By now, you've been inundated by television ads and direct mail pleading for your to repair our crumbling out-of-date schools that put Portland's kids at risk with leaks, antiquated boilers, overloaded electrical systems and asbestos.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.
kittyok@earthlink.net
Monday, May 2, 2011
Wednesday, April 13, 2011
Why the Budget Fight Was Meaningless
We just witnessed a potential budget fight that nearly stopped non-essential Federal government spending to a standstill. Why it was a farce, and the reason that women can picture how ridiculous the cuts are.
Our Spending Pie Chart
We've probably all baked a pie. We've certainly all served a piece of pie. We absolutely know how to cut one half. If we cut a sliver from one of those halves, the piece that is left, almost 40%, is about the amount we spend on Social Security, Medicare and Medicaid. That's a very, very big piece.
If we cut the other half of the pie in half again, we have a quarter of the pie. That's what we spend on Defense, including Homeland Security. That's a pretty big piece as well.
Did we cut anything from these two pieces that are almost 2/3 of the pie? Not a cent.
Instead, we shaved crumbs off of tiny little pieces and called it a victory. It was not, for either side.
The Sacred Cows
It is considered political suicide to discuss changes to Social Security - 40% of our spending, for 13% of our population. No matter that:
The answer, of course, is any politician, whether conservative or liberal. Instead, both sides suggest ideological arguments that play to their base. Both have good ideas, but neither side acknowledges that. Instead, both point at the weaknesses in the other's plans. And neither even brings up social security.
It's not that hard. Take a listen, and see if you can live with this change to Social Security.
"Obamacare"
Much has been made about the repeal of Patient Protection and Affordable Care Act. It's too expensive. Wrong and right. It should not be repealed. It should be made more cost effective. Again, read on, and see if you can live with this change to health care reform.
Everyone knows that health care costs have been rising unsustainably, and our collective medical condition does not reflect the amount we pay. To address this issue realistically, two goals must be accomplished. First, health care coverage must be universal. Romney's Massachusetts plan addressed that well. Second, after universal coverage, costs must be contained.
Those that want to repeal the bill would be far better served by amending it to assure cost containment. Otherwise, the country will continue to have rising costs, either for those who have coverage, or for those who use expensive and inefficient alternatives, such as emergency room coverage. That's clearly unacceptable. So fix the bill. Make it cost effective.
Education
Cutting educational funding is insane. In a highly competitive global environment, an educated work force will assure our economic viability. We all know where we stand in the world rankings for education, and we all know it's not good.
Much has been said about accountability in the educational system, yet the unyielding teacher's union mandates seniority over accountability, saying that a "one size fits all" measurement is impossible. I disagree.
Every person who performs a function in a capitalistic society should be paid on a merit basis. Why would it be so hard to test children at the beginning and the end of the year and measure progress over a period of time? If some teacher's students show little or no improvement, should they not be replaced?
Summary
These suggestions would save far more than have been proposed thus far. No suggestion is mean-spirited, ideological or particularly difficult. They are, however, inconsistent with either major political party. There lies the difficulty.
With politicians so unwilling to compromise, true deficit reduction is likely to be a battle of the ideologues. Most of us are not ideologues. And we are, sadly, poorly represented.
Anyone who knows how to slice a pie can see that.
Our Spending Pie Chart
We've probably all baked a pie. We've certainly all served a piece of pie. We absolutely know how to cut one half. If we cut a sliver from one of those halves, the piece that is left, almost 40%, is about the amount we spend on Social Security, Medicare and Medicaid. That's a very, very big piece.
If we cut the other half of the pie in half again, we have a quarter of the pie. That's what we spend on Defense, including Homeland Security. That's a pretty big piece as well.
Did we cut anything from these two pieces that are almost 2/3 of the pie? Not a cent.
Instead, we shaved crumbs off of tiny little pieces and called it a victory. It was not, for either side.
The Sacred Cows
It is considered political suicide to discuss changes to Social Security - 40% of our spending, for 13% of our population. No matter that:
- In 1950, 16 workers contributed for each retiree; now there are 3
- In 1950, life expectancy was 68 (just over three years payment from age 65); now it is 81 (15 years payment from age 66), yet we moved the full retirement age up only by one year)
The answer, of course, is any politician, whether conservative or liberal. Instead, both sides suggest ideological arguments that play to their base. Both have good ideas, but neither side acknowledges that. Instead, both point at the weaknesses in the other's plans. And neither even brings up social security.
It's not that hard. Take a listen, and see if you can live with this change to Social Security.
- Changes won't affect anyone currently receiving benefits. The age for whom changes will be made can be set at 55, or even 50.
- Full retirement would be raised for those at the set age and below on a step basis. For instance, if you're 50 - 55, full retirement age is 67 (one year older than it is now). For those who are 45 - 50, full retirement is 68. For people who are 40 - 45, full retirement is 69. For 35 - 40, full retirement age is 70.
- Means testing will be in effect for those who's Adjusted Gross Income is $250,000 or more at full retirement age. Hopefully, we can agree that, at some level, we can afford to forgo our benefits for the long term sustainability of the program.
"Obamacare"
Much has been made about the repeal of Patient Protection and Affordable Care Act. It's too expensive. Wrong and right. It should not be repealed. It should be made more cost effective. Again, read on, and see if you can live with this change to health care reform.
Everyone knows that health care costs have been rising unsustainably, and our collective medical condition does not reflect the amount we pay. To address this issue realistically, two goals must be accomplished. First, health care coverage must be universal. Romney's Massachusetts plan addressed that well. Second, after universal coverage, costs must be contained.
Those that want to repeal the bill would be far better served by amending it to assure cost containment. Otherwise, the country will continue to have rising costs, either for those who have coverage, or for those who use expensive and inefficient alternatives, such as emergency room coverage. That's clearly unacceptable. So fix the bill. Make it cost effective.
Education
Cutting educational funding is insane. In a highly competitive global environment, an educated work force will assure our economic viability. We all know where we stand in the world rankings for education, and we all know it's not good.
Much has been said about accountability in the educational system, yet the unyielding teacher's union mandates seniority over accountability, saying that a "one size fits all" measurement is impossible. I disagree.
Every person who performs a function in a capitalistic society should be paid on a merit basis. Why would it be so hard to test children at the beginning and the end of the year and measure progress over a period of time? If some teacher's students show little or no improvement, should they not be replaced?
Summary
These suggestions would save far more than have been proposed thus far. No suggestion is mean-spirited, ideological or particularly difficult. They are, however, inconsistent with either major political party. There lies the difficulty.
With politicians so unwilling to compromise, true deficit reduction is likely to be a battle of the ideologues. Most of us are not ideologues. And we are, sadly, poorly represented.
Anyone who knows how to slice a pie can see that.
Monday, April 11, 2011
Which Portland investment bankers gave the best advice in 2011?
Earlier in the year, I gave you this year's forecast given by the strategists from ten investment firms, the advice from which private investors pay dearly. For the third consecutive year, we'll compare the return you'd receive from following their advice with simply buying the Standard and Poor's 500 Index.
Let's see how the quarter ended March 31 stacked up.
Oppenheimer's Brian Belski's advice would have earned you 5.26%, less commissions. You would have earned more with the S and P 500 Index, which earned 5.92% this quarter.
BofA Merrill Lynch's David Bianco's recommendations would have earned you 7.95%, more than 2% above the S and P 500.
Credit Suisse's Doug Cliggott's advice would have earned your portfolio 3.41% in the first quarter, 2.5% less than the S and P 500.
Barclay's Capital's Barry Knapp would have provided returns of 9.24% if you'd followed his advice, more than 3.3% higher than the S and P 500 Index.
Goldman Sach's David Kostin's recommendations would have returned 7.42%, 1.5% higher than the S and P 500.
JPMorgan's David Kelly's advice would have enriched your portfolio by only 3.8%, 2.13% less than the S and P 500.
Putnam's Jeff Knight's selections earned 7.67% in the first quarter, 1.75% more than the S and P.
Morgan Stanley's Henry McVey suggested investments that returned 12.25%, more than twice that of investing in the S and P 500.
Wells Capital Management's James Paulsen's advice would have returned 4.56%, about 1.3% less than the broad index.
UBS's Michael Ryan's advice was worth 7.36%, 1.4% more than the S and P.
Unlike the previous two years, a majority (six out of ten strategists) gave advice that was worth their commissions in the first three months of this year, with Morgan Stanley's advice outpacing index returns by more than 100%.
While impressive, he'd have to repeat this for two more quarters to beat a "buy and hold" strategy for the index since 2009. Nevertheless, it's an impressive feat, and we'll be watching to see if it continues into the next quarter.
kittyok@earthlink.net
Let's see how the quarter ended March 31 stacked up.
Oppenheimer's Brian Belski's advice would have earned you 5.26%, less commissions. You would have earned more with the S and P 500 Index, which earned 5.92% this quarter.
BofA Merrill Lynch's David Bianco's recommendations would have earned you 7.95%, more than 2% above the S and P 500.
Credit Suisse's Doug Cliggott's advice would have earned your portfolio 3.41% in the first quarter, 2.5% less than the S and P 500.
Barclay's Capital's Barry Knapp would have provided returns of 9.24% if you'd followed his advice, more than 3.3% higher than the S and P 500 Index.
Goldman Sach's David Kostin's recommendations would have returned 7.42%, 1.5% higher than the S and P 500.
JPMorgan's David Kelly's advice would have enriched your portfolio by only 3.8%, 2.13% less than the S and P 500.
Putnam's Jeff Knight's selections earned 7.67% in the first quarter, 1.75% more than the S and P.
Morgan Stanley's Henry McVey suggested investments that returned 12.25%, more than twice that of investing in the S and P 500.
Wells Capital Management's James Paulsen's advice would have returned 4.56%, about 1.3% less than the broad index.
UBS's Michael Ryan's advice was worth 7.36%, 1.4% more than the S and P.
Unlike the previous two years, a majority (six out of ten strategists) gave advice that was worth their commissions in the first three months of this year, with Morgan Stanley's advice outpacing index returns by more than 100%.
While impressive, he'd have to repeat this for two more quarters to beat a "buy and hold" strategy for the index since 2009. Nevertheless, it's an impressive feat, and we'll be watching to see if it continues into the next quarter.
kittyok@earthlink.net
Tuesday, March 15, 2011
What To Do With Your Money Right Now
If it were easy to take a long view of investing, everybody would be rich. How to take a long view of current events, and act rationally while others are panicking.
If someone asks you your opinion of current economic conditions, you're likely to answer in terms of yourself. That's understandable, but not necessarily accurate.
If you intend to use the answer to invest your money rationally, it's better to take a look at four broad economic categories:
Economic Cycle
Industry as measured by output and the amount of available space utilized for that output has been growing steadily for the last five months. There's plenty of room to grow further. Orders and consumption are both growing at about 5%.
The unemployment rate, which peaked at 10.2% in October of 2009, has fallen to 8.9%. "Normalized" unemployment is approximately 4%, so there's plenty of room for improvement there as well.
The cost to produce goods is growing at 3%, but consumer costs are increasing at only 1%. This means that producers will soon have to raise prices, or cut their profit margins.
Last year the US grew by 2.7%, higher than the rate of growth in 2006 and 2007, before the real estate bubble burst.
All in all, it looks like we're in the beginning of our growth cycle and have plenty of room to grow further. When earnings are growing, it is an optimal time to invest, compared with when the economy is slowing and earnings are likely to decrease.
Monetary Policy
The Federal Reserve Bank is spending trillions of dollars buying Treasury Notes and Bonds (US national debt), in order to keep both supply and rates low. The six month Treasury bill pays .17%. That means that, for a six month investment, you give the Treasury $9,991.50, and in six months, they'll return $10,000.
This is called "accommodative" policy (the Fed will accommodate borrowers), and it's being done to keep rates low to increase borrowing by business to stimulate the economy.
Monetary policy is currently positive for investing, as growing businesses will return a much higher long term rate than tiny returns on bonds.
Sentiment
Warren Buffett says, "Be fearful when others are greedy; be greedy when others are fearful." There is no better explanation of sentiment.
When everybody wanted to buy "dot com" stocks, if you entered the fray, you probably lost money. When everybody wanted to buy real estate and "flip" it for a fast profit, if you entered the fray, you probably are continuing to lose money.
So, the higher that positive investment sentiment is, the more nervous you should be. I follow "Consensus Index," but there are others, including American Association of Individual Investors, Market Vane, First Coverage Market Sentiment, and they all point in the same direction.
Nearly 3/4 of people think that it's a good idea to get into the stock market.
That makes me very nervous. I like numbers like 28%, which was what positive sentiment was in 2008, when it most definitely was a good time to buy.
Valuation
This is the measurement that tells you whether you're overpaying for the market as a whole. Right now, you're paying $13.56 for every dollar of earnings (sometimes called a P/E, or Price to Earnings multiple). The average market price is $15.82.
Not a bad price. If I hadn't been buying so much in 2008 and 2009, I'd be buying now, especially on days when the market dips significantly (like today).
Another way to look at valuation is to compare investing in the stock market with investing in a long term bond. I compare to the 10-year Treasury Note, because I don't think anyone belongs in the stock market that doesn't have a 10 year horizon.
Right now, the 10-year Treasury note will pay you 3.46%. Based on next year's projected S&P 500 earnings of $91.26, the earnings yield (earnings divided by price) is 7.16%. The potential return is more than twice that of long term bonds.
Another positive sign.
So, evaluating the risk level in these 21 economic indicators that lead me to these conclusions, I conclude that investing approximately 65% of long term (10 years +) investments in the stock market is the most rational asset allocation of risk versus reward in the current environment.
Women tend to live longer and earn less than men. These decisions are critical to our long term well-being. How do you make your asset allocation decisions? What is your opinion of current economic conditions?
If someone asks you your opinion of current economic conditions, you're likely to answer in terms of yourself. That's understandable, but not necessarily accurate.
If you intend to use the answer to invest your money rationally, it's better to take a look at four broad economic categories:
- Where we are in the economic cycle (are we growing, peaking our growth, slowing down, hitting a trough in our slowdown)
- Monetary policy (is the cost of borrowing cheap, moderate or expensive?)
- Sentiment (is everybody more happy or depressed about the stock market?)
- Valuation (is the stock market expensive compared to its "normal" price?)
Economic Cycle
Industry as measured by output and the amount of available space utilized for that output has been growing steadily for the last five months. There's plenty of room to grow further. Orders and consumption are both growing at about 5%.
The unemployment rate, which peaked at 10.2% in October of 2009, has fallen to 8.9%. "Normalized" unemployment is approximately 4%, so there's plenty of room for improvement there as well.
The cost to produce goods is growing at 3%, but consumer costs are increasing at only 1%. This means that producers will soon have to raise prices, or cut their profit margins.
Last year the US grew by 2.7%, higher than the rate of growth in 2006 and 2007, before the real estate bubble burst.
All in all, it looks like we're in the beginning of our growth cycle and have plenty of room to grow further. When earnings are growing, it is an optimal time to invest, compared with when the economy is slowing and earnings are likely to decrease.
Monetary Policy
The Federal Reserve Bank is spending trillions of dollars buying Treasury Notes and Bonds (US national debt), in order to keep both supply and rates low. The six month Treasury bill pays .17%. That means that, for a six month investment, you give the Treasury $9,991.50, and in six months, they'll return $10,000.
This is called "accommodative" policy (the Fed will accommodate borrowers), and it's being done to keep rates low to increase borrowing by business to stimulate the economy.
Monetary policy is currently positive for investing, as growing businesses will return a much higher long term rate than tiny returns on bonds.
Sentiment
Warren Buffett says, "Be fearful when others are greedy; be greedy when others are fearful." There is no better explanation of sentiment.
When everybody wanted to buy "dot com" stocks, if you entered the fray, you probably lost money. When everybody wanted to buy real estate and "flip" it for a fast profit, if you entered the fray, you probably are continuing to lose money.
So, the higher that positive investment sentiment is, the more nervous you should be. I follow "Consensus Index," but there are others, including American Association of Individual Investors, Market Vane, First Coverage Market Sentiment, and they all point in the same direction.
Nearly 3/4 of people think that it's a good idea to get into the stock market.
That makes me very nervous. I like numbers like 28%, which was what positive sentiment was in 2008, when it most definitely was a good time to buy.
Valuation
This is the measurement that tells you whether you're overpaying for the market as a whole. Right now, you're paying $13.56 for every dollar of earnings (sometimes called a P/E, or Price to Earnings multiple). The average market price is $15.82.
Not a bad price. If I hadn't been buying so much in 2008 and 2009, I'd be buying now, especially on days when the market dips significantly (like today).
Another way to look at valuation is to compare investing in the stock market with investing in a long term bond. I compare to the 10-year Treasury Note, because I don't think anyone belongs in the stock market that doesn't have a 10 year horizon.
Right now, the 10-year Treasury note will pay you 3.46%. Based on next year's projected S&P 500 earnings of $91.26, the earnings yield (earnings divided by price) is 7.16%. The potential return is more than twice that of long term bonds.
Another positive sign.
So, evaluating the risk level in these 21 economic indicators that lead me to these conclusions, I conclude that investing approximately 65% of long term (10 years +) investments in the stock market is the most rational asset allocation of risk versus reward in the current environment.
Women tend to live longer and earn less than men. These decisions are critical to our long term well-being. How do you make your asset allocation decisions? What is your opinion of current economic conditions?
Sunday, March 6, 2011
Portland $548 million school bond: No, but . . . .Part III
During the last two weeks, we've discussed the facts behind Portland Public Schools' request for you to approve a $2500 + increase in total property taxes for:
In other words, PPS appears to be banking on the fact that you aren't very good at math and won't notice that they aren't, either.
One of Portland's local professors, Dr. Eric Fruits, recently presented further 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."
What does the PPS board say?
What do you say?
Since 2007, our economy has suffered a decline surpassed only by the Great Depression. Federal and State governments are tightening their belts, reflecting the sacrifices made by their constituents. It is in this environment that PPS asks its homeowners for far more than it needs.
Portland homeowners faced with the need for updates for their homes after a fire like the one at Marysville School would likely be limited to what was covered by insurance. Superintendent Smith, however, has a different view. "The total anticipated proceeds from the insurance claim are estimated in the range of $5 - $7 million. Part of that money has already been spent to re-establish Marysville students and teachers at the Rose City Park location, do partial demolition of fire-damaged building areas and close the damaged building to the weather. About $4.5 million will be available for reconstruction.
"The insurance does not quite cover the bare minimum to replace damaged areas of the building. This minimum option means literally touching only those parts of the building that were damaged, not bringing the entire building up to current fire/life/safety or seismic codes, let alone improving basic classroom configurations, building flow, technology, etc."
Unlike Portland homeowners, who must limit repairs to the amount of insurance coverage, Smith wants a complete upgrade for the entire school, upgrades for seven other schools, and a little something in all the schools, whether they need it or not.
It's hard to believe that PPS is so thoroughly disconnected from its community that it asks for a budget of $625.5 million (including interest and insurance) instead of $370 million during a period where the economy is just scraping back from such a brutal recession. What is possibly more disconcerting, however, is the cynicism inherent in the idea that the electorate will not vote for a school construction bond unless there's something in it for them.
So, in answer to the $548 million (which is really $625.5 million) bond, the answer is no. But, if PPS asks for only what it needs ($370 million), the answer is yes, regardless of what its public relations firm tells you.
For the $21,600 PPS paid their PR firm, they could have asked your voters. We would have happily told you that floating the largest bond in its history immediately following the greatest recession since the Depression was a bad idea.
kittyok@earthlink.net
- $370 million for needed building upgrades in some of its public schools
- An extra $178 million (total of $548 million) for building upgrades in ALL of its public schools
- $0 for teachers or improved curriculum
- Portland's latest unemployment rate is almost 10%
- Portland renters pay less than their homeowners
- Since 2007, the average Portland property has declined almost 10% in value.
In other words, PPS appears to be banking on the fact that you aren't very good at math and won't notice that they aren't, either.
One of Portland's local professors, Dr. Eric Fruits, recently presented further 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."
What does the PPS board say?
- "Anyone needs a fact-lift after 65 years," says Pam Knowles, co-chair of Portland School Board.
- Portland School Superintendent Carole Smith is more to the point. She said it is her goal to persuade voters to approve new construction "until all the schools have received the overhauls the district says they need."
What do you say?
Since 2007, our economy has suffered a decline surpassed only by the Great Depression. Federal and State governments are tightening their belts, reflecting the sacrifices made by their constituents. It is in this environment that PPS asks its homeowners for far more than it needs.
Portland homeowners faced with the need for updates for their homes after a fire like the one at Marysville School would likely be limited to what was covered by insurance. Superintendent Smith, however, has a different view. "The total anticipated proceeds from the insurance claim are estimated in the range of $5 - $7 million. Part of that money has already been spent to re-establish Marysville students and teachers at the Rose City Park location, do partial demolition of fire-damaged building areas and close the damaged building to the weather. About $4.5 million will be available for reconstruction.
Unlike Portland homeowners, who must limit repairs to the amount of insurance coverage, Smith wants a complete upgrade for the entire school, upgrades for seven other schools, and a little something in all the schools, whether they need it or not.
It's hard to believe that PPS is so thoroughly disconnected from its community that it asks for a budget of $625.5 million (including interest and insurance) instead of $370 million during a period where the economy is just scraping back from such a brutal recession. What is possibly more disconcerting, however, is the cynicism inherent in the idea that the electorate will not vote for a school construction bond unless there's something in it for them.
So, in answer to the $548 million (which is really $625.5 million) bond, the answer is no. But, if PPS asks for only what it needs ($370 million), the answer is yes, regardless of what its public relations firm tells you.
For the $21,600 PPS paid their PR firm, they could have asked your voters. We would have happily told you that floating the largest bond in its history immediately following the greatest recession since the Depression was a bad idea.
kittyok@earthlink.net
Sunday, February 27, 2011
Portland $548 million school bond: No, but . . . .Part II
Last week, we talked about what the Portland Public Schools need ($370 million) and what was requested ($548 million) from Portland property taxpayers.
Here's a brief synopsis.
Portland Public Schools have an urgent need to upgrade 8 campuses for a total of about $370 million. But after paying $21,600 to research firm Davis, Hibbits and Midghall, they concluded that property owners would be more likely to vote "yes" if all 85 campuses were upgraded, and upped the ante to $548 million.
By adding $178 million to the construction bond issue, PPS and its research firm ignored Portland's:
We had a BIG financial scare a couple of years ago, and we're creeping with fits and starts from potential disaster. But we're nowhere near healthy.
That is an accurate description of the economic situation the people from whom PPS is asking for and extra $178 million for non-essential school construction.
So what are the "extras" we'll get for that additional $178 million?
PPS' research firm concluded that Portlanders are concerned about education and unemployment, and therefore would happily pay an extra $178 million for non essential construction upgrades to accommodate some temporary construction jobs.
We could very well end up with covered playgrounds in schools with no physical education programs.
But it's only going to cost the average property taxpayer about $300
I used to have a financial planning business, where I did all my own macro and micro economic research.
I ignored financial pundits and analyzed the financial statements of potential investments for my clients myself. I taught financial planning students how to analyze financial statements at UCLA as well.
Here is a perfect example of why I insisted upon doing my own research.
1. It's $300 for six years, plus. . .
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."
In plan English?
It's $300 times 6, plus $22.12 times 20 years, or almost $2,250.
2. The $548 million bond is really a $625.5 million bond
Oops! PPS forgot to include the $75.5 million cost of interest payments and the $2 million bond insurance expenses. So, it's really costing the "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
As anyone who has not spent the last three years in a cave knows, the Federal Reserve Bank has spent trillions of dollars to keep interest rates low to stimulate the economy. Everyone knows it won't do that forever. So, everyone knows rates are going up.
Everyone except PPS.
Instead of locking in a low long term 20 year rate now, PPS is going to finance short term loans that are ASSURED to be renewed at higher rates over the term of the bond.
So, you can be almost certain that the $2,500 will almost certainly be higher.
3. What's an average property taxpayer?
Probably not you. First of all, from a mathematics perspective, PPS is using the word "average" incorrectly.
We should expect more from those who supervise our math teachers.
What they should say is "median." The median assessed value for a PPS home is now $148,480.
That means that 1/2 of assessed values are more than $148,480.
Look here to input your street address, and find your assessed value. If it is more than $148,480, you'll be paying more than $2,500 for this bond.
More next week.
Until then, give this some thought and discuss it with your friends and colleagues, and certainly anyone representing PPS and this bond issue. Every assertion in this series of articles is based on hard facts, and I welcome discussion about any of them.
Next week, we'll review a local professor's analysis of how many residents are likely to be forced to move out of Portland because of the increase in homeowner expense if this bond issue passes.
And, how PPS "Superintendent Carole Smith says her goal is to persuade voters to approve new construction until all the the district's schools have received the overhauls the district says they need."
kittyok@earthlink.net
Here's a brief synopsis.
Portland Public Schools have an urgent need to upgrade 8 campuses for a total of about $370 million. But after paying $21,600 to research firm Davis, Hibbits and Midghall, they concluded that property owners would be more likely to vote "yes" if all 85 campuses were upgraded, and upped the ante to $548 million.
By adding $178 million to the construction bond issue, PPS and its research firm ignored Portland's:
- High (9.9%) unemployment rate
- Comparably low (just over $70,000) household income
- Comparably high cost of home ownership (compared to renting)
- Home prices that have fallen 12%+ last year.
We had a BIG financial scare a couple of years ago, and we're creeping with fits and starts from potential disaster. But we're nowhere near healthy.
That is an accurate description of the economic situation the people from whom PPS is asking for and extra $178 million for non-essential school construction.
So what are the "extras" we'll get for that additional $178 million?
- Doors that open with key cards
- Covered playgrounds
- Outdoor learning environments
- Upgraded science labs
PPS' research firm concluded that Portlanders are concerned about education and unemployment, and therefore would happily pay an extra $178 million for non essential construction upgrades to accommodate some temporary construction jobs.
We could very well end up with covered playgrounds in schools with no physical education programs.
But it's only going to cost the average property taxpayer about $300
I used to have a financial planning business, where I did all my own macro and micro economic research.
I ignored financial pundits and analyzed the financial statements of potential investments for my clients myself. I taught financial planning students how to analyze financial statements at UCLA as well.
Here is a perfect example of why I insisted upon doing my own research.
1. It's $300 for six years, plus. . .
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."
In plan English?
It's $300 times 6, plus $22.12 times 20 years, or almost $2,250.
2. The $548 million bond is really a $625.5 million bond
Oops! PPS forgot to include the $75.5 million cost of interest payments and the $2 million bond insurance expenses. So, it's really costing the "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
As anyone who has not spent the last three years in a cave knows, the Federal Reserve Bank has spent trillions of dollars to keep interest rates low to stimulate the economy. Everyone knows it won't do that forever. So, everyone knows rates are going up.
Everyone except PPS.
Instead of locking in a low long term 20 year rate now, PPS is going to finance short term loans that are ASSURED to be renewed at higher rates over the term of the bond.
So, you can be almost certain that the $2,500 will almost certainly be higher.
3. What's an average property taxpayer?
Probably not you. First of all, from a mathematics perspective, PPS is using the word "average" incorrectly.
We should expect more from those who supervise our math teachers.
What they should say is "median." The median assessed value for a PPS home is now $148,480.
That means that 1/2 of assessed values are more than $148,480.
Look here to input your street address, and find your assessed value. If it is more than $148,480, you'll be paying more than $2,500 for this bond.
More next week.
Until then, give this some thought and discuss it with your friends and colleagues, and certainly anyone representing PPS and this bond issue. Every assertion in this series of articles is based on hard facts, and I welcome discussion about any of them.
Next week, we'll review a local professor's analysis of how many residents are likely to be forced to move out of Portland because of the increase in homeowner expense if this bond issue passes.
And, how PPS "Superintendent Carole Smith says her goal is to persuade voters to approve new construction until all the the district's schools have received the overhauls the district says they need."
kittyok@earthlink.net
Monday, February 21, 2011
Portland $548 million school bond: No, but . . . .
Nothing worthwhile in life is simple.
Your job isn't simple. Your love life isn't simple.
Neither is the Portland Public School (PPS) $548 million bond. It's not a choice whether you're "for kids and jobs" or not.
It's a choice of whether to cover playgrounds before you fund physical education programs.
In this "School bond: No, but . . " series, you'll see that one can be "for the kids" in a way that will actually result in improved learning, not new buildings.
You can tell PPS that the best way to spend your money is to fix what is necessary, then improve education before you improve more buildings.
First, a little background. Here's an economic "look in the mirror" for Portland.
1. Unemployment (December, 2010)- 9.9%
According to the Bureau of Labor Statistics, the Portland metropolitan area has an unemployment rate nearly 9% higher than the national average.
2. Average household income (2008) - $70,000
According to Greenlight Greater Portland, Portland's average household income is ninth lowest of ten western metropolitan areas surveyed.
3. Cost of renting versus buying a home - Cheaper to rent
According to Trulia, it is more cost effective to rent rather than buy a home in Portland. Homeowner costs are high, and, one out of every 44 of our homes got some type of foreclosure notice in 2010.
4. The bottom line
Our unemployment rate is high, our average household income is comparably low, and the cost of home ownership is comparably high. Clearly, any additional cost to Portland property owners should be limited to what is absolutely necessary, and not a cent more. That's fair to both homeowners in difficult times - and the kids.
The Portland Public School construction bond
1. What is needed - $370 million
Two-thirds ($370 million) of the PPS bond is based on legitimate need for urgent repairs. Marysville K-8 School suffered significant loss in a recent fire. Jefferson, Cleveland and Roosevelt High Schools, and Laurelhurst, Faubion and Rigler K-8, and Markam Elementary are also in desperate need of repairs.
These are necessary repairs, and they're necessary now.
I urge you to be "for the kids" and vote "yes."
2. What is proposed - $548 million
That's right. We need $370 million and we're asking for $548. To be paid by home owners in a city with 9.9% unemployment. And comparably low household income. And an already high cost of home ownership.
So, this other $178 million is urgent, too, right?
Wrong.
The simple answer is that, in order to get everybody to vote "yes," all 85 campuses - not just the 8 that need it - will receive some kind of upgrade. As we've seen, nothing is simple.
My personal favorite construction project in the $178 million unnecessary repair portion of the bond issue is providing covered playgrounds for schools with very uncertain physical education program funding. Yes for protected playgrounds. Maybe not for physical education teachers.
Talk about this with your friends and colleagues.
$370 million - yes. $548 million - no.
More next week.
Until then, I sincerely invite anyone who can justify the additional $178 million to reply. I'm for the kids, too.
kittyok@earthlink.net
Your job isn't simple. Your love life isn't simple.
Neither is the Portland Public School (PPS) $548 million bond. It's not a choice whether you're "for kids and jobs" or not.
It's a choice of whether to cover playgrounds before you fund physical education programs.
In this "School bond: No, but . . " series, you'll see that one can be "for the kids" in a way that will actually result in improved learning, not new buildings.
You can tell PPS that the best way to spend your money is to fix what is necessary, then improve education before you improve more buildings.
First, a little background. Here's an economic "look in the mirror" for Portland.
1. Unemployment (December, 2010)- 9.9%
According to the Bureau of Labor Statistics, the Portland metropolitan area has an unemployment rate nearly 9% higher than the national average.
2. Average household income (2008) - $70,000
According to Greenlight Greater Portland, Portland's average household income is ninth lowest of ten western metropolitan areas surveyed.
3. Cost of renting versus buying a home - Cheaper to rent
According to Trulia, it is more cost effective to rent rather than buy a home in Portland. Homeowner costs are high, and, one out of every 44 of our homes got some type of foreclosure notice in 2010.
4. The bottom line
Our unemployment rate is high, our average household income is comparably low, and the cost of home ownership is comparably high. Clearly, any additional cost to Portland property owners should be limited to what is absolutely necessary, and not a cent more. That's fair to both homeowners in difficult times - and the kids.
The Portland Public School construction bond
1. What is needed - $370 million
Two-thirds ($370 million) of the PPS bond is based on legitimate need for urgent repairs. Marysville K-8 School suffered significant loss in a recent fire. Jefferson, Cleveland and Roosevelt High Schools, and Laurelhurst, Faubion and Rigler K-8, and Markam Elementary are also in desperate need of repairs.
These are necessary repairs, and they're necessary now.
I urge you to be "for the kids" and vote "yes."
2. What is proposed - $548 million
That's right. We need $370 million and we're asking for $548. To be paid by home owners in a city with 9.9% unemployment. And comparably low household income. And an already high cost of home ownership.
So, this other $178 million is urgent, too, right?
Wrong.
The simple answer is that, in order to get everybody to vote "yes," all 85 campuses - not just the 8 that need it - will receive some kind of upgrade. As we've seen, nothing is simple.
My personal favorite construction project in the $178 million unnecessary repair portion of the bond issue is providing covered playgrounds for schools with very uncertain physical education program funding. Yes for protected playgrounds. Maybe not for physical education teachers.
Talk about this with your friends and colleagues.
$370 million - yes. $548 million - no.
More next week.
Until then, I sincerely invite anyone who can justify the additional $178 million to reply. I'm for the kids, too.
kittyok@earthlink.net
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