The Dummies Guide to the Pension Crisis
Hat tip to Ted Nesi of WPRI.com for pointing out this excellent union sponsored video that discusses the problems for the public pensions of Rhode Island. Although the details are specific to that state the structural problems apply to almost every state because public pensions across America are underfunded. Every state faces problems that are politically or financially difficult. Either taxpayers will be paying more to top pension plans or retirees will be receiving smaller pension payments. Pension reform is a complex topic and I hope we see more educational efforts like this video.
Desperation costs are steep
Harrisburg, the state capital of Pennsylvania, has narrowly averted filing for Chapter 9 bankruptcy as their independent city Parking Authority has secured a loan to advance future payments to the city for use of city land. Unfortunately the unnamed lender will be charging the Authority 10.75% interest. The costs of desperation are steep. This one-off lease payment from the Parking Authority allows the city to make their September 15th bond payment on their crushing incinerator debt and avoid Chapter 9, but what about the next bond payment in 2012? They don’t seem to have any more assets to borrow against. So they’ve postponed the problem but not solved it. From Bloomberg:
The Parking Authority will borrow to make the payment, and some on the council balked at the interest rate of as much as 10.75 percent on the loan. About a third of the city’s 49,500 residents live below the federal poverty level. The lease covers land under several garages, and the loan costs may reduce the authority’s income, which provides revenue to the city.
An E-Bay for tax liens
Government Technology is reporting on several counties that have been using an online system to auction property foreclosures, tax certificate sales (a tax lien against property) and sales of surplus equipment. The advantages to the counties are more auction participants, more revenue, less paperwork and allegedly less collusion. From Government Technology:
[Charlotte Luke, the county’s tax collector] said since launching the site, the auction process has become more efficient. In the past, live auctions were held at the Hillsborough County Center, a county building.
Anywhere from 50 to 100 people would gather in a conference room and once the auction began, bidders would yell interest rates at the auctioneer. Luke said the method would cause confusion and the process would at times get out of hand.
Since the switch to hosting bids online, the county has seen an increase in tax certificate purchases, Luke said.
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+ Good Links +
Wall Street Journal: BNY Mellon Forex Trades Cost Pensions
Wall Street Journal: Post Office History for Sale