September 27, 2008

I saw this homeless guy the other day, head down, asleep:  Wearing 4 jackets but no shoes; a nice-looking backpack to his left, a half-eaten bag of spilt caramel corn in his lap.  A few seconds later a panhandler asked me for change, and a few seconds after that, another panhandler.

The scene unfolded in San Francisco, one of the most beautiful cities in the U.S. were it not for its seamy and exposed underbelly.  The homeless problem has plagued the city for years, and city government has not been able to solve – or even slow down – the growth in the homeless population.  It is estimated to be over 7,000, the highest per capita in any major American city.  Lots of ideas have been tried, even special parking meters to provide change to charitable organizations in lieu of giving money to the homeless; but so far the results have not been good.  Most of the San Franciscan homeless are city natives; this is not a problem caused by immigration from cold-climate cities.  The lack of affordable housing is one reason but there are many other reasons.  This article is a great read about what the city has tried, and what it is trying today.

Funny story:  My wife and I were staying at the Parc 55 hotel, just off Union Square in the heart of the tourist area, when around 3 am sirens, honking and generally loud noises emanated from blocks away.  We could hear bullhorns in the distance but couldn’t make out what (we assumed were) the cops were saying.  A few minutes later they got a lot closer, and it was obvious the police were yelling “Wake up!  Get off the street!  You’re going to get wet!  Wake up!  Get out of the way!”

The street sweepers were out, right behind the cops, spraying everything.

No doubt to wash down the smell of urine.

All Your Mortgage are Belong to Us

September 7, 2008

Betcha didn’t see the Fannie Mae/Freddie Mac bailout coming, did you?  As predicted, we are now about to live through the recession while paying for someone else’s greed.

Based on the bleak grades given to the Hope Now Alliance [Who comes up with these names?  The Bush Administration sure knows how to color ideas, good or bad, with propaganda phrasing not seen since the Third Reich.  Godwin!] it was inevitable that the Feds would step in and offer a bailout in an attempt to stabilize the housing market, for which the two mortgage giants play a $5 trillion role.  In return for up to $200 billion in short-term financing the U.S. government will receive warrants representing 80% of ownership.  That’s warrants.  Not ownership.

If that’s the game that the Treasury Department is going to play then I want my warrants now, and as a new player in this housing market I demand having the ability to buy and sell my warrants that the government is foisting on me.  But I probably won’t get that opportunity.  I probably won’t even get a chance to determine whether or not the warrant price is reasonable (note to myself:  It probably won’t be).

Instead I’ll pay now through taxes to provide liquidity to the existing shareholder pool, then have to pay again if I want to actually buy shares on the open market at the probably inflated warrant price.

This whole mortgage thing just irks me.  It was obvious years ago that selling subprime mortgages could not be sustained yet risk managers, risk management software and federal regulators all failed to address the simplest of questions:  What happens should the bubble burst?  That they decided that such a scenario had minimal risk associated with it is an understatement.

We are now the proud owners of a huge fraction of the U.S. housing market.  May it serve us well.

Misconceptions About Unions

September 5, 2008

This past week’s Buffalo Business First articulates union leaders’ concerns over the public’s misconceptions about unions.

Ask labor union workers about the public’s perception of them and you’ll usually hear something like this:  Union workers are the bearers of a bad rap.

“I think some people think unions are very selfish and only out to achieve what’s best for their members,” said Michelle Pancoe, a fourth grade teacher at Williamsville Central School District who oversees new member orientation for the Williamsville Teachers’ Association.  “But we’re not arguing for class size limits because we want to correct fewer papers.  We’re arguing because students learn better when there are less students in a room.”

Well, when I went to grade school 25+ students in a classroom were the norm, not the exception, and yet somehow I learned that fewer, not less, is the appropriate adjective to use in Ms. Pancoe’s last sentence.  B-minus for you, Ms. Pancoe.

And that B-minus is about the best I can ever give the teachers union, whose union mentality even pervades New York State politics with little but self-serving and self-preservation tactics.

It does not take a (non-union) rocket scientist to understand why today’s Buffalo News article about the current teacher pension system makes most people’s stomachs grind away.  For every altruistic aim that the teachers union touts there’s an example of abuse waiting to happen, of contract clauses unrelated to good teaching that become entitlements – pensions are just one.  Protection of poor teachers and poor teaching methodologies are others.  So is the union’s fight against charter schools (and I always thought that competition was good).  The unwillingness of the BTF to consolidate health insurance carriers to save school district costs is another.  Then the ensuing lawsuit, and the defense of that lawsuit, was taxpayer money down the drain;  I don’t think any kids were helped by that either.  Small wonder that unions get a bad rap.  They deserve much of it.

Unions doing dumb things that stick in one’s craw is not new.  I was told a great story years ago about a work stoppage that took place at Bethlehem Steel in the early 60s.  It turned out that the flag being flown in front of corporate headquarters in Lehigh, PA, had 48 stars and should have had 50, as Alaska and Hawaii had entered the union a year earlier.  The workers walked off their jobs until the correctly-starred flag was raised.

You would not guess from my anti-union rhetoric that I’m very sympathetic to unions, and pro-union in the sense that organization and concern for employees (or members of any large group) is vitally important to make sure that health, safety and employment concerns are heard above the gray din of other corporate issues.  They are critical when it comes to defending against corrupt and incompetent management (as one might find within the Buffalo school district).

But I am hard-pressed to believe that many union members are not simply in it for themselves, that they are at war with management:  Contract negotiations are not at all a town meeting to get issues out into the open:  It’s pickets and cursing, wildcat strikes, name-calling and occasional violence.  It’s entitlement-talk, pensions and health insurance for life in an economy that cannot compete globally because of them.

Several years ago the UAW agreed to a profit-share plan that has, in some years, been very successful.  That approach traded rewards based on corporate success for a little skin in the game.  I think that all unions will need to adopt more cooperative approaches to benefits, or else sit by as their jobs continue to move oversees.

It would also improve their public perception greatly.

Why Kevin Gaughan is Misguided

August 21, 2008

Yesterday it was announced that FEMA got its new phone system hacked, to the tune of $12,000 dollars in long-distance calls worldwide, including Asia and the Middle East.  FEMA put out the warning about America’s vulnerability to this very threat in 2003.  It’s the same FEMA that handled the preparations for and the aftermath of hurricane Katrina, the same FEMA that then housed thousands of displaced hurricane victims in formaldehyde-laced trailers.  The same FEMA that is not accountable to the American voter.

Today it was announced that the Department of Homeland Security has halted an immigration program aimed at reuniting African refugees with their families because of widespread fraud:  Only 20% of the refugees claiming to be families were related by blood.  Now, DHS doesn’t appear to take into account that most of these refugees come from areas that have been decimated by civil war, disease and starvation, and that perhaps, just perhaps, many of these so-called families comprise men and women who have taken homeless and orphaned children in as their own.  DHS can do this at will – just as they can dictate the terms of the Canadian/U.S. border crossings – because DHS is not accountable to the American voter.

The New York State Thruway Authority has been denounced by many – for years – as a lackluster, bloated haven for patronage jobs and overpaid managers.  Yet they can and do raise the Thruway tolls at will; in fact, all 640 of New York’s authorities can and do use taxpayer money as they please because they are not accountable to the New York State voter.

Okay, now to Kevin Gaughan.  He has been trying, and failing, to convince Western New York town and village governments to reduce their overall size.  The local boards vigorously responded that they are the last places that people like Gaughan should be looking to decrease the cost of government.

Gaughan is hammering the one set of governmental boards that are (generally) held accountable for their actions.  The average town councilman lives in town, goes to church there, does much of his/her business there.  He/she is visible to their constituency.

This is not true at all of government at the county, state or federal level, and absolutely not true of the New York Authorities, FEMA, DHS or most other Federal agencies.

If we are to reduce government bloat we have to do so at the highest of levels, not the lowest.  That’s where the waste is occurring; that’s where the money spigot needs to be tightened.  Because we have control over town and village governments, they are incentivized to be frugal with our taxes; or else they will be out of office.

If Kevin Gaughan put as much energy into fixing Albany or agencies at the Federal level we’d be a lot further ahead.  But what he’s doing is penny-wise and pound-foolish.

Why are the Roads so Bad?

July 30, 2008

This post is in response to South Buffalo Blogger, who wrote this post bemoaning the slow collapse of South Buffalo’s infrastructure.  I couldn’t leave the type of comment that I wanted to leave there, so I’m doing it here.

SBB writes:

Having lived in Buffalo all of my life, there’s love for this city…. compassion, understanding and sorrow in feeling like there’s so much to do in so little time. Of all though, there’s frustration from the (election grandstanding) lies, frustration from the waiting & wondering when our time will come for new changes, for new focus…. for that feeling of splendor I had as I sat on a bench down at the Commercial Slip.

South Buffalo’s time for new changes and new focus, I’m afraid, has to wait for the revitalization of a much larger segment of Buffalo than what the Commercial Slip might bring to Downtown.  It has to wait for a revitalization of this house:

and this area:

and this business:

Aside from a very small mansion district, the city has nowhere to turn to generate the revenue needed to do what you want done for South Buffalo – that is, without completely shutting out other neighborhoods.  Neither does the state (and, as we shall soon hear from Governor Paterson, not for a long time).

South Buffalo, like the rest of the city, will have to pull itself up on its own.  There may be those in office softly cooing “keep the faith, help is coming” but in reality, what help there may be can only dot the landscape with little fixes.  Wholesale changes are not in the picture.  SB’s street lamps will continue to rust and its streets will continue to crumble, as they are in the rest of the city.

That’s pretty gloomy.  The upside is that streets and streetlamps are merely facades.  What makes a true neighborhood are the people in it.  What we need to do is convince the politicians to concentrate what funds they do have on things that bring people together into a community.  This may sound hokey, but I think your focus on bumpy roads and duct-taped light poles misses the point about what made makes SB great.  If anything, pictures of people at Community Center functions, at church bazaars and at school athletic contests, and the use of public funds to encourage more participation in community collective activities (how about an open market every Saturday?  Or book parties at the library? An Irish Festival every season?) might be a better rallying cry.

Maybe, if cars are forced to go 15 mph down cruddy Seneca Street, they’ll have that much more time to observe how SB reinvents itself with festivities and events that put other Buffalo neighborhoods to shame!

Sallie Mae and Freddie Mac: The Pending Bailout

July 10, 2008

For sale signs

For sale signs (courtesy http://realagile.wordpress.com/)

A frugal investor that I know very well, someone who doesn’t buy what he can’t afford, will once again pay for the sins of those less frugal than him.  That him is me.

I saw this coming five years ago and I didn’t try to do anything about it. My bad.

Congress is currently mulling a bailout for Sallie Mae and Freddie Mac which will, no doubt, get one unless the housing market does a huge turnaround in hurry (it won’t).  Mark Zandi, chief economist for Moody’s Economy.com told NPR:

“Unless you’re a shareholder I wouldn’t be worried because there is no chance that the federal government would allow these institutions to fail — to stop doing business. It would just be catastrophic for the system, for our economy. It’s just not going to happen.”

Bloomberg’s web site was a bit more cautious, indicating that a taxpayer-fueled bailout was a last resort:

“The government would not step up to support the enterprises until they’ve exhausted all options, including acceptance of significant shareholder dilution,” [Joshua] Rosner, whose research firm is based in New York, said in a telephone interview. “And if the government did have to get involved, I would expect equity holders would lose everything.”

What irks me is that this is a repeat of the S&L crisis of the late 80’s, prompted by the deregulation of the banking industry, which eventually led to 1) a recession and 2) today’s banking system where savings accounts earn a whopping 0.3% a year while credit cards cost you somewhere around 1 ½ to 2% a month for outstanding debt. The subsequent S&L $157 billion bailout plus interest, to save the industy, came courtesy of Congress.

This decade the mortgage credit industry learned to wrap their riskiest tranches in sweet-smelling language, leaving the rotting carcasses for whatever investor was at the end of that food chain.  Typically, that is the small investor, you and me.  (Stan O’Neal, Merrill Lynch’s former CEO, only got $161 million when he resigned after leading his company to an $8 billion dollar loss in a single quarter; his shareholders got coal in their stockings.)

I am unclear on the concept of not letting foolish investors suffer the risks of foolish investment.  I am unclear on why one should receive any kind of reward for buying a house that wasn’t affordable in the first place.  Is there something wrong with a free market economy? Congressional attempts to prevent the greedy from taking advantage of the less-greedy seem filled with loopholes that allow the greedy to 1) become greedier and 2) shoot themselves in the foot knowing that they’ll probably get some kind of bailout anyway.

Today’s mortgage crisis was perpetrated by greed all the way around.  Any bailout will guarantee that I will pay for that greed twice, by living through the recessional fallout and paying for the bailout.  Ugh.

Speaking of Preservation, Part 2

July 4, 2008


Want to see a real preservation nightmare?  Read this article about the state of emergency declared at the Pompeii site in Italy.

“Archaeologists and art historians have long complained about the poor upkeep of Pompeii, dogged by lack of investment, mismanagement, litter and looting. Bogus tour guides, illegal parking attendants and stray dogs also plague visitors.”

Jeez.  This sounds like the Buffalo Waterfront.  Except for the looting, since there’s been nothing to loot (until very recently) for years.

“Every year at least 150 square meters of fresco and plaster work are lost for lack of maintenance,” Antonio Irlando, a regional councilor responsible for artistic heritage, told the newspaper.
“The same goes for stones: at least 3,000 pieces every year end up disintegrating,” he said.

This is really more than just a problem of neglect; it is also an economic issue, and is obviously not unique to Western New York.  When one of the most popular tourist attractions in Italy hasn’t been adequately maintained for 30 years, one begins to realize how other priorities take precedence.

So it is with Buffalo and its below average economy in a state that has other priorities.  The preservationists, city and county need to square their preservation needs with their ability to preserve, then tackle the ones that bubble up to the top of the list.  Preservation triage may be the way to more quickly consolidate the forces needed to salvage and repair at least some of our historic structures.

Speaking of Preservation…

July 2, 2008

Hull HouseWhile the saving of the Jersey Street livery stable (or, what is left of it) has been getting all the news lately, the Hull House on Genesee Street in Lancaster has been getting its own little bit of coverage. The house, the oldest stone house in Western New York, is literally in the middle of nowhere – if you consider Lancaster to be nowhere – but really only a few minutes east of the airport.  It is nestled in the middle of suburbia, with not much else historic around it but a few homes, Tops’ main food warehouse and the Thruway to the north.  It’s an example of pretty random preservation in a community that seems more hell-bent on suburban expansion than anything else.  I think the next closest historical site may be the 1812 cemetery on Aero Drive just north of the airport.

While the preservationists can’t and shouldn’t win all their battles, with Sam Savarino’s help they have staved off the demise of the livery stable for the time being.  Something that always seems lacking, however, is a regular status report on which buildings/sites are under active preservation, which are being proactively advanced for preservation, which are on the need to be preserved list (and why) and which are being left to their own demise.

Where is the inventory? Why is it so hard to obtain a list of all preservation sites in Western New York?  One would think that this site would have it front and center; it does not.  I did find this site that lists landmarks, but that’s not the same as an assessment of what we have versus the preservation candidates out there.

In this area, in this economy, we can’t save everything.  It would be nice to know from the experts themselves what the preservation candidate list should look like, so that we all know which sites should be given most-favored preservation status.

BTEC 2008

June 20, 2008

BTECThe Buffalo Technology Enterpreneurs Conference is next Friday, June 27th at the Statler Ballroom.  If you have any interest in finding out why Buffalo will not become a deserted ghost town in another generation, show your face and talk to some of the technology companies that are springing up in the area.

Many of the startups with which I’m familiar became startups in spite of politics, state regulations and the upstate economy.  They did so because

  • Western New York is a great place to build relationships
  • Western New York is a great place to raise a family
  • Western New York is a great place to live.

With the death of heavy industry and the aging (and departure) of the blue-collar employees that grew up with it, the Buffalo area has been evolving into a more opportunistic community and the rapidity by which Buffalo’s small business community has quietly grown and diversified in the past decade is remarkable.  One obvious result is that recessionary impact is less today (and in 2001) than it was, say, in 1988-89.  A national downturn in specific market niches has less overall impact locally because our economy is no longer largely dependent on that single niche.  Manufacturing might have been the key to our greatness in the 50s and 60s, but dependence on it led to our downfall by the 80s.  The business elements that make up our local economy today are collectively much more immune to changes in business climate and more capable of turning on a dime with the inevitable economic swings.

For years our community has stubbornly clung to the 1950’s and far too many people – from political leaders to everyday Joes on the street – still resist the changes that will make this area great.  That attitude is slowly and finally giving way to understanding that entrepreneurial success is within anyone’s grasp.

So go to the show.  You’ll learn a lot about where we’re heading and how we’ll get there.

Dump the Pump

June 19, 2008

old gas pumpToday is “Dump the Pump” day, advertised throughout the nation as the day we should all try to take mass transit to work. I heard about it on the radio while I was filling my tank at the gas station, how ironic. The fillup cost me $65 and will last less than a week. I do not own a big car. It gets around 27 city, 32 highway.

But I live a good distance from my job, and that job demands non-regular hours. It will never be 9-5 so I drive alone, daily, like 85% of all other commuters in Western New York.

Aside from downsizing to an even smaller vehicle my wife and I have taken great pains to reduce our carbon footprint – something Dick Cheney might call a personal virtue but what we consider to be absolutely essentially for sustained future growth. Since 1997 we successfully cut our natural gas consumption by 60% and this past winter saved about $1,000 in the process. Our largest gas bill was $110. I have not taken the time to track our electricity consumption but I am quite sure that it too is significantly less than what it was just a few years ago.

It has not crimped our lifestyle.

Conservation is, however, all about habits, about changing the little things: Turning off the lights when you leave a room, sleeping with an extra blanket, caulking the windows, wearing sweaters, and being especially conscious of how you are using and wasting energy.

Four-dollar-a-gallon gas may have one saving grace: It may force all of us to make energy conservation a personal virtue.

Net 60 Blues

June 13, 2008


A couple weeks ago my company’s two largest customers informed us that they were unilaterally changing from paying us on a net 30 day basis to a net 60 day basis.  Our company’s most significant costs are labor, which means that the bulk of our expenses must be paid in a matter of days as payroll.  The difference between when our customers pay us and when we must pay our employees just went from about 23 days to 53 days.  For those 53 days our two largest customers essentially get a no-interest loan, and we get socked with whatever costs we incur for having to borrow the money to make payroll.

That might not seem like much, but those two customers represent more than a million dollars in revenue a year.  The 53-day float amounts to about $10,000 in interest payments on the money we will borrow.

Which is one less perk.  Or stifled Christmas bonuses.  Or 6 fewer laptop computer replacements.  It means a lot to a small company, but we have no leverage over the big gorillas whose CFOs will prop up their quarterly returns with a one-shot and probably get hefty bonuses for doing so, at my expense.

In my business, this is shit.

Kaleida and ECMC

May 28, 2008

Yesterday’s Buffalo Niagara Partnership’s Board of Directors addressed one of the more recent issues becoming yet another wart on the face of Buffalo: The Berger Commission’s mandate to merge Kaleida Health and ECMC into a single entity. The board voted – unanimously, with a few abstentions – to request that the New York State Health Commissioner and State Legislature do whatever is within their authority to implement the Berger Commission plans by the June 30th, 2008 deadline. That would include that a joint commission comprising Kaleida, ECMC and independent officials (currently called Newco) to take management reins, and that the ECMC Public Benefit Corporation be dissolved.

As of today, ECMC has not come back to the table to discuss merger plans. The June 30th date is important because prior to that date there is both state and federal money available to assist in the consolidation effort. After June 30th, all legislative bets are off, and Buffalo may be forced to go it alone.

The request to the BNP Board was spearheaded by Independent Health (Michael Cropp), Health Now (Alphonso O’Neil-White) and Univera (Mary Lee Campbell-Wisley). Their request was more of a plea to demonstrate leadership and a unified front at a time when health care costs are skyrocketing. Their belief was that consolidation and build up of the downtown medical campus establishes the critical mass needed to provide quality care at lower cost. The discussion at the BNP was rather prolonged but eventually the Board decided to back the three HMOs. Expect a full-page spread in an upcoming Buffalo News in the form of a letter to the Health Commissioner.

I found it unfortunate that what was voted on was essentially a request to persons outside of Western New York to make a decision that, as a community, we could not make ourselves.

AFRICOM – Protecting Africa, or Protecting U.S. Oil Interests?

May 16, 2008

AFRICOMThe U.S. Government has decided to scale back its once-ambitious plans to establish a military headquarters, presence and influence in Africa. Concerns about the militarization of U.S. foreign policy on the African continent created significant grief among African countries believing that U.S. oil interests, and the U.S. wariness toward China (see this article by the Washington Post) were the real reasons. This article refers to the “controlling oil ministry”, and this one sums up the oil angle pretty well. Oh yeah, the oil.

AFRICOM is actually a spinoff of the Carter Doctrine in which the U.S. made a policy shift toward protecting its vital interests via military intervention, if necessary, which included energy reserves.

Containing the unrest in Nigeria was one of the first objectives.  “To prevent such a disruption, the Department of Defense is providing Nigerian military and internal security forces with substantial arms and equipment intended to quell unrest in the Delta region; the Pentagon is also collaborating with Nigerian forces in a number of regional patrol and surveillance efforts aimed at improving security in the Gulf of Guinea, where most of West Africa’s offshore oil and gas fields are located”

The same article makes reference to the U.S. (and world’s) branding of the word “terrorist” to include anyone who might be getting in the way of their own progress, just to draw the U.S. into supporting them. “Simply put, the situation in the Niger Delta is that of ethnic-nationalist movements fighting by any means necessary for the “political objective of advancing the cause of self-determination and equitable sharing of oil-receipts.” It has nothing to do with international terror networks or jihadists.”

And then there’s the U.S. attempt to tame China, which is aggressively pursuing economic agreements with Africa, who it sees as a strategic trading partner and the U.S. sees as the start of a new Cold War.

But U.S. foreign policy has been wrapped around militarism for some time now, and that policy does not sit well on a continent where Western colonialism is still a fresh memory. Hence our government’s turnabout in less than 12 months.  AFRICOM will be diluted by adding a civilian facet to it, but the military will still be in charge.  Headquarters, however, will likely be somewhere on the U.S. East Coast and not anywhere in Africa.

Our country’s seemingly endless use of the military to shape global policy reminds me of the oft-quoted line: “To a man with a hammer, every problem looks like a nail”.  Africa, I think, is telling us to either come up with a different policy, or to stay the hell out.

The Signature Bridge Debacle Award

May 1, 2008

ECMCI am awarding the 2008 Signature Bridge Debacle Trophy to ECMC for its stunning refusal to even come to the table to discuss and plan out the Berger Commission’s mandate-now-law to merge the Kaleida and ECMC hospital systems.  ECMC has decided to take the matter to court, a tactic guaranteed to stall the merger for many years to come, and fatten the pockets of the current ECMC management team for many years to come as well.  Oh, the egos.

As Bob Gioia, chairman of the board of directors in charge of the merger, stated today:  “In my almost 30 years of public service, I have never experienced behavior like this, and I’m saddened for this community.”  ECMC, which has the same share of seats on the board as Kaleida, walked out of a recent board meeting and, to my knowledge, has not returned.

The Signature Bridge is the embodiment of long-delayed and overdue promises to improve (or at least the appearance to improve) quality of life in Western New York.  The closing of Main Street to vehicular traffic, the removal of the elevated portion of the I-190 and the Skyway, construction of Bass Pro and now the stalled hospital merger plan join it in infamy.

Excepting perhaps for the possible reopening of Main Street, the hospital merger has by far the most impact, addressing a problem that has cost taxpayer money and reduced the quality of health care for many years – too many beds, too much distribution and overlap of services, and too much overhead in the local health industry.  The cost of infrastructure just to support the roughly one-third of all beds that are routinely empty is money that either cannot be spent on health care for the occupants of those beds that are filled, or is a tax on our insurance premiums and our real estate.

ECMC is supposed to be a health care provider.  It is, instead, a JOBS provider, with health care taking the back seat.

New York State Thruway Authority Raises Tolls Again

April 26, 2008

NYS Thruway (courtesy Svirsky)Today’s article about New York’s finest (and I’m not referring to the police, who are fine men and women) comes courtesy of the Buffalo News. The Thruway Authority announced yet another regrettable but necessary increase in tolls, the second since January. There are two more slated for 2009 and 2010. When I visit my sons in the Albany area it will now cost me $25 round trip just to use 280 miles of I-90.

Will I pay it? Sure. Will I like it? Hell no. I’ll probably drive with disdain.

The Thruway is not anything to be proud of. Despite some trucker’s claim that it is one of the best maintained highways in the country, it is a dull, nonscenic and monotonous ride; and to me feels safer only because of the lack of traffic on it relative to the bustling highway systems in other states. Unlike my occasional trips through Ontario to Port Huron – which tend to fly by – the trip to Albany is seemingly endless. They are the same length.  One is a joy to drive; the other is a bore.

What struck me while reading wasn’t the Thruway toll hike. It was the statement that Assemblyman Mark Schroeder made about “the explosion of authorities in new York, which he estimated at 640. These authorities are beholden to no one, and historically have been used for patronage jobs and as off-books loan vehicles so that the state government can avoid going to referendum as mandated by the state constitution. The Thruway Authority just happens to be today’s whipping boy; deservedly so. But 640 authorities? When is this nonsense going to end? What did New Yorkers do to deserve this kind of punishment?

A quick look at the Thruway Authority’s 2008 budget reveals that it takes 3,119 employees to manage and maintain the Thruway system, about 5 employees per mile, year in, year out. Salaries and salary-related costs make up almost half of the $1.1B budget. What is way out of whack are the fringe benefits: Health insurance, vacation time, sick time and other perks, are again 50 percent additional cost on top of salary. To put it another way: If the average salary were $55,000 (it is, before overtime adds an additional $3,500 to it) then fringe benefits amount to $27,000 per person. As a business person I could buy my employees the very, very best health insurance policy, load on generous vacation and sick time benefits, put a coffee pot in every office and free soda in the soda machine, and I could still not come close to the cost of the Authority’s fringe benefit package. State employees must get take-home gold every day, or something equivalent.

This has gotten way out of hand. Without the word profitability in the state equation, the words efficiency and accountability appear meaningless.

Resurrecting Buffalo

April 20, 2008

Can Buffalo Ever Come Back? Probably not – and government should stop bribing people to stay here.

That title, in an article by Harvard professor Ed Glaeser in the New York publication City Journal (and repeated in the New York Sun), riled a lot of Western New Yorkers. In Dr. Glaeser’s defense, the subtitle (in italics above) was added by the Journal – nothing like a downstate magazine twisting the knife, eh? Rather than piss and moan about it, Kate Foster and her staff from UB’s Regional Institute invited Glaeser to come to Buffalo to discuss and possibly defend his position. He agreed, and spent most of this past Friday here under sunny skies.

The forum drew 350 people to WNED studios on a day when most of us would have probably preferred to soak up the warmth and brilliant sunshine. Yet there we were. I had the privilege of being on the discussion panel and also had a semi-private audience with Dr. Glaeser for several hours prior to the presentation. That’s where it got interesting, as that discussion covered many more issues than did the public forum.

But all in all, Glaeser really had two points to make:

  • Good schools correlate to good urban health.
  • Buffalo and other depressed cities should shrink to success.

Urban success should be measured not by population growth but by quality of life. Glaeser pointed out several times that some of the most successful cities in the U.S.: Chicago, Minneapolis and Boston – to name a few of the cold weather cities – have all suffered substantial population loss since 1970 yet they thrive as urban centers. Glaeser claims that they reinvented themselves to become centers of information flow and today manufacture ideas, not just goods. It stands to reason that a more educated society is advantageous to the creation of an urban environment that nurtures information flow; hence the stress on better schools and better education in general.

My only argument with Dr. Glaeser is the role that job opportunities play. Surprisingly, Glaeser didn’t mention this and, in fact, implied that cities in the South have become consumer cities where people move simply because it’s cheap to do so. All things being equal, I claim that most people would not move from wherever they’ve established roots if they sensed that they had job opportunities where they already live. But for many years now, Buffalo has been slow to create those opportunities, so off we go to find new opportunities elsewhere.

Other things of interest:

  • Glaeser basically implied “Don’t look to government largesse to bail you out of this. Buffalo’s success depends on the business sector and the community. Government generally does a bad job, believing that big projects (read: “shiny new buildings”) are needed to solve big problems. They generally don’t work well. Glaeser was against Boston’s Big Dig for this reason. He said to me “The people in Kansas City should not have had to pay for transportation in Boston”.
  • Dr. James Williams appeared to sleep through much of Dr. Glaeser’s presentation. Maybe he was just thinking really hard. With his eyes closed.

High-Tech 2010 Census Effort Reportedly Adrift

April 10, 2008

Census 2000The United States has, for the third decade in a row, attempted and failed to create a method by which census data can be collected by some means other than pencil and paper.

It’s not that this would be so bad except that the Census Bureau estimates that the cost of this handheld system is $1.3 billion, and it won’t do what was intended: Allow canvassing workers to enter and transmit census data digitally. It was to be the first truly high-tech census. Plans for the 1990 census called for quite a bit of minicomputer technology to support data collection, and in 2000 the use of data capture systems; those plans didn’t materialize, either.

This article is really discouraging. It further reinforces my belief that agencies like the Census Bureau are loaded with bumbling political appointees being gifted large salaries and prestigious titles for their support of the party in power. The Bureau’s bumbling appointees were Jay Waite and Louis Kincannon. Their CV’s are impressive, their results are not. When asked in 2006 by Senator Tom Koburn what the Bureau would do if the handheld units did not work, Kincannon stated that the handhelds would work, implying there was no need for a contingency plan. He repeated this statement four more times during the Senate hearing, indicating that no plans were in place should the system of handheld units fail to materialize by 2010. Kincannon was replaced in late 2007 by Steven Murdock. Read the entire story here; it’s fascinating.

Fed Ex seems to do a pretty good job using handheld scanners to track millions of packages daily. My wife uses Nielsen SCANTRAK to enter all kinds of data about her weekly purchases, transmits that data on a regular basis and gets awarded points that she can turn into gifts for all her effort. Turbo Tax turns my digitally-created 1040 forms into 2-dimensional bar codes that can be scanned at the receiving end in a matter of seconds.

The technology to do everything the Census Bureau needs has been around for years – commercially, about 15 years already – yet the Bureau cannot figure out how to turn that already-available commercial technology into something that would work for them.

What a shame. What a statement of utter incompetence.

We will pay $1.3 million for a system that will not provide census workers with the tools they need to efficiently do their jobs. We will, instead, pay those 600,000 workers to arm themselves with pencil and paper to collect data from the expected one-third of all Americans who will not return their census forms, only to have that data re-entered by other census workers sitting behind banks of PCs once the paper forms arrive back at headquarters. Total cost for the census: Around $14 billion and growing.

But it’s not entirely a lost cause. Even though the units won’t be able to collect and transmit data, the 151,000 handheld units that will be purchased (note that apparently, not every census worker gets one of these toys) will be able to use GPS to verify the location of every home in America, just like a Tom Tom. An $8,600 Tom Tom.

Maybe by 2020 we’ll decide to build something high-tech that actually works, or make the potentially wise decision to simply continue doing it with pencil and paper. The alternative – the worst alternative – we seem to choose is to pay some company billions for a half-assed, poorly thought-out design that has no chance of getting off the ground.

How sad for us.

Race to the Bottom

April 9, 2008

Dan GundersenDan Gundersen, Upstate chairman of the Empire State Development Corporation, came to the Buffalo Niagara Partnership today to discuss state incentives to businesses, and how we compete for that business with other states.

In a nutshell:

  • Business incentives have become an entitlement, not an incentive. Businesses not given an incentive package to come to New York (or any other state, for that matter) will generally choose to go to some region offering an incentive package.
  • Because New York has real estate taxes 50% higher than the national average it must offer incentives to lure businesses to the state. The problem is that incentives are being offered by every state, regardless of where they rank tax-wise. The conclusion: Offering incentives rarely provides New York an edge over other states.

This is the classic race to the bottom. As each state tries to outdo every other state the logical conclusion is that businesses will eventually be incentivized (read: entitled) to locate to the region that offers shovel-ready or spec-built real-estate essentially for free – no taxes, ever. People who are lured to that region for the jobs it produces may be burdened with taxes, but not the businesses providing those jobs.

Given that our current system of taxation is plainly not working well, New York State might be wise to grab the lead on this and offer a free ride to any company willing to relocate to the state – especially to the upstate area.

Ed Glaeser

April 7, 2008

On April 18th Harvard Professor Ed Glaeser is invited to WNED studios in Buffalo to discuss, possible debate, his locally-controversial article “Can Buffalo Ever Come Back?” first published in the New York Sun and City Journal magazine. Although the subtitle of the article essentially screams “No, and the government shouldn’t bother to try”, a thorough reading hints that Buffalo should endeavor to right-size itself rather than attempt to grow back to its prominent old self.

I am not in agreement with all of Glaeser’s conclusions (especially the ones using old or faulty statistics), and I think he left out a number of arguments that speak highly for Western New York, like its people. Nonetheless, I am not out to disparage the guy, either. Professor Glaeser is the pre-eminent urban economist, and we should listen very seriously about what he has to say for a number of reasons, not the least of which is that people in high places listen to him.

Glaeser eagerly accepted the UB Regional Institute Director Kate Foster’s invitation to come to Buffalo (he’s been here before). He did so graciously and without reservation. The event will not be a public forum, so don’t expect to be able to walk up to a microphone and start venting your anger and frustration at him; that is not the intention. This is meant to be a serious discussion about the future and how we might get there in better shape than we are today.

I have been asked to be on the discussion panel that will meet with Glaeser at 2 PM at WNED. An audience of around 200 is expected. I also get the chance to have lunch with the man in a more private setting. I hope that as a community we take away new insights into how we can efficiently and effectively revitalize Western New York. I certainly intend to pick his brains.

Other articles about Glaeser can be found here and here and here.

Thoughts on Secession

March 17, 2008

New York - UpstateJefferson is the State that never was.  In 1941 the people in Northern California might have taken it further than a whimsical, political stunt had not the bombing at Pearl Harbor focused their attention elsewhere.

Their story is not much different than that experienced by Upstate New York:  A governmental decision-making process dictated by more populous counties to the south and a state government that (from our vantage point) caters to those counties first and foremost.

A lot of the laws and different things that affect us are voted on by people who’ve never been here and don’t know anything about us,” said John Lisle, a barber from Yreka, California. 

There are Upstaters who talk about – demand – secession from Downstate; and they have arguments, not necessarily believable, indicating that we would be economically ahead to do so – since legislation favoring NYC tends to suck Upstate dry with, for example, unfunded mandates.  Likewise, there are many Downstaters who talk about – hell, try to legislatesecession of New York City and its environs from the rest of the state, using the same arguments.  The common denominator is, of course, New York State government, which over the years appears to have legislated the State into a position where taxes and fees from both Downstate and Upstate outstrip these regions’ ability to pay for them.  Hence we find it easy to blame each other for our woes.

Perhaps we should try to do away with New York State government, and start over again?


Get every new post delivered to your Inbox.