California where fiscal responsibility takes a back seat to the narrative

California leased 15,000 hotel rooms to help homeless people. Half now sit empty

“He said, ‘I saw you at the Beer Store and to me you were taking back, what looked like in my opinion, an excessive amount of bottles,’” Art said.

‘A Serious Erosion of Civil Liberties’: Backlash Grows Over Canada’s New Impaired Driving Laws

By Steph Willems on January 11, 2019 

Can you be pulled over and ordered to blow into a breathalyzer, under threat of arrest, for the simple act of returning empty liquor bottles in the middle of the day? Sure can, at least if you’re living north of the border. It happened to a 70-year-old man in Mississauga, Ontario last weekend.

As part of a massive package of laws enacted in mid-December, Canadian drivers are waking up to the knowledge that the legal standard of “reasonable suspicion” no longer exists when it comes to interactions with the police — at least when pertaining to the combination of alcohol and motor vehicles.This week, they’re learning it’s possible to face a drunk driving charge, even if you only started drinking after you got home.

Oddly, the new booze laws stem from Canada’s recent legalization of marijuana. Seeking to soothe nervous citizens worried about stoned carnage on the roads, the governing Liberal Party passed Bill C-46, a raft of new laws designed to clamp down on impaired driving, despite the fact that roadside testing for cannabis is still in its infancy (and can be quite inaccurate).

Buried in the legislation was the removal of “reasonable suspicion.” This standard, found in most Western countries, maintains that a police officer must have a reason to demand a roadside breath sample from a motorist. Erratic driving, for example, or slurred speech and the smell of booze or drugs during a checkpoint stop or when pulled over for an unrelated reason. The new laws give Canadian officers the ability to demand a breath sample from any sober-looking individual pulled over for having a broken taillight.

Failing to provide the sample when asked constitutes a crime, and a motorist will not be driving away in their own car after refusing a breathalyzer request (or, where applicable, a saliva test).

But let’s get back to the 70-year-old who enjoys bottle deposits. According to Global News, Art (last name withheld) had just finished returning his holiday bottle cache to one of the province’s Beer Stores (yes, that’s the name of the store that sells beer in Ontario — the government makes it so) when he found himself pulled over. The officer asked if he had been drinking.

“He said, ‘I saw you at the Beer Store and to me you were taking back, what looked like in my opinion, an excessive amount of bottles,’” Art said.

From Global:

During the discussion, Art said the officer demanded a roadside breath sample. He asked what would happen if he did not provide it. The officer told him he would face arrest, a criminal charge, and a licence suspension.
Art agreed to provide the breath sample, passed the test, and was on his way.
“I felt like I was violated in a way. They shouldn’t have that right to pull a person over unless there is a good sign the person is doing something wrong,” said Art, who was not using a cellphone, hadn’t been speeding or violating any traffic rules.

While the federal government stands by its legislation (“This is one of the most significant changes to the laws related to impaired driving in more than 40 years and is another way that we are modernizing the criminal justice system,” Justice Minister Jody Wilson-Raybould said last month), civil liberties groups and criminal defence lawyers single it out as being ripe for abuse. The “slippery slope” argument applies here, whether or not you feel it’s valid. Opponents feel that, with this tool in hand, fishing expeditions could become commonplace, with minorities shouldering the bulk of the roadside stops.

It’s a possible hammer-and-nail scenario, with every motorist looking like a nail … and some looking more like a nail than others. Of course, keep in mind that police still need a reason to pull you over in the first place.

But while some proponents of the law (or at least the government behind it) fall back on the time-honored “Well, if you’ve got nothing to hide…” argument, another section of the impaired driving legislation has given even backers food for thought. Contained in a law is a subsection that allows police to breathalyze operators of vehicles, vessels, or aircraft up to two hours after they’ve parked their vehicle. A finding of impairment would lead to an impaired driving charge, unless the individual can prove they weren’t also sloshed while operating the vehicle.

Why would this make it into law? Well, the chances of it being used against a random person is indeed slim, as it’s meant as a way of dealing with the drunk driving suspect who bolts into his house and chugs a bottle of whiskey, knowing the police are on their heels and they’ll soon have to undergo a breath test. “Sorry, officer — just havin’ a drink here. Just started.” That kind of thing. It’s a way of erasing a loophole. However, the mere fact the law exists marks “a serious erosion of civil liberties,” according to Toronto criminal defence lawyer Michael Engel.

“Husbands or wives in the course of separations would drop the dime on their partner,” he told Global, describing how a malicious tip-off to the police would lead them to an individual’s door at an hour when the person is known to be relaxing with a drink. While the law itself offers an out (you’re not actually breaking the law by drinking in a restaurant or home if you weren’t above the legal limit while driving there and there’s no reason to believe you’ll have to undergo a breath test in the immediate future) the onus is on the suspect to prove they started drinking after driving.

If the person is suspected of the crime of impaired driving, either through direct observation by an officer or via a malicious and fake tip, failing to provide a breath sample will lead to charges. Blowing over the limit, in your own home, will also lead to an arrest for impaired driving, until you hire a lawyer and a toxicologist to prove otherwise. Assuming you can afford a toxicologist, that is, and assuming they can prove it. It’s debatable whether going out to your car and asking the attending officers to feel your engine block will work. And what if you only got home an hour ago and it’s still warm?

“It’s a very draconian rule, a very significant invasion of privacy,” said Joseph Neuberger, another Toronto-based criminal defence lawyer.

Opponents say this tool, which could potentially put innocent people at risk of losing their license and job — and maybe even their freedom — will certainly end up being contested in the courts. It turns out legalized weed has unexpected consequences.

[Image: Michael/Flickr (CC BY 2.0)]

Financial illiteracy among our youth...

Millennials don’t know how credit cards work: survey

By Gregory Bresiger

August 5, 2017 | 10:48pm

Before your son or daughter starts using credit, make sure he or she understands that a credit card could be a weapon of self-destruction.

That’s because a new survey found that “millennials’ knowledge of credit cards is lacking” and “very concerning.” A few millennials — people born in the last decades of the 20th century — actually believe that missing a card payment would “improve” their credit rating, the survey said.

“It was only 6 percent, but it actually shocked us,” said Mike Brown, a research analyst with LendEDU and the author of its Millennials & Credit Cards Survey. “They might think that by missing a payment they are gaming the system,” he added. 

Seventeen percent said missing a card payment would have no effect on their score.

LendEDU, a Web site that provides information for student loan refinancing, also found that many millennials are spooked by credit cards, yet many use them in self-destructive ways. This leads to late-payment charges and poor credit scores.

The report, which questioned 500 millennials from various educational backgrounds who use cards, also found that some 36 percent have maxed out cards. Some 48 percent carry card balances on which they pay hefty interest charges from month to month. 

That doesn’t seem to make a difference to 45 percent of those questioned. They didn’t even know their credit-card interest rate. The survey also found that about a quarter of respondents are carrying three or more cards. 

That is too many for young people, most financial advisers say. “One to three is enough to establish a credit history,” said adviser Charles Hughes. “More than that, and you are tempted to run up lots of bills.”

Other young people fear cards could ruin their lives, so they avoid them, the report said. About half polled said they found cards “scary.”

So fewer millennials are signing up for cards than before 2008 because of fears of what happened in the aftermath of the crash. Many suddenly unemployed cardholders couldn’t pay bills.
Why do so many millennials misunderstand credit, and why are some spooked by it? 

Brown said the problem is a lack of financial literacy, a sentiment shared by many in the cards industry. 

“I think in general we are doing a terrible job of educating young people about credit,” added Bill Hardekopf, chief executive of LowCards.com. 

“We train young people to drive a car. We don’t train them to handle money,” he added. “The subject is taboo in many households.” 

Brown noted most young people graduate from high school or college without any money education. So a large number of millennials, Brown noted, lack card knowledge or an understanding of college debt. 

In a separate LendEDU survey earlier this year, “roughly 50 percent of respondents thought they would be helped by federal student forgiveness programs after graduation.” 

“The truth of the matter is that a very small percentage will qualify,” Brown said.

Chicago: Running out of other people's money to pay off public workers

Rahm’s latest plan to stave off Chicago financial collapse under fire – from Dems

By Thomas Lifson

Chicago and the State of Illinois are lurching toward insolvency, burdened by enormous pension liabilities, political payoffs from past generations that kept the Democrat Machine in power for generations. Rahm Emanuel knows this, and is doing his best to come up with financial schemes to keep paying bills. His latest effort at borrowing to keep the Chicago Public Schools (already almost a billion dollars behind in paying its expenses – particularly pension fund contributions) afloat is being called a “payday loan” even by Democrats, as the Dems scramble to blame Republican Governor Bruce Rauner for the collapse of the Blue Model. Fran Spielman reports for the Chicago Sun-Times:

Under fire for authorizing a “payday loan,” Mayor Rahm Emanuel on Friday defended his plan to let the Chicago Public Schools borrow $389 million secured by late block grants owed by the state.
“You have a situation...created by the state of Illinois to create a maximum amount of pressure on the public schools, specifically Chicago,” Emanuel said.
“It’s a short-term solution to a short-term problem created consciously, woefully by
the governor to create political pressure. That’s how we’re handling it. That’s the most appropriate way to deal with it.”
Aldermen don’t see it that way. They likened it to the skipped pension payments that got CPS into this mess and Emanuel vowed to end.

“Daley didn’t pay pensions. This is borrowing instead of not paying. You’re still robbing Peter to pay Paul and putting a Band-Aid on it,” said South Side Ald. Anthony Beale (9th).
“We’re borrowing money hoping that, eventually, the state comes through. If the state doesn’t come through, we’re gonna be in worse shape tomorrow than we are today. It’s gonna cost to borrow money. Taxpayers are still losing.”

Illinois is as broke as Chicago. If this were a business, Rahm would be borrowing against his “accounts receivable” – also known as “factoring.” That is a common practice among financially-troubled businesses to keep the doors open. Rahm is trying to find a factor that will lend almost $400 mill against the promise of a broke state to come up with the cash.
The source of the borrowing has not yet been determined, nor has the interest rate. That must wait until the borrowing goes out to bid. The maximum interest rate allowed by state law is nine percent.
Chief Financial Officer Carole Brown said the short-term loan will be limited to $389 million because the school system’s “lending partners” were willing to finance only about “85 percent of the outstanding receivable” of state grants. The rest will come from savings generated by mid-year budget cuts, Brown said, with a hazy explanation that raised more questions than it answered.
Nine percent is a handsome return in a low interest environment. If Rahm is unable to borrow at that price, it would be a sign that the financial crisis is getting closer. But I suspect that he already has sources of funds, and that the bet would be that the feds would come up with a loan if the effort fails.
Chicago has already sold off major assets, including the right to collect money from parking meters. There are fewer and fewer sources of funds available.
The crash is coming. The Dems are just looking for opportunities to blame Republicans for the consequences of their bribes to unionized public employees. 

A financial ticking time bomb.

Alarming number of borrowers failed to repay student loans last year

Jon Street  Mar 16, 2017 5:58 pm

The U.S. Department of Education announced the number of borrowers who defaulted on their federal student loans increased by 17 percent from 2015 to 2016. (Phil Walter/Getty Images) 

According to new data from the U.S. Department of Education, an alarming number of borrowers failed to pay back all or part of their federally subsidized student loans just last year.

The number of borrowers who defaulted on their loans increased by a whopping 17 percent from 2015 to 2016. Overall, more than 3,000 borrowers defaulted on their student loans every single day, CNBC reported.

In 2016, about 42.4 million Americans owed around $1.3 trillion in federal student loan debt. Of those 42.4 million borrowers, about 10 percent — or 4.2 million — defaulted on their loans at one time or another. The number of borrowers who defaulted on their loans in 2016 was up by 14 percent from just the previous year. In 2015, the number of people who defaulted on their student loans was 3.6 million.

According to MarketWatch, 1.1 million of those 4.2 million borrowers defaulted on direct loans, or loans that are subsidized by the federal government.

“Despite a booming stock market and unemployment falling, student loan borrowers are struggling,” Rohit Chopra, senior fellow at the Consumer Federation of America, told CNBC.

Chopra said that those who have defaulted on their student loans “are going to have a tougher time passing an employment verification check, saving for retirement or ever buying a home.” They could also have their wages garnished or their tax refunds withheld.

Behind home mortgage debt, student loan debt is the largest source of consumer debt in the country. Unlike home mortgage debt, the majority of student loan debt is held by the federal government.

Adding insult to injury, a staggering number of U.S. college students aren’t even using all of the money they borrowed to pay for school. About one-third of current college students applied the funds to their spring break vacations, according to another recent study.

Millions of other student borrowers admitted they have used their student loan funds to pay for drugs, alcohol, gambling or clothing, according to the same study.

Perhaps all of this shouldn’t be surprising, though, considering how nearly half of U.S. college students believe their student loan debt will eventually be forgiven.

Mexico’s remittances reach almost $27 billion...for which we receive nothing in return. Add that to the drugs business.

Mexico’s remittances reach almost $27 billion

By Associated Press February 1 at 3:19 PM

MEXICO CITY — Mexicans living abroad sent home almost $27 billion in 2016, the highest yearly figure on record, the central bank reported on Wednesday.

The remittances rose 8.8 percent, from $24.78 billion in 2015 to 26.97 billion last year.

The central bank said almost all the money was sent to Mexico by electronic transfers, though about $600 million continues to arrive in cash or by money orders.

Remittances have become Mexico’s most important source of foreign income after auto exports of almost $34 billion per year. Remittances have far surpassed the $15.6 billion Mexico earns from oil exports and the $17.5 billion in tourism income Mexico received in 2015.

U.S. President Donald Trump has suggested the U.S. might retain some remittances to pay for a wall between the countries, a project Mexico opposes.

It is unclear whether migrants sent more money home because they feared possible future restrictions on the transfers or whether they were taking advantage of the dollar’s higher purchasing power in Mexico. The Mexican peso dropped 19 percent in value against the dollar in 2016.

But, they have plenty of money to hire Eric Holder and fund sanctuary city protestion programs.

Democrats always take the easy way out because it's not their money.

L.A. needs to borrow millions to cover legal payouts, city report says

Dakota SmithContact Reporter

The Los Angeles City Council in recent years has repeatedly settled costly, high-profile lawsuits, agreeing to spend millions of dollars to end litigation brought by grieving families, disability-rights groups and people wrongfully convicted of crimes.

City Hall leaders championed some of the settlements as having a silver lining for taxpayers, such as one in 2015 that created a program to fix L.A.’s buckling sidewalks.

But a surge in legal settlements, along with court judgments against the city, is outpacing the city’s ability to keep up.

With payouts projected to total at least $135 million this fiscal year, budget officials said Monday that the city needs to immediately borrow up to $70 million to avoid dipping into its emergency reserve fund.

In a new report, the City Administrative Office said the gap reflected “a new trend of increased liability payouts.” The report recommended raising the money through a bond that would be paid back over 10 years.

Such borrowing would cost the city millions of dollars each year in interest and fees. Under one scenario discussed Monday, the city would pay $9 million each year in principal and interest on a $70-million bond.

Councilman Mitchell Englander voted against the bond at Monday’s budget committee meeting, arguing the city needs to do a better job allocating its money given the repeated lawsuits.

“We’re going to be in the same boat next fiscal year...it’s every year,” Englander said. The measure was approved, 4-1, and sent to the full council.

The city typically budgets $60 million a year for its legal liability fund, but has seen a significant number of settlements since the fiscal year began on July 1.

City Administrative Officer Miguel Santana said his office issued financial reports to the City Council for the last several years warning of costs to the city because of the lawsuits. He also called on the mayor and City Council to “significantly increase” the amount funded for liabilities.

“Ideally we would have budgeted more,” Santana said.

In August, the City Council agreed to a roughly $200-million settlement over a housing-related lawsuit brought by disability-rights groups, with the city expected to pay about $20 million a year.

Last month, the council agreed to an $8-million settlement to end lawsuits related to the fatal Los Angeles Police Department shootings of three unarmed men in separate incidents. The payouts are among the highest by the city for deadly police shootings in the last decade.

Two years ago, officials agreed to spend $1.2 billion over the next three decades as part of a legal settlement to fix the city’s massive backlog of broken sidewalks.

The city paid out $110 million in legal cases last fiscal year, according to budget staff. In January 2016, the city agreed to pay out $24 million to settle lawsuits from two men who alleged that dishonest LAPD detectives led their wrongful murder convictions and caused them to spend decades behind bars.

City lawyers concerned about the police misconduct allegations recommended the settlements, saying in confidential memos to the City Council that taking the cases to trial could be even costlier.

In an interview Monday, Los Angeles City Atty. Mike Feuer cited several reasons for the increased payouts. He said juries are more skeptical about law enforcement when it comes to police liability, and cited a “significant” amount of deferred maintenance of city infrastructure.

Jay Handal, co-chairman of the Los Angeles Neighborhood Council Budget Advocates, questioned the city’s approach given the bond’s interest rates. Such costly borrowing, he said, makes more sense for long-range construction projects, not ongoing legal expenses. 

“What this [proposal] tells you is that we have an upper management who quite honestly isn’t addressing the systemic problems we have in our budget,” Handal said.

Already, the city has taken $28.5 million from its reserve fund this fiscal year to cover legal payouts, according to Assistant City Administrative Officer Ben Ceja. 

As of November, the reserve fund stood at about $295 million, which the CAO report said is “only precariously above” the minimum amount required under city policy — 5% of the General Fund budget. Reducing the city’s reserve fund has the potential to hurt its bond rating, which makes it more expensive to borrow money.

Ceja said the rising expenditures “could be the new normal in terms of paying out cases.”

The last time L.A. issued a such a bond was after the 2010 May Day Melee, when the city was forced to pay millions in lawsuit settlements after police turned on demonstrators at MacArthur Park.

The city borrowed $50 million and currently spends $6.5 million to pay off that debt, according to budget documents.

Councilman Paul Krekorian, who chairs the city’s Budget and Finance Committee and voted for the bond, said he’s hopeful that a working group established with Feuer’s office in 2015 will help bring down costs as city lawyers work to reduce legal risks.

“It’s not my preferred solution,” Krekorian said of the bond. “My preferred solution is to have a budget that anticipates what our likely liability will be.”

Cities facing a financial meltdown

EXCLUSIVE: Chicago, New York in Worst Financial Shape Among Large US Cities

By Marc Joffe

January 9, 2017

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Emanuel's re-election present: Chicago’s fiscal nightmare is just beginning

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Chicago and New York rank at the bottom of a new analysis of fiscal strength based primarily on data from 2015 financial reports issued by the cities themselves. The analysis includes 116 U.S. cities with populations greater than 200,000. See the full rankings here.

Chicago’s position at the bottom of the ranking is no surprise to anyone who follows municipal finance. The Windy City has become a poster child for financial mismanagement, having suffered a series of ratings downgrades in recent years. Aside from having thin reserves and large volumes of outstanding debt, Chicago is notorious for its underfunded pension plans.

For example, the city’s Municipal Employees' Annuity and Benefit Fund (MEABF) reported $4.7 billion in assets and $14.7 billion of actuarially accrued liabilities at the end of 2015, representing a funded ratio of just 33 percent. The actuarial calculations rely on a controversial practice of discounting future benefits at a rate of 7.5 percent, which is the assumed return on the fund’s portfolio return. If a more conservative assumption was employed, MEABF’s liabilities would be higher and its funded ratio lower.

Related: See the Full 2017 Fiscal Strength Index Ranking of 116 US Cities

Because the ranking is based on 2015 financial audits — you can see the full data behind the scores here — it does not take into account more recent news. Last summer, Mayor Rahm Emmanuel announced a plan to resolve MEABF underfunding by raising water and sewer rates and increasing employee contributions to the system. Because these changes don’t take effect until this year, it will take some time for them to impact Chicago’s audited financial statements and their fiscal health scores.

While Chicago’s place at the bottom of the list is unsurprising, New York City’s position — just one step above — was unexpected. An extended bull market and soaring real estate prices have pumped money into the Big Apple’s coffers. Total municipal revenues rose from $60 billion in 2009 to $81 billion in 2015. But the city has been spending the money almost as quickly as it has been coming in.

At the end of its 2015 fiscal year, the city’s general fund reserves amounted to just 0.67 percent of expenditures — well below the Government Finance Officers Association recommendation of 16.67 percent (equivalent to two months of spending). A city’s general fund is roughly analogous to an individual’s checking account.

Related: The Financial Health of All 50 States, Ranked

New York City also carries a very heavy debt burden. According to a report issued by City Comptroller Scott Stringer, New York’s per capita debt greatly exceeds that of all other large U.S. cities, and is even 50 percent higher than that of Chicago. But the comptroller’s report only focuses on bonded debt. Government financial accounting standards require cities to report other long-term obligations such as pensions, compensated absences for municipal employees (accrued sick and vacation leave payable at retirement) and “other post-employment benefits” (or OPEB). 

It is New York’s OPEB obligation that really sets the Big Apple apart. In 2015, the city’s OPEB liability was $85 billion — roughly equivalent to its bonded debt.

The large OPEB liability is driven by the size of the city’s workforce and the relatively high cost of health care in New York. According to its most recent OPEB Actuarial Report, the city is providing retiree health benefits to 222,000 retirees, while another 315,000 current and separated employees are potentially eligible for future benefits. In 2015, benefits per retiree ranged as high as $17,000 a year (for workers who were not yet Medicare-eligible and who had eligible dependents).

High debt burdens and insufficient general fund reserves are associated with episodes of fiscal distress, which are marked by employee furloughs, layoffs and, in extreme cases, bond defaults and bankruptcy filings. Still, if New York City continues to record strong revenue growth, it can shoulder its sizeable obligations. With the stock market perking up in the aftermath of Donald Trump’s election victory, the odds of a fiscal crisis in the near term appear long — but a bear market could place the city in jeopardy.

Related: Is Your State the Next Puerto Rico?

Such was the case back in 1933, when New York City briefly defaulted on its municipal bond debt. In the aftermath of the stock market crash and the Great Depression, city revenues declined amidst a rash of property tax delinquencies. The city faced a second fiscal meltdown in 1975, when the federal government refused to provide a bailout and the state declared a moratorium on certain city bond payments. Although the default occurred during another bear market, the proximate cause of the crisis was rising interest rates. At the time, the city relied heavily on short-term debt, which became more difficult and expensive to roll over as inflation spiked in the early 1970s.

Aside from New York and Chicago, three other cities received scores below 40:  Reno, St. Louis and Toledo. All three of these cities had relatively small general fund balances and high debt burdens.

One Perfect ScoreAt the other end of the spectrum, with a perfect score of 100, is Irvine, California — a rapidly growing “edge city” south of Los Angeles. Rising revenues have resulted in a series of budget surpluses that have bulked up the city’s reserves. In 2015, the city reported over $700 million of cash and investments on its balance sheet, more than enough to fund two years of government spending. Irvine is also unique among large American cities in that it has no outstanding bond obligations. All municipal borrowing in Irvine is done by special districts, which levy supplemental taxes to service their debt.

Two cities in California’s Inland Empire, Fontana and Moreno Valley, took the second and third spots. Both cities have modest debt loads and large general fund reserves.

Related: The Worst States for Retirement 2016​​​

These high-ranking cities are both located within a short drive from San Bernardino, which filed for bankruptcy protection in 2012. Their presence near the top of the list is testimony to California’s economic recovery, but it also suggests that sound financial management practices make a difference. Although Fontana and Moreno Valley faced similar challenges to San Bernardino during the Great Recession, both of these cities avoided a fiscal crisis – apparently because officials showed greater discipline with respect to spending and borrowing.

Keep in mind, though, that it is not necessary for a city to have a near-perfect score to be regarded as a good fiscal steward. Any score higher than 70 could reasonably be interpreted as a level of fiscal health sufficient to justify a triple-A credit rating.

Bankruptcies and DelinquenciesThe universe of cities we analyzed includes three that filed for bankruptcy since the Great Recession: Stockton and San Bernardino, which filed in 2012, and Detroit which filed in 2013. Both Stockton and Detroit have emerged from bankruptcy, while San Bernardino is close to doing so. All three cities have scores in the middle of the pack. Detroit and Stockton benefited from court-mandated reductions in their debt, while San Bernardino has been running general fund surpluses during its extended time in bankruptcy.

Of the 116 cities we analyzed, three had not published 2015 Comprehensive Annual Financial Reports by the end of 2016. One of them, Baltimore, will publish its 2015 CAFR in early 2017, which is quite late. Federal regulations require state and local governments that receive over $750,000 in federal funds to file audited financial statements no later than nine months after their fiscal year end. Since Baltimore’s fiscal year ends on June 30, it should have filed its 2015 CAFR no later than March 31, 2016.

See the full ranking of 116 cities here. To see the data behind the scores, please visit the new Center for Municipal Finance website