In the crazy world in which we live, a blog looking to make sense of it all.

Wednesday, April 26, 2006

Where There's Smoke

This is a topic I've wanted to blog about for a while now. The issue of smoking bans which are now found in 17 different states and 461 towns and cities, according to an Associated Press story in Sunday's Peoria Journal Star.

I'm a bit divided on this issue. Since I'm a non-smoker, I believe it would be great to go anywhere and not be bothered by smoke emitted by tobacco. However, what right does the government have to dictate to business owners to what their customers and employees may do. More specifically, I'm referring to restaurants and bars.

I can understand locations to where individuals have to travel to take care of certain needs and business, i.e. a county courthouse, grocery store, post office. But as for bars and restaurants, this is more of a want rather than a need, at least for a customer. If there is a tavern with a number of cigarette smokers, no one is forcing you to go in. If you don't like the smoke, then don't go in. If tavern owners knew that smoke-free bars were all the rage and huge money makers, we'd see a few more of them by now. This should be up to the tavern owner, since most of his/her clientele are most probably smokers.

During 1933 to 1945, Nazi Germany under the rule of Adolf Hitler enacted a smoking ban. The reason was to foster the health of Germans; moreover, Hitler wanted a master race of purity and quality. It is postulated that Hitler feared that intellectuals, who often smoked in those days, would assemble and would think up ideas not conductive to what Hitler had in mind for his 1,000 year Reich. It was recorded that smoking rates increased during the first 6 years of Hitler's rule, most probably it served as a form of resistance. The tobacco supporters often cite this fact, however, smoking bans of today have nothing in common with Hitler's ban. It is more about protecting the health of non-smokers.

I believe the best compromise is to allow exempt status for certain businesses, such as bars and restaurants; smoke shops for sure. Let these business owners decide what they wish to have; necessitate that proper signage is displayed so patrons will know what type of establishment to expect.

Common Sense of it All: It seems little by little, we lose more of our freedoms and rights. We now have to wear seat belts in our own cars, which is our personal property. Children must wear helmets on bikes and sit in car seats. While these are sensible and practical things to do, we are being legislated to do it. Careful. Today it's a total smoking ban in all public places, tomorrow it may be your home.

Tuesday, April 25, 2006

Sticker Shock At The Pump

The other day I pulled into the Huck’s to fill up and paid $2.95/gallon or almost $50. Good grief!! This morning on CNBC, they are covering the debate over record oil prices. Are the oil companies price gouging or is it simply a supply and demand issue? Should the government impose a “windfall tax” to help consumers is another topic.

First off, if you break the problem down, it is a supply and demand issue. In recent years, developing economies such as India and China, both with a population of 1 billion people, are growing rapidly. Their demand for oil is also growing rapidly, which has put strain on our supplies. In a small way, we Americans also compound the problem with our desires for gas guzzling SUVs and love of travel, thus putting additional demands on the supply of oil and gasoline. And basic economic theory will tell you that high demand and low supply will translate to high prices. Supply and demand is what a free market is all about.

As for the oil companies, I don’t know if they are gouging per se, but it appears they are taking a monopolist's strategy to the problem. Oil supplies are being bottlenecked at the refineries. Oil companies, which are now flush with cash, have not built any new or additional refineries in a generation. So gasoline and other oil products are only produced at 1975-1980 capacity levels. And as a monopolist, what incentive do oil companies have to spend more capital to erect refineries so that prices can drop? A monopolist will charge prices to where marginal demand is equal to marginal supply. In layman’s terms, they’re going to charge what the market can and will bear. Granted oil companies are not a complete true monopoly, but they can work as a cartel.

And what should the government’s role in this be? Normally, I would prefer the government to stay clear and let free markets take its course. But there are things as anti-trust laws to prevent monopolies from taking advantage of consumers and ensuring reasonable prices for needed items. Do anti-trust laws apply here? I’m not an attorney, nor do I play one on TV, nor did I sleep at a Holiday Inn last night. I don’t know for sure.

However, there is talk of implanting a “windfall tax” on oil companies since they seem reluctant to do anything to ease this burden on consumers. I’m not sure this is the best idea. While I understand the idea that if the oil companies do not police themselves, the government will step in and that would be the deterrent for the oil companies to change. But questions on this new tax need to be asked. What is a “windfall?” For an umbrella salesman who sells an above average number of umbrellas on a rainy day; will that be a windfall and he/she will need to be taxed, though it was brought about from an unusual, one-time circumstance? What will be done with the windfall tax proceeds? Will gas taxes be dropped? Probably not. Regardless of the best of intentions, I do not favor the increase of any taxes.

It is time for the government to help foster the development and marketing for alternative fuels, such as bio-diesel, ethanol and hydrogen. Perhaps offer substantial tax breaks for the development of these technologies. Auto manufacturers are not going to spend millions of dollars to develop a car no one wants to buy. Even go as far as allowing any profits made from the sale of an all hydrogen-powered car will be tax free; offer tax credits for the purchase of such a vehicle. While this is a long term solution, it will help foster markets for alternative fueled-cars and lessen the demand for oil.

This is a shit sandwich that we all have to eat. And there’ll be more sandwiches to come.

Common Sense of it All: Paying nearly $3 for a gallon of gasoline, we now know how dependent we are on oil, whether foreign or domestic. We keep opening our wallet and paying the price. Instead, lets squelch our desires for SUVs, RVs and other gas guzzlers; let’s stay home a little more often instead of eating or going out; remember the “phone first” campaign during the energy crisis of the 70’s, time to bring that back; support alternative fuels and perhaps put public pressure on oil companies to expand refineries.

*Correction* - Ooops! Above I stated that a monopolist will set prices to where marginal demand is equal to marginal supply. This is what happens when you type too fast and don't closely proofread your work. More acurately, a monopolist will set prices where his marginal revenue is equal to his marginal cost. But the outcome is still the same; they will charge as much as the consumer is willing to pay.

Sunday, April 16, 2006

Who is Ray Nagin?

That is the question that is asked by a good article from Michelle Roberts of the Associated Press, regarding Mayor Nagin running for re-election in New Orleans this month.

Most Americans never even heard of this man until the Hurricane Katrina disaster late last August. And for a while, it was a name you heard every day.

The article covers his pre-mayoral resume fairly good and I even learned a few things about him. Though he has an MBA from Tulane University and was a top executive at Cox Communications, I am not very impressed with his performance as mayor with the Katrina disaster. From what I've seen and read, I don't really think he was prepared to deal with the matter before, during and after it.

Days before the hurricane, as reported from an investigation of the Wall Street Journal, President Bush pushed Mayor Nagin and Louisiana Governor Kathleen Blanco to complete documents so the Federal government could have a leg up to send in relief efforts (the Federal government cannot come in unless the local governments request it). Both, Nagin and Blanco refused. Finally, before Hurricane Katrina even hit, President Bush declared New Orleans a disaster area. Why did they refuse to sign documents requesting help? It was a political maneuver; they would appear as weak leaders if they were to get a head start on asking for Federal assistance.

More previously, New Orleans accepted Federal tax dollars to be used to reinforce its levee system. Somehow, the money was used for other purposes and the levees remained as is.

But let's not forget about the predetermined plans for evacuation for when this situation would arrive. It was not implemented. Scores of school buses that were to be used to evacuate those who needed help and could not leave on their own remained unused, parked idle in a parking lot. In addition, a CNN reporter (forget his name) discovered that a train that was scheduled to depart from New Orleans asked the mayor's office if they would like the train to take on extra passengers for evacuation efforts. The mayor's office claimed that that would not be necessary.

Then the storm hit. The levees broke. The city was in shambles. Mayor Nagin threw his little temper tantrum on camera, cussing out Federal and state officials on the whereabouts of aid. Then on MLK day, Nagin declared that New Orleans would again become a "chocolate city." Good Grief!

And now Mr. Nagin is running for re-election against a vast array of other candidates.

Common Sense of it All: There is enough blame to go around on the disaster relief effort from Katrina, but I think Ray Nagin should shoulder a large portion of it. Had the man kept his cool, followed predetermined contingency plans for evacuation, used acquired funds to strengthen levees, asked for Federal help instead of being too arrogant, a lot of this disaster could be avoided (and saved the taxpayer some dollars). Maybe the people of New Orleans should write in Rudolf Giuliani's name for mayor.

Tuesday, April 11, 2006

Lawyers, Guns & Money

I discovered another local blog via Bill Dennis' Peoria Pundit site. The blog is called Angie's Drama. Though most of the posts detail Angie's day to day life, her husband Rob is purported to have a "rant" ever now and then. His latest one is a post called "Rob's Rant... Back in Black" and is packed full of info and data regarding guns, gun crime and the 2nd Amendment. It is a *great* post.

I for one support the 2nd Amendment and agree with many of Rob's statements. I know several gun owners, from family and friends, and all are very careful and very responsible with their guns. The issue of gun control is a hot one; probably second to the abortion issue. This amendment was created so that American citizens are able to defend themselves when in trouble. True, we have police, National Guard and a military, but who is going to fight your little battle until those folks arrive on the scene.

When our forefathers came from Europe, they were escaping the tyranny of militia coming into their homes, confiscating what they wanted, dictating what religion to practice, etc. They eventually said "enough." They came to the new world to make a better life to where they can live in freedom. To ensure that freedom, they created the Bill of Rights which included the right to bear arms so that individuals may protect themselves. That was more than 200 years ago. But the more things change, the more they stay the same. The reasons for the 2nd Amendment still apply today; be it redcoats or terrorists, the King's militiamen or gang members.

Common Sense of it All: Like any other contraband, if you were to outlaw guns, a black market would quickly grow. Law abiding citizens would be unarmed while criminals would not hesitate to obtain and use such weapons; this is why they are criminals; they don't give a shit about laws and respecting other people's properties. The result would be a drastically skewed playing field in trying to defend oneself.

Wednesday, April 05, 2006

Why Can't They Just Say "No"?

The city council has done it again. They’ve taken the taxpayer, bent ‘em over and, well, you know the rest.

At last night’s council meeting, the council voted overwhelmingly to amend the contract regarding the Museum Square, which will allow it to lift the cap on tax-increment financing for the project. The original contract was for $500,000 a year. I don’t know how much it’s going to be now; I only know I’m hurting in my backside this morning.

The argument was that more capital was needed to accommodate underground parking. I will admit underground parking does make some sense. But why wasn’t this in the original plan and already budgeted for? And with the TIF now capped at a higher amount, is this extra money *really* going to pay for underground parking or will it be diverted to something else? I also have to ask about Caterpillar’s role in this debacle. A Fortune 500 company, flush with cash, stock price at record levels and they need this “corporate welfare” for a project the company doesn’t particularly need to operate efficiently? Good grief!!

Meanwhile, city services are lacking; roads and sidewalks in disrepair; swelling budget deficits. With the exception of Councilman Gary Sandburg, the city council needs to learn to say no. I had to chuckle when 3rd District Councilman Manning made the motion that developers should not come back for more financial help. Good one! Make all the motions you want; they’re still going to come back and ask for more money.

I sincerely hope I am wrong, but I do not foresee this museum being a big success in the future; actually I see it becoming a miserable failure. I see this following the same path as the other developmental projects previous city councils have undertaken. After the initial 3 months, visitor levels will drop, interest in the museum will collapse and the facility will begin to hemorrhage money. Like I said, I hope I’m wrong about this.

This is government bureaucracy at its best. The plan for a downtown museum to become a regional draw was ill-conceived from the start. Without rare and unique exhibits that would be popular with people, no one is going to come to this place. Do our leaders and those who will manage the museum have a business plan in place to acquire these types of exhibits? Probably not. Did the planners of the museum budget wisely, preparing for budget overruns and develop contingency plans? Probably not. Did the planners stick with their main plan for the museum that would have prevented budget overruns? Definitely not.

Common Sense of it All: By agreeing to bankroll more of this project last night, the city is getting in deeper and deeper. And this city can’t afford it.

Tuesday, April 04, 2006

Don't Drink The Water

Journal Star reporter Jennifer Davis had an update regarding the misadventures of the city of Peoria attempting to purchase the Illinois-American Water Company in Saturday's edition.

In 1998, a group of Peoria investors got together and formed a company specifically to loan the city of Peoria $1 million to investigate the possible buyout of Illinois-American Water Co. This company, the Peoria Area Advancement Group, LLC (PAAG), claimed that if the due diligence should prove that it would not be financially feasible for the city to purchase the water company, they would forgive the loan.

On April 7, 2005, the city’s water selection committee voted that the valuation of $225 million for the water company made it financially infeasible for the city of Peoria to purchase, under the 1998 PAAG/city arrangement. Shortly thereafter, newly elected councilman Bob Manning, who is also a CPA, examined Illinois-American’s books and determined that it was feasible for the city to purchase the water utility. But an estimated $2 million would be needed to complete the due diligence.

Also in that same month, legal council for PAAG claims that an agreement between the city and PAAG outlined specific steps the city needs to undertake to be considered “due diligence.” Eventually in Sept of 2005, the city council overwhelmingly voted down to purchase Illinois-American. And guess what; PAAG wants their money back.

The issue is now supposed to go to arbitration. It’s somewhat difficult for me to comment as I’ve never read the complete agreement(s). But here’s some common sense observations.

The business model that PAAG is built upon is woefully weak. Aside from trying to create the illusion that these investors are acting as “concerned citizens,” no astute businessman would have invested in this scheme. This has the makings of investing in a junk bond. The premise is that PAAG would loan a cash strapped municipality a seven-digit figure. This borrowed money would not be invested, but instead, be used on expenses (for due diligence); money that most likely would not be recovered.

Should due diligence indicate infeasibility to purchase the water company, the investors are out there investment. However, if it should prove financially feasible, and should the city pursue a purchase, they get their investment back plus interest (I don’t know what the interest rate was set at).

Sounds like a bad risk/return ratio, doesn’t it? A lot of risk for little reward. Read between the lines. I’m sure there are some unwritten strings attached to this money. PAAG investors were investing in influence to set on how the water company deal would be structured, how it would be run and establish conditions that would become beneficial to their other Peoria companies. Basically, they wanted their hands in the cookie jar. Now the jar’s empty and PAAG is crying.

It really depends upon how the agreements were worded is what will determine if PAAG gets their money back. I think PAAG is getting what they deserve.

Common Sense of it All: In the movie Wall Street, Gordon Gekko claimed that greed is good. Figuratively speaking, you could argue that. You could argue that it is what motivates people; be it money or other things. But greed, especially strong greed, will get you nowhere. Fools and their money are soon parted.