Friday, May 20, 2011

An open letter to PPS Superintendent Carole Smith: why we said no

Dear Superintendent. Smith,
After publicly stating that it was your goal to persuade voters to approve new construction "until all the schools have received the overhauls the district says they need," it must have been quite a shock when a your well advertised campaign resulted in a resounding "no."  How could that have happened?
Who does NOT heart Portland Schools?
Does that mean that you wasted the $21,600 you paid research firm Davis, Hibbits and Midghall to tell you voters would say "yes" if you added something for ALL schools (not just the ones that needed it)?  What's another $178 million, when EVERYBODY gets a little something?
Also, you made the bond issue sound positively miniscule by not including that pesky $77.5 million interest and insurance costs we'd have to pay.  $625.5 million does sound like a lot more than $548 million.  Voters won't notice. 
You even went to the trouble to underestimate the real interest cost by promising to do the very thing guaranteed it high.  You would finance the long term bond by renegotiating interest rates every few years, when every economist under the sun is warning that interest rates are going up.  I guess you thought that, if voters didn't notice that you didn't include the interest or insurance they'd pay, they certainly wouldn't notice that the terms of the deal were bad.
The plastic surgeons in Portland probably loved your co-chair's quote, "Anyone needs a face-lift after 65 years," but apparently some of the other voters didn't.  Talking about elective plastic surgery when 9.6% of the city's workers are looking for a job may have been a bit of a misstep, but maybe you thought that if they don't work, they may not vote. 
But, it turned out, even the Portland voters with jobs notice that the value of their homes was down 29% from its peak, while their property taxes were rising up at least 3% a year.  Of course, you tried to soothe homeowners by saying that, the average voter would only be paying $300 more.  You didn't expect them to know the difference between median and average.  You couldn't have known that they'd figure out that half of them would be paying more than $300.  You relied on the voters, who paid out money for salmon and elephants to pony up for the kids.
All you needed to do is show the poor little kids with ceiling tiles raining down on their heads, pointing to signs that read "asbestos," and entering through warped, unpainted doors.  Surely the voters would heart schools.
On the other hand, maybe it was the older voters that killed it.  They may not have liked that "everybody needs a face-lift after 65 years" comment as much as the plastic surgeons.  And they may have listened to local professor Dr. Eric Fuits, with two young children in Portland schools, that recommended a "no" vote.    Based on census data and Journal of Urban Economics, he estimates that "approximately 4,500 people age 50 and older may be driven out of Portland if voters approve the higher property taxes."  That may have upset them more than you thought.
So, where should you go from here?  Perhaps you should recognize that there is a national wave of voter disapproval of wasteful spending.  Take your cue from Washington politicians, who are recognizing that unnecessary spending will cost them their jobs.
And definitely hire a new research firm.  You got some bad advice.


Sunday, May 8, 2011

Give your mother a gift that's worth something

Maybe your mother isn't an online gamer, but in case your sweet little mom is one of the more than one hundred million people whose personal information was recently hacked, here's how to teach her to protect herself.

You've already told her not to download anything ridiculous like "never before seen pictures of bin Laden's corpse."  If she's on facebook, you've told her not to click on "I won a free iPad and you can, too!" - even if it has a picture of her adorable child next to it.  Now you need to teach her to monitor her credit reports and her credit score, and you love her so much, you'll show her how to do for free.

There's only one place where you can get your credit reports without charge, and it's NOT is where to take your mom.  Each of the three credit reporting agencies, Equifax, TransUnion and Experian, must provide her a free copy of your credit report annually, and this is where they do it.  Log your mom on to the website, choose your mother's state of residence in the drop down menu, and hit "Request Report."

Have her complete her name, date of birth, social security number and address, telling her NEVER to release this information to anyone unless: 1) She goes to the website independently (they did not come to her); AND 2) She sees a https: (not http:) in the website address.

Have her check the box under her Social Security number request that all but the last four digits be encrypted,  type the word at the bottom of the form in the box provided, and Send.

Select one of the three consumer reporting agency boxes, and click Next.  Click Next again to continue.  Review the personal information on the credit agency's page, and click Continue.

Have your mom answer the Personal Information questions listed, and hit Continue.  Click Submit Order Now.   On the last page, you can choose to View/Print your report or Create an Account in order to view it for 30 days.   You may wish to choose the former, in order to have a printed copy of her report.

Help her to review the report very carefully, and notify the credit agency immediately if there are any errors.

Since your mom is entitled to only one free copy of your credit report each year from each agency, recommend that she stagger her request by ordering one report every four months.  That way she'll help ensure that no one has stolen her identity and opened unauthorized accounts in her name.

Next, you can show her how to check her free FICO credit score by logging on to  This is her number, based on a statistical analysis of her credit report, that evaluates the relative credit risk she represents to a lender.  The higher her FICO score, the better a credit risk she is, and the lower the interest rate she will pay.  Again, she is entitled to see her FICO score annually, and recommend that she wise so, to monitor her credit and take care of any potential problems quickly.

That's all there is to it.  Tell her you'll help her with the next one in four months and put it on your calendar so you won't forget.

What a great daughter you are.  Your mom should be proud.

Monday, May 2, 2011

Why to say no to the Portland Public School construction bond

By now, you've been inundated by television ads and direct mail pleading for your to repair our crumbling out-of-date schools that put Portland's kids at risk with leaks, antiquated boilers, overloaded electrical systems and asbestos. The Portland School Bond promises financial accountability.

Here are the reasons to say no.

The bond measure is bloated with unnecessary repairs.

Nearly 1/3 of the bond ($178 million) is NOT necessary repairs, but added construction to ensure that every school will get something. Why?

A research firm which was paid over $20,000 by the school board said that the bond would be more likely to pass if every school got something, whether it needed it or not.

The publicized costs are purposely underestimated

From PPS, “The estimated bond rate for six years is approximately $2 per $1,000 of assessed property value. It then drops to an estimated 15 cents per $1,000 for no more than 20 additional years.” The median assessed home value in the school district is $147,480, or $300 times 6, plus $22.12 times 20 years, or almost $2,250.

PPS also neglected to include the $75.5 million cost of interest payments and the $2 million bond insurance expenses.   So, it’s really costing average; property taxpayer about 2,500. 

And that $75.5 million interest cost is very likely understated.  Most of the financing, in their own words would be in short-term bonds that mature in one, two or three years.  Interest rates are rising, so when the short term financing matures, they will be refinanced at a higher rate. 

Is it really only $300 for the average taxpayer? 

No.  When they said “average,” they meant median home price, which means half of all Portland homeowners will be paying more.  Look here to input your street address, and find your Assessed Value, directly under your Market Value. If it is more than $147,480, you’ll be paying more than $2,500 for this bond.

According to Willamette Week the best reasons to vote no are: 

”It’s expensive . ., the timing sucks, the plan is to ask voters to renew the construction bond every six years for the next three decades . ., PPS wants to rebuild two schools whose populations have fallen so dramatically that they were at risk for closure last year . ., (and) PPS is not allocating our very scarce resources to protect and educate . . at a time of huge budgetary crisis.”

It will hurt older Portland citizens.

A Portland professor with two children in the Portland Public School system, Dr. Eric Fruits, recently presented findings to the PPS Board based on census data and Journal of Urban Economics.
 He estimates that “approximately 4,500 people age 50 and older may be driven out of Portland if voters approve the higher property taxes”

Who is supporting this bond issue?

The vast majority of financial support for this bill is from the construction industry, not concerned parents, teachers or people who “heart” Portland schools.

This is a needlessly expensive, misrepresented, badly financed, expensive bond with terrible timing, and will be only the first of many to come over the next thirty years. It will drive older citizens out of the school district and benefit the construction industry far more than it will improve local education.