers, though some work for outsourcing firms. Hackett studied companies with at least $1 billion in annual revenue, noting they represent about 75% of the offshoring market.
India is the largest offshoring center. Service jobs also have gone to eastern Europe, the Philippines, China and Mexico.
In other sectors, initially low-level jobs were offshored, such as handling payroll or tracking purchase orders. Employers typically can cut labor costs by about 75%. In recent years, a growing number of higher-level jobs have moved overseas, such as benefits analysis and vendor management, though the cost savings for offshoring those positions is only about 25%.The trend took off after companies began contracting with programmers in India to help with the massive preparations for the Y2K computer bug in 2000, according to Hackett's research director.
He also indicated organizations now feel more comfortable moving up the value chain, noting, for example, that India's education system is improving and turning out top-notch job candidates.
Since 2005, legal services such as document review, contract drafting and regulatory communication increasingly have been offshored, particularly to India, according to the managing director of Pangea3, a legal outsourcing firm. Indian attorneys handle work that in the U.S. is sometimes done by paralegals and at a 40% to 60% cost savings, he says.
Several thousand legal jobs have been offshored, estimates the founder of The LPO Program, a legal consulting firm.
In the current environment, it is more important than ever that … the support we provide to clients adds value without adding unnecessary cost, law firm Clifford Chance said in a statement.
Once services are offshored, there's little chance they'll come back to the U.S. according to The Hackett Group. By contrast, manufacturers have returned some production to the U.S. recently, largely because of a narrowing wage gap between the U.S. and China, rising shipping costs and falling U.S. energy costs — factors that generally haven't affected service jobs.
One exception: call-center jobs. About 500,000 were offshored from 2006 to 2010, according to the Communications Workers of America. Many have returned to the U.S. the last few years because of cultural gaps between representatives and customers that hurt sales, according to the senior partner of Boston Consulting Group.
Yet CWA spokesperson called the jobs that have come back a drop in the bucket.
The strike that crippled two of the nation's busiest shipping ports was settled this week, but the offshoring of service jobs — is expected to continue to grow as a trend across the USA.
The eight-day walkout by clerical workers at the ports of Los Angeles and Long Beach largely centered on the outsourcing of their jobs overseas and elsewhere in the U.S., says a spokesman for the International Longshore and Warehouse Union. Shippers denied outsourcing jobs, but the tentative settlement restricts the practice, according to the Associated Press.
Yet service companies have been sending jobs abroad in large numbers the past decade to cut labor costs — a trend that accelerated in the recession and is expected to continue the next few years before slowing after 2016. About 663,000 large-company jobs in information technology, human resources, finance and purchasing — the category that includes the port workers — have been offshored since 2002, according to The Hackett Group.
By 2016, the consulting firm estimates, another 375,000 jobs in the sectors will be moved abroad. More than a third of the U.S. jobs in those industries in 2002 will have moved offshore by 2016.
Most workers are employed directly by companies that previously used U.S. staffers, though some work for outsourcing firms. Hackett studied companies with at least $1 billion in annual revenue, noting they represent about 75% of the offshoring market.
India is the largest offshoring center. Service jobs also have gone to eastern Europe, the Philippines, China and Mexico.
In other sectors, initially low-level jobs were offshored, such as handling payroll or tracking purchase orders. Employers typically can cut labor costs by about 75%. In recent years, a growing number of higher-level jobs have moved overseas, such as benefits analysis and vendor management, though the cost savings for offshoring those positions is only about 25%.The trend took off after companies began contracting with programmers in India to help with the massive preparations for the Y2K computer bug in 2000, according to Hackett's research director.
He also indicated organizations now feel more comfortable moving up the value chain, noting, for example, that India's education system is improving and turning out top-notch job candidates.
Since 2005, legal services such as document review, contract drafting and regulatory communication increasingly have been offshored, particularly to India, according to the managing director of Pangea3, a legal outsourcing firm. Indian attorneys handle work that in the U.S. is sometimes done by paralegals and at a 40% to 60% cost savings, he says.
Several thousand legal jobs have been offshored, estimates the founder of The LPO Program, a legal consulting firm.
In the current environment, it is more important than ever that … the support we provide to clients adds value without adding unnecessary cost, law firm Clifford Chance said in a statement.
Once services are offshored, there's little chance they'll come back to the U.S. according to The Hackett Group. By contrast, manufacturers have returned some production to the U.S. recently, largely because of a narrowing wage gap between the U.S. and China, rising shipping costs and falling U.S. energy costs — factors that generally haven't affected service jobs.
One exception: call-center jobs. About 500,000 were offshored from 2006 to 2010, according to the Communications Workers of America. Many have returned to the U.S. the last few years because of cultural gaps between representatives and customers that hurt sales, according to the senior partner of Boston Consulting Group.
Yet CWA spokesperson called the jobs that have come back a drop in the bucket.
Thursday, December 13, 2012
Tax Law News
originally appeared on npr.org:
Every time President Obama explains why he wants to increase taxes on the richest 2 percent, Republicans have a ready answer: Most small business owners file their taxes as individuals, and a rate hike would discourage them from hiring new workers.
So when Obama visited the K'NEX factory in Pennsylvania recently to push for his tax plan, House Republicans countered with a campaign-style video, also featuring a Pennsylvania business.
For small business tax help contact this Philadelphia tax lawyer.
In it, Gorski Engineering's owner explains how his company is set up as a "subchapter S" corporation under the tax code. So, however good or bad we do is my income, he says.
But how does that back up the fundamental Republican argument, that a higher tax rate would make it harder for him to hire new workers?
Actually, it doesn't. Which is why, Gorski's owner told NPR in an interview, he specifically avoided saying that in the video. He didn't know that that would be true for his business or a different business unless we understood the complete situation.
Some of these situations, said other business owners, are such that the higher tax rate could actually act as an incentive to hire more employees or invest in new equipment.
Because that would then lower your potential tax rate, according to the owner of Hobby Works, a group of toy stores in the Washington, D.C., area.
If this seems counterintuitive, the answer lies in the way businesses calculate their taxes. Obama's proposal would increase the tax rate, but only for income that exceeds a quarter-million dollars per household.
For some 97 percent of small business owners, that higher rate is irrelevant. They make less than $250,000 a year.
And for those whose income works out to be just over that threshold, one way out of paying that higher tax rate could be to hire one more person — or finally replace that 10-year-old car. These investments would pull net income back under that quarter-million-dollar mark, out of range of that higher rate.
The owner of Paloma Clothing in Portland, Ore., thinks if you're a person who hates paying taxes, hiring another employee for thirty- or forty-thousand a year is a great way to stay below the new so-called marginal rate.
There are situations, though, where Obama's proposed higher rates would make it tougher for particular small businesses to expand.
Owners of franchise restaurants, for example, who need to save up tens of thousands of dollars in cash so they can open up a new eatery, would have a harder time. Such savings are treated as business profit and, therefore, in the case of most small businesses, personal income prior to the reinvestment.
If that money is taxed at 35 percent instead of 31 percent, it would take somewhat longer to get to the necessary goal, according to the CEO of Florida-based Firehouse Subs.
Gorski Engineering's owner similarly faces that higher tax rate when he saves up for a number of years to hire a highly paid employee or a piece of earth-moving equipment.
Gorski Engineering's owner indicated that if he started to build a nest egg again, if I start to invest in equipment and things but I don't have as much to do that, or invest in people, which is our biggest resource, I don't have as much to do that, that's going to be difficult.
Of course, when Gorski finally does hire that expensive employee or buys that pricey backhoe, he will have a large, new expense he can write off — potentially offsetting some or most of the extra taxes he had to pay earlier.
The owner of Hobby Works, says there's really nothing new or unusual about taking the tax code into account when making business decisions.
He indicated the fact of the matter is, businesses, all businesses, large and small, do this all the time.
One business strategy is to continually plow extra profit back into the business to avoid those higher tax rates. Eventually, the owner can sell the business or take it public, and convert those years of deferred income into a big cash payout.
And depending on how it's handled, selling a business can be considered capital gains, taxed at a lower rate right now, a much lower rate.
Every time President Obama explains why he wants to increase taxes on the richest 2 percent, Republicans have a ready answer: Most small business owners file their taxes as individuals, and a rate hike would discourage them from hiring new workers.
So when Obama visited the K'NEX factory in Pennsylvania recently to push for his tax plan, House Republicans countered with a campaign-style video, also featuring a Pennsylvania business.
For small business tax help contact this Philadelphia tax lawyer.
In it, Gorski Engineering's owner explains how his company is set up as a "subchapter S" corporation under the tax code. So, however good or bad we do is my income, he says.
But how does that back up the fundamental Republican argument, that a higher tax rate would make it harder for him to hire new workers?
Actually, it doesn't. Which is why, Gorski's owner told NPR in an interview, he specifically avoided saying that in the video. He didn't know that that would be true for his business or a different business unless we understood the complete situation.
Some of these situations, said other business owners, are such that the higher tax rate could actually act as an incentive to hire more employees or invest in new equipment.
Because that would then lower your potential tax rate, according to the owner of Hobby Works, a group of toy stores in the Washington, D.C., area.
If this seems counterintuitive, the answer lies in the way businesses calculate their taxes. Obama's proposal would increase the tax rate, but only for income that exceeds a quarter-million dollars per household.
For some 97 percent of small business owners, that higher rate is irrelevant. They make less than $250,000 a year.
And for those whose income works out to be just over that threshold, one way out of paying that higher tax rate could be to hire one more person — or finally replace that 10-year-old car. These investments would pull net income back under that quarter-million-dollar mark, out of range of that higher rate.
The owner of Paloma Clothing in Portland, Ore., thinks if you're a person who hates paying taxes, hiring another employee for thirty- or forty-thousand a year is a great way to stay below the new so-called marginal rate.
There are situations, though, where Obama's proposed higher rates would make it tougher for particular small businesses to expand.
Owners of franchise restaurants, for example, who need to save up tens of thousands of dollars in cash so they can open up a new eatery, would have a harder time. Such savings are treated as business profit and, therefore, in the case of most small businesses, personal income prior to the reinvestment.
If that money is taxed at 35 percent instead of 31 percent, it would take somewhat longer to get to the necessary goal, according to the CEO of Florida-based Firehouse Subs.
Gorski Engineering's owner similarly faces that higher tax rate when he saves up for a number of years to hire a highly paid employee or a piece of earth-moving equipment.
Gorski Engineering's owner indicated that if he started to build a nest egg again, if I start to invest in equipment and things but I don't have as much to do that, or invest in people, which is our biggest resource, I don't have as much to do that, that's going to be difficult.
Of course, when Gorski finally does hire that expensive employee or buys that pricey backhoe, he will have a large, new expense he can write off — potentially offsetting some or most of the extra taxes he had to pay earlier.
The owner of Hobby Works, says there's really nothing new or unusual about taking the tax code into account when making business decisions.
He indicated the fact of the matter is, businesses, all businesses, large and small, do this all the time.
One business strategy is to continually plow extra profit back into the business to avoid those higher tax rates. Eventually, the owner can sell the business or take it public, and convert those years of deferred income into a big cash payout.
And depending on how it's handled, selling a business can be considered capital gains, taxed at a lower rate right now, a much lower rate.
Port strike may hit holiday sales
originally appeared in USA Today:
A strike has crippled two California shipping ports and if it continues, could leave some retailers with sparse shelves toward the end of the holiday shopping season.
About 450 clerical workers represented by the International Longshore and Warehouse Union went on strike a week ago at the ports of Los Angeles and Long Beach. But the work stoppage quickly became more serious as an additional 10,000 port workers refused to cross the striking workers' picket lines.
Despite agreeing to federal mediation Tuesday, the Local 63 Office Clerical Unit says it plans to continue its strike. It has accused the ports' managing group, the Harbor Employers Association, of outsourcing jobs.
The strike has essentially shut down 10 of 14 terminals at the two ports, backing up cargo and delaying shipments.
The majority of our members have been impacted, cargo that's already arrived is just sitting at the port. Right now there isn't a whole lot they can do, according to the vice president of supply chain and customs policy for the National Retail Federation.
The NRF, which has more than 9,000 members, is still working to assess the economic impact. The NRF notes in one of its letters to President Obama calling for an intervention that a 10-day West Coast ports lockout in 2002 cost the economy an estimated $1 billion a day.
According to the Port of Long Beach, the closed terminals have led to more than $3 billion worth of goods sitting on the docks of both affected ports, causing backups and delaying trucks and trains.
The executive director for the Port of Long Beach indicates all of the people in the supply chain, or most of them, have stopped working because of this, (they) have approximately 15 ocean vessels outside at anchor that are waiting for a resolution to this labor problem.
While most retailers already have the majority of their shipments for the holiday season, the work stoppage could affect merchandise coming in just before Christmas.
This time now is when retailers do the big last push to get products to store shelves according to the executive director, so some of that product is currently being delayed.
Retailers faced a similar situation in September, when threats of a strike by the International Longshoremen's Association along the East Coast had some acting on contingency plans and rerouting shipments to the West Coast to avoid backups during the holiday season.
Those workers returned to the docks but are still in negotiations with the United States Maritime Alliance.
A Harbor Employers Association spokesman denies accusations that the organization is outsourcing jobs. The staffing issue is over whether to fill all jobs that become vacant with full-time workers.
The spokesman indicated that they say (when) three people have retired; we want their jobs replaced, he says. We want to make sure the people who occupy those chairs have work to do, as opposed to just occupying chairs. The bottom line is the cargo volumes are not what they used to be.
Wednesday, December 12, 2012
Starbucks rolls out $450 gift card
originally appeared in USA Today:
Starbucks lovers, don't choke on your latte. The $450 Starbucks card is here.
Just in time for the holidays, the trend-setting coffee behemoth on Wednesday will be at the forefront of what could be yet another cultural hot button: the super premium gift card.
The Starbucks Metal Card isn't made of plastic, but steel. Each specially etched card, loaded with $400, costs $50 to make, which Starbucks says explains the $450 price tag.
Starbucks will make only 5,000 of them. But you can't buy them at any Starbucks store. They'll only be sold via the luxury goods website, Gilt.com. The card comes with gold-level Starbucks card membership benefits, such as gifts and freebie refills on brewed coffee and tea.
Some stores will never even see this card, according to vice president of card and payments at Starbucks.
But not everyone is impressed. This is a card for the 1%, according to a well-known cultural anthropologist. It's all about status, and to tell you the truth, I don't know if I'd want to be seen with one of these.
The move by Starbucks blends two growing trends: consumer love of gift cards and upper-end exclusivity. The costly gift card follows another recent, pricey rollout: a limited brew coffee sold in 46 Starbucks stores, which fetches $7 for a 16-ounce cup.
I won't be at all surprised to see other retailers follow according to National Retail Federation vice president of operations.
Its appeal is exclusivity, according to executive vice president at Gilt.com, When you're waiting in line at Starbucks, the next person in line won't have it.
On Thursday, Starbucks members will have first access to the card on Gilt.com's website before it's available to all on Friday.
For collectors, it could be huge. Some limited-edition Starbucks cards have sold on eBay for thousands of dollars.
Starbucks lovers, don't choke on your latte. The $450 Starbucks card is here.
Just in time for the holidays, the trend-setting coffee behemoth on Wednesday will be at the forefront of what could be yet another cultural hot button: the super premium gift card.
The Starbucks Metal Card isn't made of plastic, but steel. Each specially etched card, loaded with $400, costs $50 to make, which Starbucks says explains the $450 price tag.
Starbucks will make only 5,000 of them. But you can't buy them at any Starbucks store. They'll only be sold via the luxury goods website, Gilt.com. The card comes with gold-level Starbucks card membership benefits, such as gifts and freebie refills on brewed coffee and tea.
Some stores will never even see this card, according to vice president of card and payments at Starbucks.
But not everyone is impressed. This is a card for the 1%, according to a well-known cultural anthropologist. It's all about status, and to tell you the truth, I don't know if I'd want to be seen with one of these.
The move by Starbucks blends two growing trends: consumer love of gift cards and upper-end exclusivity. The costly gift card follows another recent, pricey rollout: a limited brew coffee sold in 46 Starbucks stores, which fetches $7 for a 16-ounce cup.
I won't be at all surprised to see other retailers follow according to National Retail Federation vice president of operations.
Its appeal is exclusivity, according to executive vice president at Gilt.com, When you're waiting in line at Starbucks, the next person in line won't have it.
On Thursday, Starbucks members will have first access to the card on Gilt.com's website before it's available to all on Friday.
For collectors, it could be huge. Some limited-edition Starbucks cards have sold on eBay for thousands of dollars.
Tuesday, December 4, 2012
Some Small Businesses in Fear after Election
story first appeared in The Wall Street Journal
The results of the presidential election dampened the spirits of many small-business owners who now worry that forthcoming federal policies, including potentially higher taxes and health-care reform, could stunt growth and hiring at their firms.
A November survey from Vistage International Inc. and The Wall Street Journal found a significant drop in optimism compared with the months leading up to the election, as respondents anticipated a worsening economy in 2013.
Julie Sanderson, owner of Vail Condo Rentals, a small business operating with a tight budget, says her main concern is health insurance. She believes that with rates already "sky high," she will be unable to keep her employees if her business costs go up.
The survey's overall confidence index, based on responses of 740 small-business owners, fell to 83.9 from 95.3 in October. That is the lowest in the survey's six-month history.
Specifically, the survey's index of expected economic conditions fell to 77 from 105, a result of 43% of the respondents anticipating worse U.S. conditions in the next 12 months. That is nearly twice as many as October's 23%. The index of business profits also fell to 122 from 135 as only 43% of owners anticipate higher profits in the coming year, down from 50% last month.
Some policies that Mitt Romney had proposed during his campaign were appealing to small-business owners, such as keeping taxes low and repealing President Barack Obama's health-care reform.
Anticipating higher taxes under President Obama, more business owners are preparing cutbacks to their payroll and other overhead expenses. November's employment index fell to 124 from 141 as 16% of owners are planning to reduce staff in the next year, up from 9% in October. And the fixed-investment index fell to 107 from 123, in part because 23% of owners plan to decrease their investment expenditures, up from 14% last month.
Terry Racciato, one business owner, said she was despondent in the days following the election. Ms. Racciato is president of Together We Grow Inc., a pediatric health day-care business for special-needs children in San Diego that she started in 1990.
The top issue for Ms. Racciato is rising health-care costs. She provides benefits to her 52 full-time employees and personally gets coverage through her company's plan. Because she and her husband are now over the age of 60, their deductible and copayment for medical care recently doubled to $37,000 annually. That is money she could have used to bring on another employee, she said.
What's deepening her worry, she said, is that if she opts to drop health benefits to save money, she will, in 2014, have to pay a penalty—a provision that kicks in for companies with 50 or more full-time employees under the federal health-care reform.
She reiterates the fears of Mrs. Sanderson, who fears both her Vail business and her Deer Valley Condo Rentals will be in jeopardy because they operate at low costs. She says keeping vacation rental costs low for her customers is her greatest value, but isn't sure how she'll be able to keep up if her health care costs increase.
Ed Trevis, president and chief executive of Corvalent Corp., an industrial-computer manufacturer in Cedar Park, Texas, says the uncertainty about potential tax hikes is hurting his 50-person firm because he can't plan for the future.
A tax increase on higher-income earners may come as part of an agreement to avoid the so-called fiscal cliff—a series of across-the-board tax hikes and government-spending cuts that will kick in at the beginning of 2013. But Congress has yet to come to a resolution and Mr. Trevis is nervous that any agreement could come down to the last minute and be only temporary.
Global economic conditions are most troubling to William P. Southard, founder and president of DST Controls in Benicia, Calif. Mr. Southard and his 38 employees set up and service computer systems and monitoring panels on five continents.
The results of the presidential election dampened the spirits of many small-business owners who now worry that forthcoming federal policies, including potentially higher taxes and health-care reform, could stunt growth and hiring at their firms.
A November survey from Vistage International Inc. and The Wall Street Journal found a significant drop in optimism compared with the months leading up to the election, as respondents anticipated a worsening economy in 2013.
Julie Sanderson, owner of Vail Condo Rentals, a small business operating with a tight budget, says her main concern is health insurance. She believes that with rates already "sky high," she will be unable to keep her employees if her business costs go up.
The survey's overall confidence index, based on responses of 740 small-business owners, fell to 83.9 from 95.3 in October. That is the lowest in the survey's six-month history.
Specifically, the survey's index of expected economic conditions fell to 77 from 105, a result of 43% of the respondents anticipating worse U.S. conditions in the next 12 months. That is nearly twice as many as October's 23%. The index of business profits also fell to 122 from 135 as only 43% of owners anticipate higher profits in the coming year, down from 50% last month.
Some policies that Mitt Romney had proposed during his campaign were appealing to small-business owners, such as keeping taxes low and repealing President Barack Obama's health-care reform.
Anticipating higher taxes under President Obama, more business owners are preparing cutbacks to their payroll and other overhead expenses. November's employment index fell to 124 from 141 as 16% of owners are planning to reduce staff in the next year, up from 9% in October. And the fixed-investment index fell to 107 from 123, in part because 23% of owners plan to decrease their investment expenditures, up from 14% last month.
Terry Racciato, one business owner, said she was despondent in the days following the election. Ms. Racciato is president of Together We Grow Inc., a pediatric health day-care business for special-needs children in San Diego that she started in 1990.
The top issue for Ms. Racciato is rising health-care costs. She provides benefits to her 52 full-time employees and personally gets coverage through her company's plan. Because she and her husband are now over the age of 60, their deductible and copayment for medical care recently doubled to $37,000 annually. That is money she could have used to bring on another employee, she said.
What's deepening her worry, she said, is that if she opts to drop health benefits to save money, she will, in 2014, have to pay a penalty—a provision that kicks in for companies with 50 or more full-time employees under the federal health-care reform.
She reiterates the fears of Mrs. Sanderson, who fears both her Vail business and her Deer Valley Condo Rentals will be in jeopardy because they operate at low costs. She says keeping vacation rental costs low for her customers is her greatest value, but isn't sure how she'll be able to keep up if her health care costs increase.
Ed Trevis, president and chief executive of Corvalent Corp., an industrial-computer manufacturer in Cedar Park, Texas, says the uncertainty about potential tax hikes is hurting his 50-person firm because he can't plan for the future.
A tax increase on higher-income earners may come as part of an agreement to avoid the so-called fiscal cliff—a series of across-the-board tax hikes and government-spending cuts that will kick in at the beginning of 2013. But Congress has yet to come to a resolution and Mr. Trevis is nervous that any agreement could come down to the last minute and be only temporary.
Global economic conditions are most troubling to William P. Southard, founder and president of DST Controls in Benicia, Calif. Mr. Southard and his 38 employees set up and service computer systems and monitoring panels on five continents.
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