Here’s the headline from Saturday morning’s Boulder Camera that pushed Colorado’s big snowstorm off the front page: City Mulls Millions in Cuts. Uh-oh. Could it have been just a few short weeks ago that we were reading about how Boulder’s budget was well under control? The story then was that the city was going to have to watch expenditures more closely than usual because of the severity of the economic downturn. Now, though, they’re talking about shutting down the recreation centers, fire stations, libraries and who knows what else. There’s also the dreaded possibility of “special tax districts” that would raise money to support services and amenities that most taxpayers must have thought they were already paying for in-full. Could this happen where you live? We hope not, but if Boulder can be blindsided by this kind of news, it could happen anywhere. The town has never struck us as an out-of-control spender, as have other cities in which he have lived, including San Francisco and New York, and budgeting at the state level has always seemed relatively conservative.
Since a significant portion of Boulder’s revenues comes from business taxes, shoppers and diners probably bear some of the blame for cutting back on frills. So what’s the city to do? They could try the Obama approach, exhorting consumers to keep spending money they don’t have, presumably by borrowing it. Or, as appears more likely, they could cut back on outlays until the budget is back in balance. Too bad Boulder doesn’t have the Bernanke option of financing prodigious increases in spending by purchasing its own municipal bonds. Ten million dollars raised this way would probably do a lot more good for the local economy than ten spurious billions would do for the U.S. economy. At least we could see where it’s going. For the moment, it appears that Joe Taxpayer will have to content himself with news that Citi, Goldman Sachs, Well Fargo and friends are finally starting to make money. How nice for them.
Thrift, Heaven Forbid!
With the mortgage crisis still far from resolved, we read that Rep. Barney Frank is attempting to dust off an old proposal that would put taxpayer backing behind municipal bonds. He thinks cities are paying too much to borrow and that federal guarantees would help reduce such costs. We can only hope for Boulder’s sake that the legislation gets fast-tracked in time to solve the city’s budget crisis without the unpleasantness of layoffs, library closings and, heaven forbid, thrift. Perhaps if Moody’s and Standard & Poor’s play ball with Mr. Frank, passing out triple-A ratings with the same easy generosity they brought to subprimes, buyers of munis will be none the wiser about Boulder’s budget problems. Failing that, maybe the banks could be made to purchase the muni bonds with some of that bailout money? Now that would be a real vote-getter for Mr. Frank and his colleagues.
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Barney Frank will go down in history of one of America’s greatest traitors. How this guy stays elected and in power is mind boggling.
That is grim news for Boulder. It is certainly reminiscent of what happened in the Great Depression as municipalities raised taxes to balance budgets and the remaining solvent homeowners were left carrying the burdens of the locally unemployed while business left and right failed and coffers could not be replenished adequately.
Of course this drove many property owners over the brink with the devastating consequence of municipal tax sales that were necessitated to make ends meet. And none of it was personal. It must have just felt like that. But those pressures seem to be on the rise again. What good are local tax revolts when your neighbors are openly in favor of cities collecting revenue by any means possible in order to keep basic services operating. Including selling off your home to raise much needed cash.
We do need to look closely at what is happening locally. I know of course we spend most of our thoughts and energy on this site ruminating over the macro events, roots, causes , potential outcomes etc and attempting to chart our futures based on the collective wisdom of all. At the end of the day though the real money is lost and gained in our own backyards and watching what is happening at the local level and at city hall is really in our best interests. It will have a much bigger impact for sure on our daily lives than say, how much copper the Chinese bought this year.
I live in North Americas economic anomaly. There is no recession in Saskatchewan so there are days I can only imagine the hardships faced by so many South of the border. Out here the economy is booming, thousands of jobs continue to go begging and the local governments continue to come up with wild spending plans as though we were still in a global growth economy. What most of them don’t understand of course is the branch-plant status of most Canadian companies nor that we tend to follow the American experience albeit lagging by 6 to 12 months.
So I am dismayed that while we have not suffered any real estate meltdown whatsoever, while retail sales continue to surge, government revenues are still surplus and unemployment is at historic lows, our Governments ignore the Canary in the mineshaft and continue to spend like there is no tomorrow.
There must be a certain sense of denial of the inevitable., a suspension of disbelief..or the hope that the US will get back on track before reality catches up with us here. Of course there are many pluses too and some investors out there might take an interest in our positive economy. We are resource based. The largest producer of Uranium in the world, 2nd for Potash and soon to be one of the largest diamond producing regions. In the late summer the whole prairie is a sea of Wheat and Canola planted over an ocean of oil and gas. So it is still a very good place to invest.
I expect some turbulent times will arrive here eventually though and so I am watching more closely what transpires close to home because that is what will affect my bottom line the most in the end.
Cam
Cam, since I live just south of you, I am both amused and amazed at the differences that abound between our different sides of the Border. Montana’s economy has faired much better than most of the rest of the US in the past year, due mainly to the boom in the oil production from the new Williston Basin plays. But, all that is on private land. When you get to the federal lands of western Montana, all other natural resource production has either come to a halt or is tied in knots due to the environmentalist lobby lawsuits against every initiative. It is a rare event when a timber sale is approved on federal land and when that does happen it is after several years of litigation. Mining? Yes, for coal as long as it is shipped out of state but no new coal fired power plants. No, for any new metals mines. I am not sure when we will pull our heads out and realize that all wealth starts from either mining or agriculture. It will probably be after the dollar becomes so worthless we can’t buy either what we need from Canada or what we want from China. That might not be as far away as we think.
Grass Ranger – I’m in Columbia Falls, MT. Whre are you located? Just got back from a trip to Calgary. I noticed they have a lot of rail cars on sidings just like here, but saw a lot of Potash semis on the road. Elk Valley Coal is still humming too.
In NJ those folks lucky enough to work for some agency of Gov’t have a 2.5% unemployment rate today, as compared to the Private economies rate of 8.7% and rising. I don’t like to see anyone lose their jobs, but it certainly doesn’t seem right that Gov’t workers don’t seem to be shouldering some of the pain of this down turn as well. Not only are they’re jobs secure, but they also have excellent health care and pensions all financed by a shrinking “private sector”. Sooner or later this situation will be come intolerable in NJ as the State is essentially bankrupt. As things stand today we have the countries highest real estate taxes, a 7% sales tax and an income tax , mind you all of these things were increased or created with the idea in mind of being able to maintain Gov’t services and balance the budget. They’ve accomplished none of these goals. Instead, what has happened over the course of the last 50 yrs., NJ has expanded it’s Gov’t sector hugely at all levels. In 1908 NJ had just 267 State employees, today it’s @ 85,000 and climbing. Add in all the other Gov’t employees that work for the hundreds of cities and counties and the Federal Gov’t and you have what is essentially a mini- Socialist State without the title. Many of us have come to calling NJ jokingly “The People’s Republic of NJ.”
In NJ it’s common knowledge that most people who don’t have plush State or Private pensions ( getting rarer by the day) cannot afford to retire here. Where is all this leading my question? Having been a small business person most of my life I can no longer even consider starting a new business in NJ and this bothers me. If business people cannot see any way to make a living here then all that will be left is the Public sector and the huge Too Big to fail Private sector. This is not a good thing for the future.
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