Public Finance and Pension Quick-Takes: Puerto Rico, Chicago, and Detroit
by meep
Hey, y’all, I’m in Nashville at the Life & Annuity Symposium, talking about predictive analytics and the middle market today (two different talks, though predictive analytics could help with the middle market)
Let’s do a quick trot around the state of public finances!
PUERTO RICO
Speaker: Puerto Rico relief bill ready ‘in the coming days’
On Friday evening, House Speaker Paul Ryan said legislation to restructure Puerto Rico’s ailing finances will be introduced in the coming days.
“Right now, we are working with the Natural Resources committee, the administration, and our Democratic counterparts to iron out the final constitutional and legal questions surrounding the legislation,” Ryan said in the statement. “Let me be clear: There will be no taxpayer bailout of Puerto Rico.”
The measure seemingly hit another snag this week when House Natural Resources Committee Chairman Rob Bishop (R-Utah) delayed the introduction of an expected reworked measure to deal with some technical issues.
Earlier Friday, Treasury Secretary Jack Lew said the House’s delay shouldn’t be misinterpreted as a lack of progress.
Lew said that while time is of the essence, with a looming $2 billion debt payment due on July 1, Treasury and Congress are making progress toward a long-term solution to the island’s fiscal woes.
“The substance is more important than the schedule, as long as it gets done for Puerto Rico,” Lew told reporters at a Christian Science Monitor breakfast in Washington.
“So I wouldn’t confuse delaying a day with a lack of progress; sometimes a delay can be a sign of progress if you’re getting close to something,” he added.
Tourism Industry in Cash-Stapped Puerto Rico Attempts to Calm Zika Fears
Puerto Rico’s tourism industry is hoping to ease tourists’ concerns about the Zika virus on the cash-strapped island, describing the extra precautions businesses are taking.
“We feel this has been blown out of proportion,” Clarisa Jimenez, president and CEO of the Puerto Rico Hotel and Tourism Association told ABC News. “We have taken all the measures that the CDC has recommended from day one.”
Tourism is particularly important to Puerto Rico, as the U.S. commonwealth struggles through its recession and its inability to pay $72 billion in public debt. Puerto Rico’s hotel business comprises about 7.1 percent of the island’s GDP, and adding satellite businesses brings the percentage closer to 10 percent, according to the Puerto Rico Tourism Company, the public corporation that promotes the island.
It also doesn’t help tourism to have a raw sewage issue:
Whenever it rains, several feet of black, contaminated water and trash flood the homes of people living near the Martin Pena Channel.
While Puerto Rico’s debt crisis, estimated at more than $70 billion, has dominated headlines about the U.S. territory for more than a year, for the 27,000 residents living in a ring of impoverished communities in the island’s capital, another disaster has been brewing for decades.
The channel is the U.S.’ only tropical estuary and connects the San Juan Bay and a series of lagoons. In the early 20th century, garbage was used as fill material on the channel’s wetlands to create housing for industrial workers. Adequate sewer systems in most of the area were never built.
Today, more than 3,000 homes and buildings still dump raw sewage into the channel. What was once an expansive waterway has been reduced to a trickle, and many inside and outside the neighborhood continue to use the channel as a garbage dump.
Lovely.
I just got to the part in in Detroit Resurrected when Kevyn Orr has had trash services in Detroit privatized.
While police and fire protection are up there in governmental services, trash collection is extremely important for public health. Much of the improvement in mortality results in the first half of the twentieth century didn’t come from vaccines, improved drugs, or anything like that: it was from cleaning up the streets, literally. It helped that the car replaced horses as well. Horseshit all over the place… well, read this book for details.
Additional: Puerto Rico debt becomes constitutional fight on the right
CHICAGO
This isn’t about finance, per se. Chicago Mayor Says He Will Disband Much-Criticized Police Oversight Agency:
Embattled Chicago Mayor Rahm Emanuel says he will disband the city’s police oversight agency. It is charged with investigating police shootings and misconduct — but it has long been criticized for slow investigations that rarely result in disciplinary action.
NPR’s Martin Kaste tells our Newscast unit that scrapping the Independent Police Review Authority is a response to a crisis of confidence in Chicago’s police. Here’s more from Martin:
“Chicago’s Independent Police Review Authority was created a decade ago during a previous push for tougher oversight of police misconduct, but it failed to deliver. Only two percent of claims against officers were ever upheld — and the vast majority of complaints got stuck in bureaucratic limbo, never resolved one way or the other.”
As NPR’s David Schaper has reported, a Chicago Police accountability task force released a scathing report last month. It called for a “major overhaul in the way [the department] investigates officers and holds police accountable,” citing a “racist history and use of excessive force.” The report stressed a “fundamental lack of accountability and a stunning lack of transparency” within the country’s third-largest police department.
The police have a different take, obviously:
Fraternal Order of Police Prediction: Chicago Violence Ready to Explode This Summer
Disrespect for the Chicago police is at an all time high and as the weather turns warmer this summer, the city’s already high level of violence is ready to explode, especially if new proposed policies are adopted. So warns an official with Chicago’s Fraternal Order of Police (FOP).
In a new interview, Dean Angelo, Sr., President of Chicago Fraternal Order of Police Lodge 7, expressed foreboding about the summer months as gang violence in the city ramps up to a fever pitch as it usually does in the warmer weather. But the climate of violence isn’t just because of the temperature.
Angelo criticized as “ridiculous” Chicago Mayor Rahm Emanuel’s pubic pronouncements that the Chicago PD is fraught with systemic racism and warned that the disrespect Emanuel’s words fostered toward police, and possible changes being proposed in the state legislature, will cause the city to “light up” this summer.
Related: Is the ‘Ferguson effect’ real? Researcher has second thoughts
DETROIT
So my last post was on Detroit schools. Let’s look at it some more!
Detroit Schools Plagued by Mismanagement, Student Losses:
Michigan lawmakers trying to glue together a plan to fix Detroit Public Schools using taxpayer money are staring down more than a decade of failure with what was once among the largest public education systems in the nation.
It’s a story that stretches back to the 1990s, when poor academics, abhorrent graduation rates and low test scores opened the door for the state to wrest control from an elected school board. The district was set free in 2005, but budget missteps, corruption, financial mismanagement and enrollment losses ushered in the current state oversight — yet debt and deficits continue to rise.
“It hasn’t worked. It clearly hasn’t worked,” Juan Jose Martinez, a Detroit school board member in the late 1990s, said of state oversight. “It’s a shame things are in the condition they are in. … I’m a man of faith and I have to keep praying that it’s going to get back on solid footing.”
The latest of five state-appointed financial managers has said the district can’t continue unless legislators pitch in to pay off the debt and include funding to allow resources to be directed back to classrooms.
FINALLY, I have a total number of emergency managers for DPS. It’s been 5.
With encouragement from Republican Gov. Rick Snyder, the state Senate has approved a plan to pay off the district’s estimated $467 million debt and provide $200 million in transition funds for a new, separate district that would educate students and have its finances overseen by a commission of state appointees. The plan effectively commits Michigan to a decade of new spending until the old DPS debt is retired. The House version would pay off the debt and provide $33 million for transition costs.
“We recognize that the future of Detroit’s schoolchildren is on the line,” said Republican Rep. Al Pscholka, House budget committee chairman. “There’s never been an indication … that we would not help the children of Detroit. It doesn’t matter to me today who’s to blame. Assigning blame doesn’t solve it.”
Hmmmm. I guess that would prevent a second Detroit bankruptcy. For now.
The Michigan court of claims will hold a hearing Monday on a lawsuit filed by the Detroit Public School District.
The District is suing the teachers union after teacher sick-outs have forced the district to close down schools several times this year.
The latest sick-outs happened earlier this month when 94 schools were closed after reports that the district might not have enough money to pay educators this summer.
I wonder about this new, separate district. Is it intended to replace the original DPS? So that the old entity is cut off, debtwise, and you’ve got a system to start anew?
Reminds me of what insurance companies do when they’re trying to get rid of a losing line of business: shove it into its own entity and see if it can sell it off.
Doubt there will be many takers for legacy DPS debt, but there’s one born every minute.
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