Big Lie

Nazi propaganda was governed by a principal known as the “Big Lie Idea”.  It is based on Hitler’s book, Mein Kampf, and essentially boils down to this: if you tell a big enough lie, people will believe it because… who’d lie about that?  Hitler actually said that the public would refuse to believe that someone would have the “impudence to distort the truth so infamously”.

Joe Goebbels was a bad guy.  As the one in charge of Nazi propaganda, he knew a thing or two about how to control the public opinion.  There’s a relatively famous quote that is often attributed to Goebbels about the “big lie”.  The quote is:

If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.

Whether or not he actually said it, I find that it is grossly appropriate for Scranton.  As the city burns, our officials jovially wander the halls telling taxpayers the hikes are not coming, telling banks the revenue exists and telling State officials they care about balancing the budget as they pile massive costs into future years.

It sure sounds a like the Big Lie is Scranton’s current plan for solvency.

Scranton loses RTKL appeal

On October 10, 2012, I made a request to Scranton for four documents.  The request read:

1. A listing of all current Police Officers, including years of service
(estimated at 140 individuals)

2. A listing of all current Fire Fighters, including years of service
(estimated at 135 individuals)

3. Information related to the following excerpt from the Fire Union contract:

“6. On or before 12/31/12, the city shall pay to current and former
bargaining unit members $162,892 in damages and interest as
reimbursement to bargaining unit members arising from the Award of
Stanley Aegis involving the deduction of health care contributions as
enforced by the Pennsylvania Labor Relations ct and affirmed by the
Commonwealth Court”

SPECIFICALLY: Is this award ($162,892) the amount due to EACH
bargaining unit member, or the total amount to be SPLIT by all bargaining
unit members.

4. An update on the status of the 2011 audit being performed by Robert
Rossi, including an explanation of why the audit is more than 100 days
past due.

After the city invoked a 30 day extension, they denied the request on November 20, 2012.  The stated reasons were:

1. Not a public record
2. Not a public record
3. Not a document request
4. Not a document request

Seriously.  That was the response: sixteen words.  I appealed their decision to the State, citing the Sunshine Law which explicitly states that “nothing… shall preclude the release of the name, position… and length of service of a public official or an agency employee”.

The State’s “appeals officer” issued a ruling on December 26.  In the six page discussion of issue, the officer made a few interesting comments.  To wit:

• The city was required to provide a discussion of “legal authority” for the denial, which they failed to do.
  Translation: When the city denies an open records request, they must tell you why the document is not a public record.  They have the “burden of proof”, because a government should not be keeping secrets.
  
• Because I am requesting the names of law enforcement officers, the city was required to notify all employees impacted by the request (specifically, all active Police and Firemen).  The appeals officer notified the city of their requirement to disclose my request.  The office also asked that the city respond to the notification indicating it had complied with the notification.  The city ignored the State’s notification and did not respond to the appeals officer.
• In the appeal, I argued that request 3 and 4 were descriptive enough indicate the type of document which would satisfy the request.  I even clarified my third request, stating that I would like a break-out of employee names and amounts received.
• The appeals officer noted that even though the city failed to provide legal support for why they denied my request, I was able to provide a specific legal citation for why the documents should be public information.

So, want to know the final outcome?  Here’s a shock: the city lost, mostly because they failed to comply with the law.  I guess it just doesn’t apply in Scranton?  Here’s the actual verdict:

1. The City failed to meet its burden of proof as to Items 1 and 2 of the Request and must release the requested documents.
   
2. Items 3 and 4 of the Request do not seek records, and as such cannot be produced by the city

That looks like I am batting .500, but there is a catch: in the final ruling, the appeals officer stated that the requests were dismissed only because my clarification of the documents I am looking for was not included in the original request.  That means that I can re-request these two documents.  And I will.

What a way to wind up the year: first a win in the commuter tax hearing, and now a win in a RTKL appeal.  I am hopeful this is just the beginning of a very good 2013.

Holiday Hiatus and a Funny Picture

Apologies for the lack of movement in the last week or so here.  I have been celebrating the holiday season along with a few hard won wins (such as the commuter tax verdict and my win vs. Scranton on a Right to Know appeal).  I will get back to the regular schedule in the very near future.  Until then, here’s a holiday funny:

Point to the doll’s wallet when they ask where the city touched you

I had planned to avoid an opinion heavy rant on this blog.  For the most part, I kept to that plan.  The vast majority of posts over the last eight months have included thoroughly researched, well documented background as the base for some wishful thinking about how to solve municipal distress.  Tonight, I am breaking with that tradition.

On 12/23/2012, the Scranton Times published a piece of propaganda an article about the financial woes of NEPA.  The article is ostensibly about the systemic drivers of municipal distress.  Its true purpose, though, is as a puff piece designed to help “very competent people” (such as Scranton’s Mayor?), PEL, and its Executive Director Gerry Cross, save face after a humiliating defeat in court seeking the imposition of a commuter tax.

Let’s dive down the rabbit hole, shall we?

The article points out that Police and Fire Department salaries will exceed tax revenue – something I have been harping on since this blog’s inception.  Apparently, the Scranton Times’ Golden Boy Chris Doherty knew this was a problem, too.  And lo! For the last decade he has been battling for you, lowly tax payer of Scranton, by proposing massive tax hikes and feeding millions of dollars to attorneys in an attempt to… well, I don’t really know.  Take your money, I guess.

But! That’s not a very good platform for a fourth (?!) Mayoral bid.  Nor is it the kind of resume you want if you are looking to take over the Chamber of Commerce.  So, let’s dispense with the creative accounting: in an effort to stave off tax hikes (which keeps the economy ripe for investment, see how this plays into the Chamber gig?), Doherty engaged in financial shenanigans that would have made Bernie Madoff blush.  After running up $54,000,000 on the Parking Authority’s tab (the statutory limit), Doherty tacked another nine-figures onto the city’s direct tab.  Then he started with the Sewer Authority – forcing them to buy an asset off the city, which the city leased back for $1.  That sounds like a great deal!  I get $1 for the use of a property that I paid $4,000,000 for… wait.  Maybe that DOESN’T sound like a great deal.

At the end of the day, even these hush-hush-don’t-tell-the-taxpayer antics couldn’t balance the budget.  That’s because for every dollar we borrowed, we had to budget two dollars to repay it.  And then came the unions!  As I have documented all over this blog, the average policeman or fireman in Scranton makes 2.5-3x what the average taxpayer does (a paltry $36,000).  And they are all due for $40,000 – $60,000 MORE in 2013.  Fiscal instability scapegoat found, apparently.  To wit: “the biggest problem now is the increases in wages, health care and pension benefits”.

This is a wonderfully transparent example of how to alienate one side in a debate that requires everyone to give an inch.  Because Doherty, Evans, etc. cannot be re-elected on a “raise the taxes!” platform, they are going to take aim at the unions.  Without ever mentioning that their actions lead to the unsustainable cost structure they are so quick to lampoon.

And the best part – nay, the worst part, but this has already taken a turn for the Greek tragedy, so what’s a little artistic license – is PEL.  Remember PEL?  That’s the organization that has rubber stamped the city’s decent into the fiscal abyss over the last 20 years.  The same organization that has collected more than $2,500,000 in consulting fees.  The same organization that “missguestimated” commuter tax revenue as $4,000,000 when it was actually north of $8,000,000.  Gerry Cross wants you to know that these issues are simply… to tough:

“What’s harder to point out is the inability of competent people – very competent people, mayors that are professionals, finance guys that are professionals, the city councilmen that are professionals – (who) aren’t able to make this work. And that it’s not because they’re all goofs or they’re all incompetent.”

Mr. Cross, how dare you!  Competent?  “Finance guys”?  Let’s clarify something right here: maxing out a city’s debt load at the statutory limit, then pillaging authorities before raising taxes so you can continue to spend millions per year in Professional Services (read: attorney’s fees) is not competent.  But then again, you are the guy that rubber stamps these decisions.

Maybe, Mr. Cross, the problem is what you consider to be “competent”.  This is a very, very simply problem: a city has a fixed, potentially declining, revenue stream.  It has fixed, increasing expenditures driven by reckless borrowing and unsustainable CBAs.  The answer is quite simple: cap the expenditures.  It’s what I have been writing about for a year.  Does it require some legislative leg-work by the State?  Yes, absolutely.  But to paint a picture of saintly local-level politicians striving for the pocketbook-welfare of taxpayers is completely reprehensible.  All of these problems were caused by politics tainting finance, and the only true solution does not involve more “very competent” politicians.  It involves radical new ideas, supported by well reasoned and heavily researched opinions.  It involves a plan for the future, not finger pointing at the past.

I am flabbergasted by this article.  So, how to wrap this up?  How about a call to action.  For that, I turn to William Tecumseh Sherman – the man who presented Abraham Lincoln with Savannah, GA as a “Christmas Present” in 1864.

On December 20, 1860 – the eve of his departure for the Union – General Sherman delivered an address at what-was-to-become LSU.  As he was concluding, Sherman stated:

You are rushing into war with one of the most powerful, ingeniously mechanical, and determined people on Earth — right at your doors. You are bound to fail. Only in your spirit and determination are you prepared for this. In all else you are totally unprepared, with a bad cause to start with. At first you will make headway, but as your limited resources begin to fail, shut out from the markets as you will be, your cause will begin to wane. If your people will but stop and think, they must see in the end that you will surely fail.

On Christmas Eve, I wish to offer a similar warning to any official in any city across this  nation engaging in massive deceit of the taxpayer.   The taxpayer – a powerful, ingenious and determined group of people – are at your door.  You may have the entrenched treachery of a crony government on your side, and you may chalk up some early wins in the battle to keep taxpayer advocates silent, but you will surely fail.  You will fail for one simple reason: you are fighting to polish your legacy and retain a paycheck, all at a great cost to the public.  The taxpayer, though, is fighting for sustainability: sustainable, lower taxes; sustainable budgets and sustainable growth in the local economy.  You are bound to fail.

Merry Christmas.

(Today’s image is one again courtesy of Imaginary Foundation)

Here’s a Radical Idea: Revoke Scranton’s Charter

Let’s talk about some abstract theory for a moment: Scranton has a state charter to operate as a municipality.  It is the charter that makes Scranton a legal entity, able to levy taxes and execute contracts.  Without a charter, the city would be impotent.  They would have no taxing authority, and thus no revenue.   Without a legal entity, no contracts can exist, either.  So that means no debt service payments or pension payments.

Here’s the curve-ball I am proposing: force the county to operate the city.  Why couldn’t the county levy identical taxes as the city, effective as of the dissolution of the city, and limit those taxes to the geographic limits of the “defunct” city.  The commissioners would then have a completely unencumbered city apparatus that is generating $54,000,000 per year.  They could then appoint a “receiver” to operate the city.  After a revised structure is worked out, the county could hold a special election to re-institute the “old” form of government.  And the restructured city could pay a “breakoff” fee to the county, thereby shoring up their budget.

Or we could trod the path that exists: Chapter 9.

Commuter Tax Denied

It’s official: Scranton will not be reaching into commuters pockets in 2013.  Earlier today, Judge Nealon penned an order denying the city’s petition because they failed “to satisfy statutory criteria set forth in… Act 47”.

You can see the order here:

View this document on Scribd

Scranton taps their credit, continues to borrow at 10+%

Scranton continues its attempts to borrow away the fiscal distress.  On 12/14, the city borrowed an additional $14,660,000 at a stated rate of 7.25%.  They paid another $787,430 in origination fees (at least the lawyers don’t have to worry about the tax hikes with fees like that!).  My review the debt offering indicates that the true cost of this borrowing is approximately 9.4%, bringing the city’s effective cost of borrowing – that is to say, the weighted average interest rate on this year’s borrowing – to more than 10.25%.

This new round of borrowing is going to cost the city an average of $2,100,000 per year for 10 years.  FUN FACT: that brings the total new debt service from all the years financing activities to just under $4,000,000.  That is to say, we now have an EXTRA $4,000,000 of new costs – EVERY YEAR – in order to pay off the new debt.

I find it fascinating that our officials attempt to address fiscal distress by adding costs to future years.

If your pay gets cut at work, you don’t go take a second mortgage on the house, right?  So… what are Evans, Doherty & Co. doing?  Oh, protecting their political careers and enriching their chosen constituencies.  I forgot.

I am going to spend some time breaking down the cost of the new debt this week.  Stay tuned.

Time to replace the Plumber

 

It’s a simple thought: when your fan is slinging garbage in every direction, you don’t replace the fan.  Instead, you find where the garbage is coming from and you stop the leak.

In Scranton, I think PEL is the plumber.

I believe in Radical Transparency

Municipal Finance impacts everyone.  When the finances get screwy, your taxes go up.  When your taxes go up and you’re in an area like Scranton which is relatively free of annual increases in median income, that means you have less money.

Allegedly, Sunshine Laws and Open Record Laws are supposed to render municipal finance transparent.  However, if 2012 is any real guide for Scranton, the majority of decisions and discussions are still made behind closed doors with no public input.

I believe this is a problem.

In an attempt to address this short-coming, I have made every single piece of research I have produced available on this website.  And this evening that trend continues.  Here is a high level overview of my take on the city’s 2013 fiscal crisis.  It might look familiar because I published an earlier version in June.  At that time, I ended the post by noting that the City faced insolvency in July, a prediction which was spot on thanks to the minimum wage fiasco.

I have one fun fact related to this piece of research: I believe the City has about $53,000,000 in actual revenue in 2012.  The City, though, believes they have an $85,000,000 budget.  That is a difference of $32,000,000.  Do you know what else adds up to $32,000,000?  I do:

• $11,320,000 from the 10/24/12 debt issue
• $21,000,000 that the city is seeking by the end of 2012

How about that.  We are borrowing almost the exact difference between my projected actual revenues and the City’s budget.

Curious.

Anyway, here’s my comments:

View this document on Scribd

How self-interest sinks Cities

I missed this article when it was originally published last month, but I highly recommend reading it over.  It explains that Scranton’s problems are not unique; they are the same issues sinking other cities all over the country:

http://www.reuters.com/article/2012/11/13/us-bernardino-bankrupt-idUSBRE8AC0HP20121113

Enjoy.