Finance & Revenue

Why are Municipal Utility Districts getting the label unchecked? 

• “unlimited power” to raise taxes
• unlimited power to issue bonds
• no spending oversight

Total MUD debt? $60 billion

Houston Chronicle | MUDs sell bonds, levy taxes for developers who court conservative politicians with campaign cash

What calculation makes Dallas’ pension debt seems smaller than other cities? Overlapping debt analysis that considers the debt of pension systems in shared property tax bases

An example of overlapping debt analysis:

• Dallas unfunded liabilities at the end of 2015 were $1,371 per capita
• For the same time period, Denver had unfunded pension liabilities of $709 per capita
• Factor in overlapping taxing district unfunded liabilities, Dallas liabilities are $1,362 per capita
  • This adds in pension liabilities for the 20 overlapping taxing districts
• Factor in overlapping taxing district unfunded liabilities, Denver’s unfunded pension liabilities are $4,876 per capita
  • This adds in pension liabilities for 1 overlapping taxing district, the Denver Public Schools

Governing | A Better Way to Measure Pension Debt’s Danger

2 swing states could address fantasy sports this year:

• Ohio
  • S 356 makes fantasy sports legal only if no revenue is retained by the fantasy sports platform
• Pennsylvania
  • A court ruling threw gambling revenue into chaos making gaming legislation more likely this year

Legal Sports Report | These State Legislatures Could Still Tackle Daily Fantasy Sports This Year

The state: New York

The people opposed to the new fantasy sports regulation: 4 people, impacted by gambling disorders

What claims are alleged? That fantasy sports are a game of chance and thereby illegal gmaing under the state constitution

The proposed solution: Let the citizens of New York vote on it.

Bonjour! Constitutional Amendments for Fantasy Sports.

NY Post | New Yorkers want to block new fantasy sports gambling law

Anyone who is double dipping by receiving any government pension is not a safe hire in Burlington County New Jersey. Double Dutch enthusiasts breathe a sigh of relief that they’re safe.

Where:  Burlington County New Jersey

The pension prohibition: The County cannot hire anyone who is receiving an annuity under a tax payer funded pension

The exemptions: Current employees and military personnel

Governing | To Prevent Pension Abuse, County Bans ‘Double Dipping’

The 5 states considering leglaizing marijuana and imposing a tax:

• Arizona
  • 15% tax
  • tax to fund  health and education initiatives
  • creates the Department of Marijuana Licenses and Control
• California
  • 15% sales tax
  • cultivation tax of $9.25 per ounce for flowers and $2.75 per ounce for leaves sold in state-regulated retailers
  • Claims it will “reduce criminal justice costs by tens of millions of dollars annually.”
• Maine
  • 10% sales tax
  • Requires  municipal approval for vendors
• Massachusettes
  • state sales tax +  3.75% excise tax
• Nevada
  • 15% excise tax 
  • location restrictions on retailers like Alaska, Oregon and Washington and somehwat similar to TX alcohol free school zones

Governing | States Voting on Marijuana, Medical or Recreational, in November

The 7th largest pension: Texas’ own, TRS

The current alternative investment/hedge fund invesment: 8.3% of the $129 Billion Fund

The average rate of return for TRS by hedge funds? 2.7% over 3 years

Before official TRS action to cut hedge funds, these cuts are occuring:

• TRS staff has terminated some hedge funds
• TRS staff is moving for fee cuts

The Street | Texas Teachers May Be the Next Big Pension Plan to Snub Hedge Funds

The State: Pennsylvania

The 2015 E-Cig Tax: A 40% wholesale tax on e-cigarette goods

What happened before the 40% tax went into effect? Stores liquidated their goods and closed leaving the state without its revenue source

The revised proposal: Replace the wholesale tax with a 5cent per mL tax

PennLive | Vape tax takes effect as shops close, Legislature mulls rollback

The State: New Jersey

The pension board vote: To cut by 52% the investment in hedge funds

When did the board take this action? August 2016

Any mitigating facts in New Jersey? It wasn’t a bonus for the investment industry that one of the private investment firms that manage pension funds is being investigated for bribery 

Salt Lake Tribune | New Jersey pension pulls $190M from hedge fund

What’s a dark store appraisal? On 7th of September we talked about how Michigan and other states experienced large big box retailers reducing their property appraisals by comparing the store front to what an vacant store front would garner on the open market.

First came Dallas.  The Dallas Morning news the following week talked about dark stores.

Just in time for Halloween, the spooky dark store arrives in San Antonio. 

Let’s look at the Lowe’s plight in Bexar County:

The assessed value: $82/sq. foot

Lowe’s dark store retort: $20/sq. foot (the value of empty stores)

Bettencourt comments: 

• Dark store strategy is legal
• Texas doesn’t have legal protections against it
• Its comparable to the Valero vs. Gavleston County Appraisal District suit before the Texas Supreme Court

San Antonio Current | Big Box Chain Brings “Dark Store” Tax Dodge to San Antonio

• Ohio has a new fantasy sports bill
• Ohio’s Attorney General says fantasy sports isn’t legal and isn’t illegal – lawyers… its never a clear cut answer
• Ohio’s bill isn’t super industry friendly for these reasons:
  • It doesn’t call fantasy sports a game of skill or chance but rather a “scheme of chance”
  • 100% of entry fees have to go back to players

Ohio SB 356

Legal Sports Report | Ohio’s New Daily Fantasy Sports Bill, And Why Framing Matters At The State Level

• As of September 2016 LBB has reporting information on 22,600 contracts 
• In the last year the total value of contracts reported to LBB increased from $5.7 Billion to $82.6 Billion
• Latest and largest chunk of reported contracts comes from Institutions of Higher Education

LBB Contract Reporting and Oversight September 2016 

LBB Contracts Chart

The Comptroller has a new hotel tax data base that allows you to search by:

• Type of filer (montly or quarterly)
• Date
• Location
• City Limits restrictions

Texas Comptroller | Transparency | TEXAS HOTEL DATA SEARCH

San Diego in 2012 reduced its pension payouts. Labor groups sued. Pension cuts are caught in the courts.

The costs facing San Diego from the 2012 pension costs:

• Attorney fees for labor groups. No estimate of amount, but guesses are high.
• Cost of the pension cut payout: $100 Million  to $20 Million (people disagree)
• $20.1 million to retroactively create pensions for new hires, if the city is forced into this route

What’s the timeline for the 2012 cuts? An appeals court should rule in 2018.

Next stop: California Supreme Court. 

San Diego Union Tribune | Pension case could cost city millions

Which state’s governor cut university budgets by 2% mid-budget cycle? Kentucky

What was the Governor’s argument? Universities were part of the executive branch and he has broad discretion to cut executive branch budgets

What did the court say? Whatever power the Governor has to reduce budgets does not apply to univerisites. universities are indpendent, with distinct control over their budgets, with appropriations going directly to the university and not through the state treasury.

Governing |  Court: Kentucky Governor Lacks Authority to Cut Universities’ Funding

Never ever should investors buy pension obligation bonds because:

• the bonds will be downgraded at the end of the current credit cycle
• revenue bonds are a better choice for investment in the bond market
  • general obligation bonds suck your protfolio dry
• pensions are “grotesquely under water

Forbes | Why Investors Shouldn’t Buy Pension Obligation Muni Bonds

• Protecting consumer information
  • The volume of personal data collected includes:
    • credit card numbers
    • personal identifying information
    • Social Security Numbers
    • driver’s license number
• Preventing hacker manipulation of the fantasy sports platform
• The application of class action lawsuits to data breaches

Bloomberg | Fantasy Sports Must Tackle Cybersecurity Threats

Why? 2013 legislation created the committee . Government Code Section 316.091 et.seq.

Who serves on it? 5 Senators & 5 State Representatives

2016/17 Appointees:

• Sarah Davis (co-chair)
• Donna Howard
• Lyle Larson
• Drew Springer
• Armando Walle
• Paul Bettencourt
• Don Huffines

What the committee considers:

1) the history of fund balances;

(2) the history of transfers to the fund;

(3) estimated fund balances during that fiscal biennium;

(4) estimated transfers to the fund to occur during that fiscal biennium;

(5) information available to the committee regarding state highway congestion and funding demands; and

(6) any other information requested by the committee regarding the state’s financial condition.

What does the committee do?

• “adopt for the next state fiscal biennium a sufficient balance of the fund in an amount that the committee estimates will ensure an appropriate amount of revenue available in the fund”
• Pass a resolution stating such

Speaker Straus  | STRAUS NAMES APPOINTEES TO ESF COMMITTEE

Lt. Gov. | LT. GOVERNOR PATRICK ANNOUNCES APPOINTMENTS TO JOINT SELECT COMMITTEE

• Philadelphia
  • The buy-out: Buy out employees in the highest plans, and put the employees back into a plan that matches current employees
  • The net effect: Cuts $1 B of $6 B of pension liabilities
• Illinois
  • ​The buy out: Buy out employees without offering reduced pension plans to comply with court ruling prohibiting pension reductions
  • The net effect: Reduce some pension liability
• Connecticut
  • ​The buy-out: Less buy-out & more funding shift. High dollar pension plans would be paid directly through the state budget and off the pension’s liability
  • The net effect: Pension liabilities are reduced via cost shift

Governing | Pension Crisis: Could Buyouts Be a Solution?

This week Nevada Legislature was called into special session for economic development. The details:

• The goal: A new NFL stadium
• The stadium cost to the state: $1.9 B
• The method of finance: increase on the hotel tax
• Additional sweetener: A 0.1 cent sales tax increase to fund more law enforcement in the resort area that would service the stadium

Las Vegas Review Journal | More Cops tax hike heads to Nevada Legislature along with stadium proposal

Informed Intel on September 7th, 2016:

Trend from West. Special Sessions of Legislature for Economic Development.

The State: Nevada

Economic Development Special Sessions:

• 2014 incentives for Tesla
• 2015 incentives for Faraday
• Potential 2016 incentives for a new Raiders Stadium

Economic Arguments for a NFL Stadium in Las Vegas:

• $750 million public contribution base don raising hotel taxes
  • the state is only on the hook for a 1/3 of the stadium cost
• the hotel tax would be put to its intended purpose- to put more heads in beds

Entities behind the stadium push:

• Las Vegas Sands (Sheldon Adelson)
•  Majestic Realty
• Oakland Raiders

Las Vegas Sun | Nevada Legislature mulls special session on NFL stadium

The State: California

Signed by Gov. Brown: September 14, 2016

The legislative changes to pension investment managers:

• required disclosure of invesment management fees
• required disclosure of performance fees
• partial disclosure of “the fees private equity firms collect from the companies they buy out”

Calpers and Calstrs board member said it is “the “nation’s most robust transparency requirements” concerning investments in the buyout funds.”

7 States introduced fee disclosure legislation in 2016 only California passed a bill.

BloombergMarkets | California Pensions to Say More on Fees, but Critics Persist

Who: Businesses

Did what? Filed suit against Philadelphia to prevent collection of the new soda tax

What basis did business have to file suit against the City of Philadelphia to stop the soda tax? Business asserts that the new soda tax is:

• against state law that already imposes a 6% sales tax on the products
• against SNAP mandates & could affect the state’s SNAP funds

Forbes | Lawsuit Filed Against Philadelphia In Effort To Stop Soda Tax

Informed Intel on 9th of June 2016:

The Billionaires Behind the Successful Local Soda Tax.

How the soda tax win in Philadelphia was messaged:  A win for education. A win for the coalition of educators, parents, and rec center volunteers

The billionaires/business types supporting the soda tax:

• Former New York Mayor Michael Bloomberg
• Texas billionaires John and Laura Arnold

The impending legal fight: local beverage bottling businessman is filing suit

Dallas Morning News | How Texans helped Philadelphia become first U.S. city with soda tax

The National Institute for Retirement Security “Pensionomics” series put these numbers to the economic benefit of pensions:

• $1.2 trillion in total economic output (2014)
• 7.1 million jobs supported by pension spending
• $190 billion in federal, state and local taxes on pension benefits
• $1 of pension benefit creates $2.21 in economic activity

The National Institute for Retirement Security | “Pensionomics” series

Forbes | Do Public Employee Pension Benefits Stimulate the Economy?

The meat & potatoes. The nuts & bolts. The horse, still waiting on the spurs, of the tentative pension deal reached in Houston:

• The goals of the deal:
  • eliminate under-funding within 30 years
  • avoid $2.5+ billion in future costs
  • benefit reductions
  • $1+ billion in bonds
• What Houston gets:
  • cap on pension liability
  • realistic investment returns
• What needs to happen to bring this deal to fruition:
  • each of the local pension boards need to agree on benefit reductions
  • approval by each fund’s board
  • legislative approval

Texas Public Policy Foundation response: Houstonians still have no say.

Houston Chronicle | Turner unveils tentative pension reform deal

KPRC | Mayor aims to fully fund Houston’s pension plan within 30 years

TPPF 

TEXPERS Executive Director makes 3 points supporting the A.G. Opinion finding that the state is not liable for local pensions:

• The Attorney General affirmed what local pensions know & how they operate
• The state has never been a financial backstop for local pensions
• The Legislature only serves to affirm local agreements as a method of checks and balances

Mondovisione | TEXPERS Amplifies Attorney General’s Opinion on Pension Funds in Statute

7 September 2016 on informed intel:

No, the state isn’t liable for local pension obligations.

Why isn’t the state liable? Two reasons according to the rational in the Attorney General opinion:

• no specific statutory authority
• the constitution prohibits it by:
  • Article III, section 49(a) that limits the creation of state debt & does not include local pensions
  • Article III, section 50 that prohibits the state from lending its credit, which it has not

KP-112

Southeast Texas Record | Tex

Top Performing Pension Overall: Oklahoma’s Teachers Retirement System with a 8.3% return over the last decade

Top Texas Performer:  For private equity annualized performance ranking, Texas TRS with a 15.4% return on private equity

Pensions & Investments Online | State pension funds earn median 6.8% over 10 years, analysis finds

Clearwater Report for State Pensions

Where: Marin, County, California

Whose reform idea? The Executive Director of Marin Association of Public Employees, speaking for himself

The local pension reform proposal:

• Progressive Pensions
• Lower wage employees get 90% of their salary in a pension, while higher salaries get a lower percentage
• The policy goal: Protect the little guy and prevent over the top enrichment that makes for bad headlines

Marin County |  Dick Spotswood: The door is open to public pension reform

• States are loving the strategy of legitimize fantasy sports + offering consumer protection + paying fees to increase state revenues  
• The hiring formula used by fnatasy sports to achieve their strategy:
  • hire local lobbyists + flooded offices with pleas from fantasy sports players+ bring in big name atheletes to hob-knob with legislators + avoid established gaming interests
• Respond quickly to legislators who question the method by:
  • critical emails to their players
  • robo-emails
  • radio ads targeting the lawmaker and promoting fantasy sports

The big state for fantasy sports to win: Texas. Enter State Representative Richard Raymond. 

LAW.COM | How Fantasy Sports’ Bet on State Strategy is Paying Off

Texas Tribune | Lawmaker Pledges Bill to Protect Texas Fantasy Sports Betting

The pension: Houston Firefighters’ Relief and Retirement Fund

The city: Houston

The Court: 14th Court of Appeals

The Opinion: 

• Agreed with the lower court that the City cannot change how the fund is operated.  
  • The fund’s operation are in state law.
• Agreed with the pension fund that Houston fire fighters face unique challenges, unlike other large Texas cities.

Next legal stop? TX Supreme Court

From the Houston Firefighter’s Relief & Retirement Fund:

• Its grown from $468 million in 1988 to $4.63 billion
• Houston pays only about 20% of benefit costs
• 80% of benefits are covered by the fund’s investments and firefighters’ own contributions

Courthouse News Service | Houston Loses Appeal in Firefighter Pension Fight

Last week we learned about the trend to reduce commercial appraisals by the valuation of an empty store.

They’re here. The trend has arrived in Texas. & there’s a trendy name- “dark stores”

Dallas Morning News | Will big box retail’s ‘dark store’ strategy lead to fewer taxes in Texas?

Your Informed Intel on 7th Spetember 2016:

Which commercial property owners are involved? Big Box stores

What is the argument they’re using to lower their property tax bills? That market value is the “sale price of similarly sized but vacant retail buildings”

What local governmental officials say in repsonse? That’s like basing residential property taxes on a foreclosed, vacant home.

Which states have local governments that are feeling the revenue hit? 

• Michigan
• Alabama
• Florida
• Indiana
• Iowa
• North Carolina
• Ohio
• Tennessee
• Washington
• Wisconsin

What have state legislatures done in response? 

• Indiana banned the practice of using vacant stores as market value comparisons
• Alabama gave counties more resources to fight the valuations
• Michigan is considering changes to the appraisal challenge process

Governing | Big-Box Stores Battle Local Governments Over Property Taxes

Who: Robert Lee, Employees Retirement System of Texas’ (ERS) director of investments

Moving to: Texas Tech University System as deputy CIO

When: Starting October 2016

Chief Investment Officer | Texas ERS Hedge Fund Chief Exits

65% of Jacksonville, FL  voters approved a sales tax increase to cover the local pension system.

Pensions & Investments | Jacksonville, Fla., voters approve half-cent tax to fully fund city pension plans

Your Informed Intel on July 9, 2016:

Where: Jacksonville FL

How does the sales tax for pensions work? 1/2 cent sales tax to defer city pension contributions until 2030

What benefits are there to city revenues?

• From 2018 through 2034, the city would spend $857 million less on contributions to its three pension plans
• From 2035 to 2049, the city would spend $2.37 billion more in pension contributions with estimated 1/2 cent sales tax increase revenues being $2.5 billion from 2031 to 2049
• For accounting purposes, the City could use the future sales tax revenue on the current books to offset liabilities

Alternatives to the sales tax increase? property tax increase

Jacksonville | Report on proposed pension fix gives ammunition to supporters and opponents of sales tax

In 2012, South Carolina enacted the following pension reforms that applued to new hires:

• Rule of 90
• Unused leaveis not part of benefit calculations
• Vesting in 8 years, up from 5

The following 2012 pension reforms affected all South Carolina state employees:

• 8% worker contribution, a 1.5% increase phased in over 2 years
• Phased out an incentive program that allowed retirees to return to work and still draw a pension
• Limit all return to work retirees stop drawing benefits when they reach $10,000 in salary in a year
• Standard 1% annual COLA

Charlotte Observer | A look at the Legislature’s last pension reform law

Which commercial property owners are involved? Big Box stores

What is the argument they’re using to lower their property tax bills? That market value is the “sale price of similarly sized but vacant retail buildings”

What local governmental officials say in repsonse? That’s like basing residential property taxes on a foreclosed, vacant home.

Which states have local governments that are feeling the revenue hit? 

• Michigan
• Alabama
• Florida
• Indiana
• Iowa
• North Carolina
• Ohio
• Tennessee
• Washington
• Wisconsin

What have state legislatures done in response? 

• Indiana banned the practice of using vacant stores as market value comparisons
• Alabama gave counties more resources to fight the valuations
• Michigan is considering changes to the appraisal challenge process

Governing | Big-Box Stores Battle Local Governments Over Property Taxes

The State: Nevada

Economic Development Special Sessions:

• 2014 incentives for Tesla
• 2015 incentives for Faraday
• Potential 2016 incentives for a new Raiders Stadium

Economic Arguments for a NFL Stadium in Las Vegas:

• $750 million public contribution base don raising hotel taxes
  • the state is only on the hook for a 1/3 of the stadium cost
• the hotel tax would be put to its intended purpose- to put more heads in beds

Entities behind the stadium push:

• Las Vegas Sands (Sheldon Adelson)
•  Majestic Realty
• Oakland Raiders

Las Vegas Sun | Nevada Legislature mulls special session on NFL stadium

No, the state isn’t liable for local pension obligations.

Why isn’t the state liable? Two reasons according to the rational in the Attorney General opinion:

• no specific statutory authority
• the constitution prohibits it by:
  • Article III, section 49(a) limits the creation of state debt and does not include local pensions
  • Article III, section 50 prohibits the state from lending its credit, which it has not

KP-112

Southeast Texas Record | Texas AG opinion: State not ‘liable’ for municipal pension shortfalls

The City Fee: St. Paul, MN street maintenance fee

The argument against the fee: 2 churches sued saying the fees benefited not just them as property owners, but the public at large which made the fee a tax that counts against taxing limits by cities.

The court: The Minnesota Supreme Court agreed and said the fee amounted to a tax.

Governing | A Threat to City Fees?

What is the hidden property tax? Rising proeprty values that cause a property owner to pay more property taxes when tax rates are reduced. 

For or against the hidden property tax? “An increase in property value should not be an automatic increase in property tax revenue.” 

What changes are supported:

• robust & transparent communications with residents to explain why taxing entities need more revenue

Trib Talk | Daniel Gonzalez | Texas Association of Realtors | Time to talk about the hidden property tax

The company: Sandy Creek coal-fired power plant

The County of appraisal: McLennan County

The Appraisal Disrict’s values:

• $900 million in 2014
• $1.17 billion in 2015

The Company’s 2 legal argument to reduce its appraisal by 60%: 

• A willing buyer would pay no more than $380 million for the plant in 2014 and $395 million in 2015
• Creating a recognition that power markets had slumped.

POWER | Texas Coal Plant Wins Tax Appraisal Case, Property Value Cut 60%

Which state house speaker has a pension reform plan? Virginia

What goals does the Virginia Speaker want to achieve?

• Change from defined pension benefits to defined contributions
• Create the Virginia Commission on Employment Security & Pension Reform
•  Reduce the $22.6 billion in unfunded long-term liabilities
• Create a retirement system that attracts & retains employees

Are the Speaker’s pension reform plans supported by state employees and teachers impacted by the reforms? No

The Daily Progress | Speaker’s pension reform push faces budget headwinds, workforce concerns

In 2015, Kansas state pension system (KPERS) issued $1 billion in bonds to maintain the pension. The results:

• The $1billion bond, which was invested, will be able to pay bond service, but little more than that. 
• It is expected that the return will either be even or minimally positive
• For the numerically minded, KPERS assumes an 8% return rate
• KPERS had a $500 m pension bond in 2004. Those funds investment return rate has been 6.68% while the bond rate is 5.39%, generating $156 million for KPERS

Topeka Capital Journal | Kansas issued a $1 billion pension bond a year ago. How is it doing?

New issues emerged at the Sunset Advisory Commission hearing on ERS recommendations.

The new issues:

• Senator Van Taylor is interested in:
  • convicted legislators receiving ERS benefits
  • adding a taxpayer to the ERS board
• Senator Charles Schwertner is interested in ERS alternative investments, hedge fund investments and infrastructure investments best practices and whether Texas practices align with best practices and/or other states.
• Chairman Flynn is working on legislation to add an ERS retiree to the ERS board.

August 22, 2016 Sunset Advisory Commission Hearing on ERS beginning at 11:26:00 

What is the impact of lowering projections for investment returns?

• increased normal pension costs (contributions)
• increased unfunded liabilities

Bond Buyer | Should States Lower Estimates for Pension Investment Returns?

• Low bond rates and high value of the U.S. stock market will keep pension returns lower
• To meet current projected return rates requires higher risk investments

Bond Buyer | Should States Lower Estimates for Pension Investment Returns?

• California wins based on time frame, post-2011, & by using raw numbers counts
• Caliornia is helped by its larger population
• California wins on GDP and personal income growth (0.9% in CA to 0.8% in Texas)

What bodes well for Texas?

• Texas has a lower unemployment rate, for a longer period of time
• Texas has had a better nonfarm employment-to-population ratio
• Examining a bigger picture, from  May 2006 to May 2016, TX job gains of 18.6%.  California experienced 8%.

Politifact Texas | Julián Castro says California besting Texas in creating jobs, economic growth

In lieu of a tax increase, Wyoming is considering recouping the federal tax incentives offered to wind facilities.

Governing | Has the Nation’s Only Wind Tax Paid Off for Wyoming?

• Per pupil spending by state via Census Bureau numbers:
  • Texas #43 at $8,592
  • New York #1 at $20,610
  • Pennsylvania #10 at $13,961
  • California #34 at $9,595
  • Florida #41 at $8,756

What’s included in this per pupil spending amount?

• Instruction: Employee Salaries
• Instruction: Employee Benefits
• Pupil Support
• Instructional Staff Support
• General Administration
• School Administration
• Other

The factors linked to higher per pupil spending:

• High property values
• Experienced Teachers/ Teachers with advanced degrees
• Generous pension benefits

Governing | The States That Spend the Most (and the Least) on Education

New Jersey is cutting its ties to private money managers/hedge funds. New Jersey joins Pennsylvania and California in limiting or eliminating private money managers to hedge their bets for these reasons:

• the hedge funds did not hedge the pension losses
• In New Jersey, the private money managers were working on a projected 8% return. The actual return was -6.5%
• The pensions would have made more money in bonds

Philly.com | New Jersey pension system re-thinks hedge funds

Sacramento has built a new stadium for the Kings. part of the funding mechanism is parking meter revenue.

Sound familiar? Similar revenue sources are bandied about related to Arlington’s new stadium.

Let’s look at Sacramento’s parking meter rate plan:

• 4 Event parking zones will be established in a 12 block radius
• The closer to the Area, the pricier.
  • Parking prices ranging from $11.25, if you pre-arrange parking in a city garage to $18.75
  • Higher event night only prices will be within a 3 block radius of the stadium
  • What is the increase for Kings fans? Previously meters were free on weekends
• Parking meter normal shut down time of 6pm will be extended to 10pm
• Parking meters in midtown will be extended to 8pm
• City parking, and reservation system, will be linked through a smart phone app

Sacramento Bee | Sacramento to ring downtown arena with higher-priced parking zones

The roadblock for fantasy sports legislation in California:  negotiations over legalizing internet poker

Who is behind the push for internet poker? Indian tribes

The opposition to fantasy sports statewide legislation in California and other states:

• existing anti-gambling laws (internet poker in California)
• attorneys generals
• opposition from gaming interests
• gambling opponents

The Recorder | Clock Running on Fantasy Sports Bill in Calif.

Texas Conservative Coalition Research Institute’s piece, Property taxes trigger ‘growing social crises in Texas’, makes the following points:

• Lt. Gov. Patrick chaired a Conservative Coalition group in 2010 that made the property taxes and social crisis link
• Property is no longer the measure of wealth, making property taxes an outmoded system
• Lack of state funding for schools and municipalities leads to higher proeprty taxes and higher debt

The solution proposed: Expanded sales tax

Senior editor at Rice University’s Kinder Institute for Urban Research makes these 4 points about Houston’s $4 billion pension “mess”:

• The $4 billion pension liability in Houston isn’t as shocking as its rapid increase.
  • In 2000, the pension liability in Houston was $0
• There are 2 causes to the pension liability growth:
  • The calculation method backloads costs, which means that even if Houston paid for pension costs in full, liability would continue to accrue
  • Investment Assumptions are not aligning with reality
• What needs to change?  Lower the optimistic rates of return & stop using a rolling amortization schedule

Houston Chronicle | How Houston got into a $4 billion pension mess

Who studied the cost of high risk investments on pensions? Rockefeller Institute of Government

Where did they present their findings?  NCSL

What is the annual cost, nationwide, to pensions of high risk investments? $400 Billion 

What does the study say about pension contributions compared to tax revenue? From 2007-2015, Pension Contributions have increased $0.59 to every $1 of tax revenue.

What has this pension contribution tax rate led to? Riskier investments by pensions

Money | Public Pension Plans’ Risky Investments Could Cost Taxpayers Billions

The reasons the municipal pension crisis will worsen according to the Bond Market People:

• The facts are stacked against local pensions. 
  • Underfunded for years
  • People are costing the pensions more by living longer. 
  • Public sector workforce is flat, but the number of retirees increases
• Pension systems did not account for increases in retiree numbers.
• Actuarial methods for accounting for life spans by pensions do not take into account longer life spans.
  • Private pensions use a better life span formula, a generational estimate

Bond Buyer | Why the Municipal Pension Crisis Will Worsen

• Gross receipt taxes do not correlate to the amount of government services a firm uses
• Gross receipt taxes do not correlate to a firm’s cash flow
• Gross receipt taxes push certain industries into high effective tax rates
• Gross receipt taxes reduce competitiveness, fairness, and transparency

Tax Foundation | Gross Receipts Taxes: Lessons from Previous State Experiences

What is the new Rangers Stadium ballot proposal by the City of Arlington? Funding package for the stadium including:

• bonds
• extend & redirect part of its half-cent sales tax
• extend & redirect part of 2%  hotel-motel tax
• extend & redirect part of 5%  car-rental tax
• 10% tax on tickets
• $3 tax on parking

Who filed an ethics complaint? Kelly Canon, Citizens for a Better Arlington PAC

Who was the ethics complaint filed against? the City and Keep the Rangers PAC

What does the Ethics Complaint say? 

• ballot is not specific in relation to bond amounts
• ballot fails to disclose a new tax (an extension of an expiring tax)
• false and misleading statements

Ft. Worth Star Telegram | Group fighting $1 billion stadium files state ethics complaint

Who requested the opinion? Chairman Dennis Bonnen

What question about the use of hotel motel tax revenue does he want answered? Whether a local government can use hotel occupancy tax revenue to fund a feasibility study for a performing arts center.

What’s the kerfuffle? The City of Lakeway attorneys believe they’ve met the statutory requirements to move forward with the feasibility study. Some in the hotel motel industry think there is no specific permission to use the revenue in this manner.

RQ-0122-KP

Which state became the 1st to tax streaming content? Pennsylvania

Does this tax have a nickname? Netflix Tax

Which tax was extended to streaming video? The state sales tax

What does the tax apply to? streaming video services like Netflix and Hulu plus ebooks and music

Is there a netflix tax elsewhere? In Chicago, which extended an amusement tax to steaming services

Governing | The Week in Public Finance: The Netflix Tax, Another Atlantic City Rescue and More

CBS Pittsburgh | ‘Netflix Tax’ Goes Into Effect In Pennsylvania

The Start Ups in litigation funding: LexShares Inc. & Trial Funder Inc.

How do they work? Electronic platforms. Attracting 1000s of investors. Promising double didget returns.

The Wall Street Journal | Litigation Funding Moves Into Mainstream

• It does not help those with little moneyto buy school supplies
• Stores increase prices for the sales tax holiday
• It helps out-of-staters 
• $70M revenue hit to Texas
• No benefit to economic growth

KERA | 5 Reasons Tax Free Weekend Might Be A Bad Deal

The bill: HB 1378 (2015)

The information local governments have to provide to the Office of the Comptroller:

• amount of all authorized debt
• the principal of all outstanding debt
• the principal of each outstanding debt
• combined principal and interest required to pay all outstanding debt obligations
• amount of debt secured by ad voloreum bonds
• credit rating
• amount of debt per capita

Reporting deadline: 210 days after the end of the local government’s FY16

Which local governmental entities are required to comply?

• counties
• cities
• school districts
• junior college districts
• special purpose districts
• other subdivisions of state government

Comptroller | HB 1378: Local Government Debt Transparency

Which city is proposing to fill its pension deficit with a tax? Chicago

Which tax options did the mayor consider? Increasing property taxes or increasing utility taxes 

What’s the proposed water tax rate increase? An escalating utility tax that looks like this:

• Year 1: 7% tax
• Year 2: Double it. 14% tax
• Year 3: 21% tax
• Years 4& 5: 28% utility tax

How much revenue does Chicago think the utility tax will collect?  $239 million over 5 years

What’s the cost per home owner?

• year 1: $4.43 more month /  $53.16 per year
• year 5: $225.96 a year

What do opponents say about the utility tax? It’s regressive

Chicago Sun Times | Pension fix: 28 percent water/sewer tax, phased in over 4 years

• Eerie, PA pension costs trippled in 5 years, schools cannot afford basic items like textbooks or roofs without leaks
• CALPERS & CALstrs have reduced 20 year return rates to roughly 7%
• The pension woes are blamed for reduction in teacher jobs and job seekers

Fortune | The Ugly Ways the Pension Crisis Is Affecting Your Kids’ School

Wall Street Journal | Why Pensions’ Last Defense Is Eroding

On Monday July 25th, the Comptroller told the LBB:

• Texas is in a better position than other energy producing states
• Texas has an unspent surplus of $4 billion from 2015
• Texas is NOT in a recession
• Texas has positive job growth
• June 2015- June 2015 Texas job growth was 1.4%, below the 1.7% national average

Houston Chronicle | Comptroller: Texas lags nation in job growth

Galveston County  tax collector-assessor Cheryl Johnson recommends the following legislative fixes:

• Requiring the state comptroller’s office to sign off on industrial property values.
• Establishing a state-financed legal defense fund for counties facing appraisal lawsuits.

Travis County Chief Appraiser Marya Crigler emphasizes that some form of sales price disclosure would make the appraisal process more efficient and cost-effective.

Watchdog.org | Commercial lawsuits blow back on Texas taxpayers

• Taxpayers pay for the legal fees of the appraisal districts defending its commercial appraisals.
• Taxpayers cover the revenue hit to the taxing jurisdictions when lower commercial appraisals reduce revenue.
• Sen. Kelly Hancock “speculated that Texas counties punish homeowners with inflated appraisals to offset “lost” commercial tax revenue.”
• What does this look like in big Texas counties?
  • Austin
    • ​413 lawsuits
    • $11.3 billion in values are being contested
    • Travis County Appraisal District boosted its legal budget by 20% to cover challenges
  • San Antonio
    • ​$19.4 billion in appraisal disputes in the last year
  • Texas wide
    • 4,000 appraisal challenges in the last year
    • reducing taxable values on average 7.5%

Watchdog.org | Commercial lawsuits blow back on Texas taxpayers

Which Texas city offered a developer a del via a TIRZ? Galveston via the The Galveston Island Redevelopment Authority

What development was promised? Beachtown, which by 2013 was to include:

• a hotel
• 306 single-family houses
• 200 multifamily units
• 250 units of retirement housing

Was the development completed? No

What facts does the lawsuit highlight?

• Secret negotiations, secret meetings in violation of the Open Meetings Act
• Allegations that the developer forced replacement of commissioners on the Galveston Island Redevelopment Authority
• A contractual gag order on local officials to not discuss the deal

Houston Chronicle | Galveston development project shrouded in secrecy despite public investment

The State: Alabama

The legislative mechanism: A special session of the Legislature for the “specific task of approving a lottery to fund “essential services.”

The revenue shortfall source: Medicaid. Medicaid has doubled in size in the last decade.

The beneficiaries: Rural hospitals whose major patient pool is from Medicaid 

Does Alabama have a lottery currently? No, Alabama is 1 of 6 states without a lottery.

Yellow Hammer News | IT’S OFFICIAL: Bentley urges legislature to approve lottery to fund Medicaid growth

LBB Issued new Guidance to Agencies on their Legislative Appropriation Requests (LARs). The new LAR items:

• New: Budget Overview Schedule. No new data, just a new format with a concise overview
• New: Program-Level Request Schedule. Contrasts previous bienium expenditures with request
• New: Summary of Behavioral Health Funding Schedule.  List behavioral health or substance abuse services expenditures
• Deleted: Budgetary Impacts Related to Federal Health Care Reform and the Budget Control Act 
• Administrator’s Statement concerning the mandated 4% cut
• Exceptional Item Request Schedule 4.A: Information Technology.  Specifically if there is an IT contract or contracts with outside entities from amounts in excess of $50,000. 
• Ten Percent Biennial Base Reduction Options. reduction options should also include estimates of any losses in revenue, including Federal Funds, as part of the agency’s impact statement within the schedule.
• Transferred Programs.  Agencies receiving a transferred program or function should not re-enter historical expenditures for a transferred program 
• Schedule 3.A. Strategy Request. More specifics required to justify a biennial change
• Centralized Accounting and Payroll/Personnel System (CAPPS) –  include all ongoing costs to support and maintain their systems.

LARs are due to LBB in August. 

LBB | Updated 2018-19 agency CAPPS listing on page 45 of the LAR Instructions
 

6 states have enacted laws to support fantasy sports in 2016:

• Colorado
• Missouri
• Mississippi
• Tennessee
• Indiana
• Virginia

21 states did not formally legalize fantasy sports, including: Alabama, Arizona, Connecticut, Delaware, Florida, Georgia, Hawaii, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Nebraska, New Mexico, Oklahoma, Rhode Island, South Carolina, Vermont, Washington, West Virginia, Wisconsin.

7 states could still act on fantasy sports laws in 2016, including: California, New Jersey, Pennsylvania, Illinois, Massachusetts, Michigan, New York (awaiting governor’s signature)

AP | AT LEAST 6 STATES ADOPT FANTASY SPORTS LAWS; 21 OTHERS DON’T

How did the Permanent School Fund add $98 million in the past 6 months? A 3x increase in Oil & gas leases for Texas’ publicly held land 

How many acres of state land have been leased in the last 6 months? 13,000+ acres

What does this mean for the Permanent School Fund? $98 million in revenue

Average price per acre: $7,365, compared to around $2,500 per acre in January and about $1,700 in August 2015

Statesman | Texas oil and gas leases jump despite oil price slump

• Pension Debt per household
  • Texas is #33 with per household pension debt of $27,343
  • Alaska is #1 with per household pension debt of $113,137
  • California is #3 with per household pension debt of $77,700
• Pension Debt per Capita
  • Texas #42 at $9,235
  • California #4 at $25,325
  • Alaska is #1 at $38,251
• Actuarial Funded Ratios
  • Texas #20 at 81.6%
  • California #24 at 79.4%
  • D.C. #1 at 108.3%

Stanford Institute for Economic Policy | Pension Tracker

Which public pension system is the world’s largest? Japan’s The Government Pension Investment Fund

The parameters for its socially responisble investment: environmental, social and corporate governance factors

Wall Street Journal | Japan’s Public Pension Fund Looking for Socially Responsible Stocks

Harvard Business Review tells us that public pensions perform better when these charactersitics exist:

• Pensions are free from politics & able to focus on maximum returns
• Avoid poor investment choices by public pensions that are linked to:
  • elected official interference related to local economic devleopment
  • elected official interference related to compensation or recruitment of talented staff
• Strong governance model protects pensions from political whims that diminish returns 

Harvard Business Review | Public Pension Funds Perform Better When They Keep Politics at Bay

Why are we concerned about legal issues related to the sharing economy

• Within 4 years, 40% of all American workers will be independent contractors

The top legal issues related to sharing economy:

• Liability
•  Insurance coverage- whose responsible for it?
• Are people engaged in sharing economy employees or indpendent contractors?
• Does the sharing economy, using an app, trigger products liability?

California Bar Journal | On the road to a gig economy, litigators take the wheel

The State: California

The tax cut: Removing the sales tax to cover newspapers and other good

How long had the tax on newspapers been in place? 25 years

Annual tax revenue on subscriptions: $50 million

Sacramento Bee | After 25 years of taxation, California newspapers on verge of tax break

Which pension system is diversting from guns? New York City Pension Fund

What divestment is occuring? A divestment of 3 retailers that sell guns:

• Dick’s Sporting Goods
• Cabela’s
•  Big 5 Sporting Goods

How big is the New York City Pension Fund? $59 billion

Who voted to divest from gun retailers? board of trustees of the New York City Pension Fund

What do the activists say? “We will no longer do business with companies that fund the deaths of our family members and friends.”

New York Times | Dealb%k| New York City Pension Fund to Divest Itself of Gun Retailer Stock

Which pension merged the 13th check fund to the main pension fund? Wayne County Michigan

Did eliminating the 13th check impact pension soundness? Yes, by rolling the 13th check fund into the pension fund pension funding levels improved by 9% within 1 year

Detroit Free Press | Wayne County pension system funding sees improvement

The contract bidder: Texas Precious Metals

The company dates to: 1898

Location: Shiner, Texas

The proposed depository: 46,000 square feet

Victoria Advocate | Shiner Company vies for state depository contract

Where is there a legal fight over the release of pension data? Nevada

What information is sought? Names of employees are taking a pension and how much the employee receive

What type of group wants access to pension data in Nevada? A conservative think tank

What type of information did the pension system release to the conservative think tank? Pension payments by redacted social security number. The pension system believes it complied. The think tank wants the pension system to link the social security numbers to names.

Nevada Appeal | Group wants judge to force release of Nevada pension data

Michigan is funding private schools with $2.5 million in its education budget for complying with mandates like safety drills.

Opponents say the $2.5 million in funding violates Michigan’s constitutional ban on subsidizing private schools.

Detroit News | Snyder signs education budget with private school aid

Governing | $2.5 million 

• By 2025 $4.3 trillion in annual GDP in 2025 by advancing women’s equality
• Texas GDP can increase by up to 10% by 2025 with more women employment equity

 McKinsey Global Institute | The power of parity: Advancing women’s equality in the United States

The estimated lower revenues? $10 billion lower oil and gas revenues in Texas for the 2017 Legislature

The exemptions to the Governor, Lt. Governor, and Speaker’s call for 4% cut in agency budgets:

• border security
• child protective services-  foster care & adoption subsidies
• Medicaid programs
• the Children’s Health Insurance Program
• permanency care assistance
• mandatory school funding

Houston Chronicle | Call for state budget cuts includes plenty of exemptions

Where: Jacksonville FL

How does the sales tax for pensions work? 1/2 cent sales tax to defer city pension contributions until 2030

What benefits are there to city revenues?

• From 2018 through 2034, the city would spend $857 million less on contributions to its three pension plans
• From 2035 to 2049, the city would spend $2.37 billion more in pension contributions with estimated 1/2 cent sales tax increase revenues being $2.5 billion from 2031 to 2049
• For accounting purposes, the City could use the future sales tax revenue on the current books to offset liabilities

Alternatives to the sales tax increase? property tax increase

Jacksonville | Report on proposed pension fix gives ammunition to supporters and opponents of sales tax

#1 Benefit of the new Rangers Stadium proposal: Climate Control

Economic Support for new Rangers Stadium: City of Arlington is paying off its portion of the new Cowboys stadium 14 years early

Is the Ranger deal as good as the Cowboy deal financially for Arlington? No. 

• The ticket and parking taxes that helped Arlington with its payoff of the Cowboys stadium will go into the pockets of the Rangers
• The Cowboys stadium packed its ticket sales with Super Bowls, the NCAA Final Four, college football championship games, boxing matches, international soccer matches, motocross, concerts …that’s what paid the bills.

Market Watch opinion | $1 billion ballpark proposal in Texas withers in the heat

• 12th highest combined sales tax in Texas at 8.17%
• 1st highest combined sales tax is Louisiana at 9.98%
• 10th highest combined sales tax is California at 8.48%
• 9th highest combined sales tax is New York at 8.49%
• 33rd highest combined sales tax is Pennsylvania at 6.34%
• 30th highest combined sales tax is Florida at 6.66%
• 19th highest combined sales tax is Ohio at 7.14%

Tax Foundation | How high are sales taxes in your state?

Which state Legislature is moving a new music production tax credit? New York

The tax credit’s details:

• 25% tax break for eligible music-production-related costs downstate
• 35% tax credit for upstate music production
• 75% of the project must be made in New York
• Funded with $25 Million per year

What costs are included in the Tax Credit calculation?

• below-the-line fees like:
  • studio rental fees
  • mixing
  • session-musician salaries
  • engineering and mastering services

Why did New York revisit a music production tax credit?

• New York lost the Grammy’s to Los Angeles
• 50% reduction in New York based music production since 1999

Crain’s New York Business | State legislature passes music production tax credit

• #1 in outstanding debt: Business & Economic Development
• #2 in outstanding state debt: Education
• $41 billion in outstanding state bonds in Texas
• $4 billion in biennial appropriation for debt service

LBB Texas State Debt

Which state representative & senator: James Frank & Donna Campbell

The 2017 legislative idea: restrict wind energy tax abatements near military facilities

What’s the motivation? 

• 2 wind farm projects are seen as a threat to pilot safety at Sheppard Air Force Base
• If the Air Force moves operations, that’s an estimated $750 million loss 

Times Record News | Rep. James Frank to file wind farm-related proposal

How does the proposed 50-50 stadium in Arlington for the Rangers become a 80% taxpayer funded stadium?

• The 50-50 agreement includes tax increases
• An ‘admissions and parking tax’ of up to:
  • 10% percent surcharge on event tickets
  •  $3 additional surcharge on parking
• ​The Rangers can use their portion of the admissions and parking tax revenue to offset their construction costs, reducing their 50%

Breitbart | Analysis Shows Texas Taxpayers May Be Stuck with 80 Percent of Costs for New Rangers Park

Which local government is considering less costly pension reforms? Philadelphia Board of Pensions

What’s Philadelphia’s end game? To convince 30,000 retirees to switch to a less lucrative & less costly benefits plan

What’s the liability of Phildelphia’s pensions? $10.8 billion liability with $4.9 billion funded

Didn’t Phildelphia try to buy out pensions? Yes a buy out was considered but it was determined that it would cost the pension system more than to retain the pensions

So what’s on the table to encourage a switch from a costly pension plan to a less costly pension plan?

• a one time partial payment to switch pension plan
• the partial payment would equal 50% the difference in benefits from the more costly plan to the less costly pension plan

Philly.com | Philly Pensions Board considers a less costly plan for retirees

The Fort Worth Employees’ Retirement Fund lost money in its investments.

What will it take to overcome the investment loss?

• additional 5 percent in payroll contribution
• currently 30% of Ft. Worth’s payroll goes to its pension

WFAA | Fort Worth’s employee pension problems grow worse

• Pensions in Houston are “a mess”- take a look:
  • 31% of Houston’s payroll costs go to pension costs
  • pension liability is $5.6 billion
• Support lower cost-of-living adjustments
• Support higher retirement ages
• Keep on the table for consideration moving new hires to 401K style plans because:
  •  We can’t predict pension investments in the future
  • Businesses abandoned pensions for 401K systems
• If Houston won’t fix it, Austin must

Houston Chronicle Editorial | Editorial: Pension tension In critical city employee pensions talks, no solution should be off the table

A Tyler Morning Telegraph Editorial  makes these points in opposition to a Texas soda tax:

• its the worst tax as it unfairly hits the poor
• studies show that soda taxes  have little or no effect on health
• using revenues for education means the poor pay the pre-K costs for the middle class

Tyler Morning Telegraph | Soda tax would hurt the poor

• $11.64 billion in state and local taxes are paid nationally each year by undocumented immigrants
• Texas #2 for state & local taxe revenue of $1.5 billion paid by undocumented immigrants 
• California #1 at $3.17 billion per year in tax revenue from undocumented immigrants

Texas is:

• 9th best economy
• 2nd for GDP growth
• Top in Exports, tied with LA and WA for most exports per capita
• 14 years Texas has led the nation in exports
• 12 years Texas has been the top state for business
• 20th in innovation potential
• 2nd in the nation for the number of tech jobs
• More than 585,000 Texas tech jobs

Southeast Texas Record | Texas has ninth-best economy among U.S. states, WalletHub analysis reports

How the soda tax win in Philadelphia was messaged:  A win for education. A win for the coalition of educators, parents, and rec center volunteers

The billionaires/business types supporting the soda tax:

• Former New York Mayor Michael Bloomberg
• Texas billionaires John and Laura Arnold

The impending legal fight: local beverage bottling businessman is filing suit

Dallas Morning News | How Texans helped Philadelphia become first U.S. city with soda tax

The Texas Supreme Court Opinion: Southwest Roaylties Inc. v. Glenn Hegar

How the ruling saved Texas Billions: 

• The Texas Supreme Court agreed with lower courts that Southwest Royalties did not qualify for a sales tax exemption on its products and services used for oil and gas exploration and production
• Southwest Royalties wanted a $500,000 refund
• The Comptroller’s Office indicated the total cost would be $4 billion for all refunds paid

What the lawyers say after the ruling:

• Issue isn’t closed.
• Other equipment may qualify for the sales tax exemption
  • If the equipment can be linked to processing, the exemption lives

Houston Chronicle | Sales tax ruling on oil field equipment saves Texas billions