Tuesday, December 07, 2010

How State Farm won and how they got away with it.

It does not happen too often nowadays.
Good journalism is the essence of our democratic values.

I real the following in the Sarasota Herald Tribune.

It is so revealing that I have no choice but to post it on my blog.

The article is not so much about the ruthless conduct of big insurance companies, but especially revealing on how our legislators can allow them to carry out these preposterous and immoral ripoffs.

Did you ask yourself why the cost of owning a home has gone up so much during the last few years?

We all know that INSURANCE.is one important element.

You think you know what's going on?  Think again.

An intricate web of offshore companies set up with the only purpose of escaping regulations and skimming the consumer is the essence of the whole scheme.

You think you have escaped their grip?  Not so easy!


What is being perpetrated against our middle class is across the board and unbelievable.

Banks, Insurance companies, are only the tip of the iceberg.

But, as a realtor, looking as the worse real estate crisis in history, I can't but write my indignation.


How State Farm cashed in on a crisis

A Sarasota Herald-Tribune investigation

When State Farm stepped up its march out of Florida, it loudly and publicly claimed hurricanes were pushing it toward financial disaster. The company argued it had to leave the Florida coast -- and drop nearly half a million customers -- because it could not profit in a state wracked by so many storms.

But State Farm never really left Florida.

A Herald-Tribune investigation finds Florida's largest insurer has instead found an easier way to profit from homeowners desperate for coverage. And the desperation State Farm helped create allows it to command some of the highest rates in the world.

The conduit for this back-door insurance is DaVinci Reinsurance Ltd., an offshore company with no physical office or employees of its own that sells policies to insurers to cover their storm losses.
The virtual corporation was launched in 2001 by State Farm and a Bermuda reinsurer with which it has close ties.

State Farm provided $200 million in seed capital. Its partner, RenaissanceRe Holdings Ltd., took on management and the recruitment of other investors.
While it has little physical presence, DaVinci is now one of the state's most important hurricane reinsurers. Contracts show DaVinci provided coverage last year to more than 50 Florida insurance carriers representing the owners of 3.7 million homes.
Through DaVinci, State Farm quietly continues to collect money from thousands of former customers who were told their homes were too risky to insure.

Collectively, these customers have paid hundreds of millions of dollars to State Farm's offshore reinsurance venture. Without a hurricane, the $300 million in Florida premium paid to DaVinci from 2006 through 2009 has been largely profit. Florida's payments for 2010 are not yet available.

The advantages to State Farm are clear.

In Florida, the insurance rates State Farm can charge are regulated by the government. Profits are controlled and taxed. The potential loss from a major hurricane is measured in billions of dollars.

DaVinci's premiums, on the other hand, are as high as the market will bear. Based in Bermuda, it avoids U.S. taxes and faces no limit on profits. If a hurricane strikes, State Farm would lose no more than its investment in DaVinci -- $350 million at the end of last year.

State Farm officials would not disclose the company's current ownership interest in DaVinci. Nor would RenRe release the names of DaVinci's directors. Securities filings show that since 2008, State Farm has had an option to leave DaVinci, but as of December 2009 it had not exercised that right.

A spokesman for State Farm responded to questions from the Herald-Tribune with a two-sentence statement.

"Reinsurance exists to help insurers protect homeowners from major catastrophes," wrote spokesman Phil Supple. "In this instance, State Farm is simply an investor and not actively involved in this reinsurer's underwriting decisions." 

Stacked against State Farm Mutual's $92 billion in assets, the investment in DaVinci is small. The cash payout so far has been only $100 million in dividends split between State Farm and other investors, including the Ontario Teachers Pension Fund. But the impact on Floridians has been huge.  

DaVinci helped facilitate the transformation of Florida's home insurance market into one reliant on thinly capitalized, Florida-based companies and unregulated offshore reinsurance.

DaVinci, along with its partner RenaissanceRe, writes a specialized form of reinsurance that allows investors to launch and operate new Florida insurers with relatively little cash.

"It brings more capacity ... I would welcome State Farm to do more of it in a heartbeat," said Joe Graganella, president of two Florida insurance companies, Capitol Preferred and Southern Fidelity, which buy coverage from DaVinci and RenRe. Without that protection, it would be hard to do business, Graganella said.
The expansion of DaVinci's coverage in Florida, however, was also self-serving. 

DaVinci's presence made it easier for State Farm to withdraw from Florida's densely populated coastlines and in five years shed more than 865,000 customers -- by helping give those customers a place to go.  That, in turn, aided State Farm politically.

The company's withdrawal has put pressure on lawmakers to give concessions to the insurance industry, but is not so cataclysmic as to prompt state intervention to prevent it. In the end, Florida officials allowed State Farm to sharply raise rates and eliminate policy discounts while shifting to safer parts of the state and retaining its highly profitable auto insurance operation in Florida.

Earnings projections filed with state regulators show State Farm expects to collect as much premium in 2011 as it did before its exodus.

"State Farm has done a good job, an excellent job, in pulling the wool over the eyes of many of my colleagues in the House and Senate," said state Sen. Mike Fasano, a Pasco County Republican and a critic of State Farm. "They've convinced them that State Farm is poor and they're losing money and the Legislature is willing to come to their rescue."


DaVinci emerged from the rubble of the World Trade Center.
Within weeks of the Sept. 11 terrorist attacks in 2001, it was created by State Farm and its Bermuda partner, RenaissanceRe, to capitalize on price increases that followed the disaster. State Farm's original $200 million stake gave it a 40 percent share in DaVinci and a seat on the board of directors. RenRe provided 20 percent of the money and manages the venture. At the outset, DaVinci was a nominal reinsurer for Florida. It specialized in low-risk contracts with large U.S. insurers such as Allstate and Zurich American. 

That changed after Hurricane Katrina in 2005.

To take advantage of rising reinsurance rates, DaVinci shifted its attention to hurricane risk, raising $375 million, including $25 million more from State Farm. It doubled its capacity to write reinsurance and refocused much of its business on Florida. 

Together, DaVinci and RenRe became the largest provider of hurricane coverage to Florida-based insurers. The rates they charged Florida insurers post-Katrina doubled, RenRe executives told stock analysts at the time. The company's pursuit of such distressed markets is a central part of its business philosophy.

"Where there's gunfire we don't run toward the bullets, but we like to get involved when there's still smoke in the air," RenRe CEO Neill Currie told the Herald-Tribune two years ago at a reinsurance gathering in Monte Carlo. "It works out pretty well, because we come riding in on the horse."

National reinsurance records show that in 2005, Florida-only insurers provided 23 percent of DaVinci's U.S. revenue. By 2009, it was 41 percent. 

Interviews and documents examined by the Herald-Tribune show DaVinci focused on selling the riskiest, hardest-to-get coverage most critical to Florida's weakest property insurers.

There is little competition in that niche, and reinsurance brokers said the price for such protection is among the highest in the world, sometimes more than 50 cents for $1 in coverage. " 'Opportunistic' is the absolute key word," said John DeMartini, vice president at Towers Watson, a national reinsurance brokerage. "DaVinci cleverly stepped into the void."

What's more, State Farm organized its withdrawal in a way that helped it keep control of its most profitable business -- car insurance. It created a list of insurers to which State Farm agents could direct dropped customers. 

Homeowners who switched to those companies could retain their multi-policy discounts. State Farm agents also keep their clients if they move them into the state-created Citizens, or to the pre-approved companies -- most of which are backed by DaVinci reinsurance coverage. Details about DaVinci were kept quiet enough that several longtime Florida State Farm agents told the Herald-Tribune they were not aware most of the pre-approved companies had a connection to State Farm.


Tampa resident Trudy Hensley canceled her State Farm home and car policies in 2009 after seeing her premium jump 66 percent in two years. 

State Farm's threat to drop Florida residents angered her enough to look for coverage elsewhere. She switched to Tower Hill. What she did not know was that the Tower Hill group, including four insurers under that umbrella, is by far DaVinci's largest Florida customer. 

The Tower Hill companies together paid State Farm's reinsurance venture more than $48 million in premiums from 2004 through 2009. "It's very unethical. I have no feelings of Good Neighborliness," Hensley said. "I'm not happy at all. It's another case of those big insurance companies taking advantage of people." 

Hensley's first reaction after being told about DaVinci was to ask for a list of companies that do not buy reinsurance from the company. It would be hard to find one.

By 2009, DaVinci, in partnership with RenRe, had provided some hurricane protection for 54 Florida insurers, including Allstate and fast-growing Universal Property & Casualty. The duo supplied the majority of hurricane protection for six companies, a list that included Security First, Argus and the now-defunct Northern Capital.

According to financial contracts reviewed by the Herald-Tribune, DaVinci was the third-largest commercial provider of hurricane reinsurance in Florida by the end of 2009. As State Farm dropped customers along the Florida coast, many remained in the State Farm family when they were picked up by companies using DaVinci reinsurance, including Northern Capital. The Miami-based insurer was started in 2007 by the owners of a security guard company. 

Alexander Anthony and Albert Fernandez put up $8 million and approached state regulators with an offer to take on more than 45,000 homeowners who had been dropped into a state-run program by State Farm and others.

Like many Florida start-up insurers, Northern Capital lacked the money to insure that many homes. It could have drastically scaled back its growth plans to fit the money it had. Instead, it devoted two-thirds of its income to buy reinsurance, letting it insure thousands more homes. 

Northern Capital concentrated its business in Miami-Dade County and adjacent areas -- a region State Farm closed to new business in 1992. Despite that, 90 percent of Northern Capital's private reinsurance in 2007 came from DaVinci and RenRe. The decision was a fertile opportunity for State Farm's venture.

Northern Capital paid DaVinci as much as 40 cents for every $1 in protection it received, akin to paying $80,000 a year to insure a $200,000 home.

A risk assessment done for state regulators shows Northern Capital's coverage from DaVinci had a technical value -- the average annual expected hurricane loss -- of no more than 4 cents per $1 insured. But DaVinci demanded to be paid 10 times the actual risk. 

That cost landed on homeowners. A Herald-Tribune review of scores of reinsurance contracts found similar terms for other companies. In 2009, Southern Fidelity paid 52 cents for every $1 of protection bought from DaVinci and RenRe. Homeowners Choice paid the two companies 43 cents per $1 of protection. Capitol Preferred also bought high-risk coverage last year at 57 cents on the dollar; Gulfstream paid 32 cents for every $1 of coverage. 

As Northern Capital illustrates, the contracts worked out better for State Farm than for companies that bought the coverage. With no hurricanes, DaVinci kept the $20 million it collected from Northern Capital.
In early 2009, state regulators accused Northern Capital of paying too much for reinsurance and put it under secret supervision. 
A year later, the company had so little money regulators shut it down.

Thursday, October 07, 2010

Great Reading - Michael Lewis - THE BIG SHORT

Just read it:

THE BIG SHORT - Inside The Doomsday Machine

By Michael Lewis.

Whoever wants to start understanding the state of the Real Estate in the US and also in the wide world, is at a loss if he thinks he can interpret the catastrophic debacle in traditional terms and historical data.

It is evident that this is not one of the regular cycles of capitalism.

Manipulation, indifference,  greed and plain ignorance from many of the players in the infamous game that brought to their knees many of this country's small investors; drove out of their homes a large percentage of American middle and lower class citizens, is the theme of this book.

Standard & Poor, Moody's rating agencies' pitiful (or reckless?)  job at guiding the public in general, mutual funds and hedge funds in particular, is a main factor. Goldman Sachs, Bear Stearns, Citigroup, Deutsche Bank, UBS, Wachovia, Bank of America are some of the names that pop up  even though they still are for some of us the symbol of finances at their highest.

The open ignoring of the principles of banking and mortgage lending by most banks, Fannie, and Feddie, the Feds,  the SEC, are still unanswered questions.

Welcome to the world of CDO's and CDS.

Read how TRILLIONS of dollars of worthless packages of sub-prime mortgages were assembled in AAA bonds, and put on the market during these "boom" years of 2005, 2006 and 2007.

CDO is a Collatelarized Debt Obligation, supposedly an" investment-grade"  security backed by a pool of mortgages. If you didn't read too much about it, it means in reality a bunch of crappy loans with very low expectations of being ever collected, that are put together, graded by Moody's as AAA and sold as first class investment securities.

Read about how the CDS (Credit Defaut Swaps), which are a kind of insurance on the CDO's , were often bought by the same "institutions" which had issued these rotten CDO bonds in the first place.
Example:  You issue a CDS in favor of an investor who is betting that  your trashy AAA CDO's will eventually have a high grade of delinquency which will drive their value to Zero or close to it.
This investor can be a hedge fund, a group of investor, another bank, or the same bank who issued the CDO's in the first place. Incredible? A Lottery? Las Vegas? I would like to believe it if most of these "elite" guys hadn't ended with hundreds of billions of dollars in salaries and bonuses.

A fascinating and exhausting reading.

And an example on how quickly we forget and how corruption, "bubbles"  and evil can perpetuate, revive, and multiply.

Michael Lewis, famous for the Liar's Poker, about the 80's (an era where at least some of the crooks went to jail), gives the reader a fascinating rough draft of this whole new era that (sorry guys)  we are still living.
The era when, instead of sending the bad guys to jail, we give them new liberties to freely  lobby our Congress, and increase at will their campaigns contributions.   

Why real estate is what it is today?

Perhaps you'll get a less clouded idea with Michael Lewis penetrating view on this "roaring decade".

Monday, September 27, 2010

More about property taxes in Miami

I don’t usually trust billionaires when discussing politics.  

In this case, however, my sympathy goes to Normal Braman, one of the richest men in Florida whose interests or beliefs surprisingly coincide with those of the common citizen of Miami.

The City of Miami and Miami-Dade County have never been an example of incorruptible public officers.

I recall the Marlins' Stadium outrageous situation when the City and County of Miami agreed to finance it at taxpayer's expense. A team worth hundreds of millions of dollars was blackmailing a city in need of every penny to improve public services and education.   

With a  totally convoluted reasoning, Miami commissioners never talked and acted businesslike when confronted to shrewd corporate interests. 

They could have asked for partial ownership of the team, or repayment of the city's loan with part of the team's revenue. But we would listen for hours to their speeches and discourse, never to get any reasonable explanation.   

And in spite of the strong opposition and action of Norman Braman, and most of Miami's people, it just passed. The Marlins Stadium will be built by Miami.

And at the present time,while the Marlins are making a handsome profit,  Miami is increasing its tax rate by a shameful percentage. 

Too late, it seems, to reclaim taxpayer's money. But never too late to add to the suffering of their beleaguered citizens.

Here is what I read today, that sounds like a payback, but is more like a little bit of justice. 

Norman Braman launches drive to recall Mayor Carlos Alvarez 

Billionaire businessman Norman Braman announced Monday he is launching a petition drive to recall Miami-Dade Mayor Carlos Alvarez. He said, however, he will not seek the recall of sitting county commissioners -- at least not yet.
Miami-Dade County Mayor Carlos Alvarez boosted the authority of his office and became a ``strong mayor'' through a petition drive. But now, a new ballot initiative could trigger his political undoing.

For the second time this year, an effort to recall the county mayor has been launched. Unlike the unsuccessful effort waged on a shoe-string budget by a Coral Gables retiree, the new campaign is backed by Norman Braman -- an auto dealer not shy to use his private fortune to battle public officials.

The move comes after the mayor and eight county commissioners approved a 13 percent property tax rate increase last week to plug a budget hole for the coming fiscal year, and after mounting criticism over other county spending. 

Braman had pledged to launch recall efforts of the mayor and any commissioners who backed the tax hike. On Monday he followed through with the promise to target the county mayor, but said he's not currently pursuing sitting commissioners.

``This outrageous tax increase has been enacted while citizens are suffering economically, property values have crumbled, foreclosures are rampant, and unemployment has reached almost 13 percent in our county,'' Braman said.
The businessman said he's launching the campaign so ``the citizens of this community finally may have their voices heard.''
In a mid-day news conference, Alvarez responded that the property tax rate had to be increased to protect vital services, like fire and police.
" It is Mr. Braman's right to do this,'' said Alvarez, with County Manager George Burgess at his side. ``Quite frankly, I don't worry about things I can't control.''
The mayor later added: ``I will worry about running county government until the citizens of Miami-Dade County tell me otherwise.''

The recall reflects the shifting political fortunes of a county mayor ushered into office in 2004 as a former police director bent on bringing common sense reform to a county government frequently embroiled in scandal.

Indeed, in 2007 voters backed a petition-drive by Alvarez to further empower him by shifting the county manager's office and the entire county bureaucracy under the mayor's direct control. The move was supported, in part, because vesting power in a single, term-limited leader -- namely, Alvarez -- was viewed as the best alternative to improve county government.
But as the economy has worsened, Alvarez has come under fire.
In 2009 he declared that government ``must do more with less'' but then handed out double-digit pay raises to his top aides.
Separately, Alvarez initially defended his chief of staff -- whom he'd given a hefty raise on the grounds of increased responsibility -- after Miami Herald reports the top staffer was working as a private consultant in Panama on county time. He later demoted the aide amid escalating criticism.
Other criticism centers on the county's decision to use public funding for a new Florida Marlins baseball stadium in Little Havana. The mayor said the stadium is bringing jobs to an economy in desperate need of them.

Braman, joined at the press conference by state Rep. Carlos Lopez-Cantera, majority whip in the Legislature and a Miami Republican, said it is time for change. 

Thursday, September 09, 2010

This is what I'm talking about

A few days ago, I posted some comments regarding my new property tax bill.
In essence, the City of Hallandale Beach and Broward County have chosen to substantially increase their tax rate instead of trying to adjust their budget to a new reality.

Downgrading and thrift are the way to go. Continuously raising taxes to support an inflexible path of so called "growth" is irresponsible. 
It is sad to observe that citizens' response has been almost inexistent. We are sitting back, while our pockets are being sacked. Broward is our county and Hallandale Beach is our city.
We should be able to make our elected officers  work for us, not against us. 

We are tolerating that, while services provided are diminished and degraded, our taxes go up every year.

This year will mean for many "homestead" beneficiaries, an approximate 10% increase, in a time of zero-inflation. 

Is this ridiculous? Tragic would be more like it. People losing their jobs, their homes; retirees whose savings have been almost wiped out by the economy, shouldn't be confronted with this type of issue.

I am reading today on Heraldtribune.com  which covers Florida West Coast an article about how Venice, Fl. has addressed the issue. A good example to follow.

Venice tax rate held flat

BUDGET: 4-to-3 vote means city will have to use $3 million out of reserves

VENICE, FL.  Despite advertising a potential 29 percent property tax rate increase for the 2010-11 budget, the City Council voted Tuesday to keep the rate flat.  The decision marks a continuation of a decade-long streak of either lowering or maintaining the tax rate.
Property owners will continue to pay 2.77 mills, the equivalent of $2.77 per $1,000 of taxable property value. 

The council must approve the budget and tax rate at a second public hearing Sept. 21.  After two hours of spirited debate, the council voted 4-3 to maintain the current rate.  Council members Emilio Carlesimo, Kit McKeon and Mayor Ed Martin opposed the idea. Council members Sue Lang, John Moore, Jim Bennett and Ernie Zavodnyik voted for keeping the rate the same.
"I fear we are kicking the can down the road," said McKeon, before the vote, expressing concern about dipping into savings to fund the operating budget. "To be fiscally responsible, we have to maintain the proper fund reserve."  But Lang, who is up for re-election along with Zavodnyik, said with the economy struggling, residents cannot pay more. Reading tax statements from residents who have seen their properties decline in value while they are paying more in property taxes, Lang said the council needs to cut spending and use reserves.  "We have a reserve fund" that is in good shape, Lang said. "I would rather have people go and spend that money in our local economy." 

The council will have to use about $3.1 million of its $9.2 million or so in reserves to sustain its $22 million budget for the fiscal year beginning Oct. 1. It will collect about $800,000 less in taxes than last year because of declining property values.

 City Manager Isaac Turner has laid off four employees and left jobs unfilled to balance the budget. He expressed concern about deficit spending.  "We are below what your goal is for reserves," Turner said. "We will need to immediately identify where we are going to make that up."  Before the vote, Zavodnyik proposed eliminating city provided health insurance for council members. Carlesimo made a motion to eliminate council member pensions, provided by the state after six years.

City Attorney Bob Anderson said the council could not vote on the measures because they did not advertise them in advance.  Before the vote, some residents urged the council to not raise the property tax rate.  "It's been nothing but increases," said Mike Rafferty, a resident of Bay Indies, the city's largest mobile home community.

He said the county appraised the community about 18 percent higher than last year. A tax rate increase would mean his taxes would go up, he said.  "If you don't want to take it out of a rainy day fund, don't take it out of my pocket," he said. 

Venice Taxpayers League President Gary Budway said the city should have cut the budget across  the board and suggested Venice consider combining its fire department with the county and hiring a city attorney, rather than contracting with Anderson.

Monday, August 30, 2010

Florida Property Taxes - Millage Vs. The People

 I just received my 2010 proposed property taxes notice.  
I have lived in the same house for about 24 years. I am thus protected by the Homestead exemption which should not allow my taxes to be raised more than 3% per year.
The value of my home has been steadily decreasing during the last 3 or 4 years. 
However, my 2010 taxes will go up about 9.4 % in the best case and 14.4% in the worse.
How does this happen? 
a) My "assessed" home value goes up 3% to catch up on past years when I was protected.  When prices went artificially up 20% or 30% some years, they couldn't raise my taxes more than 3% per year, because I was a beneficiary of the homestead regulations. But now, even though prices have been going down every year, they still apply the 3% tax increase every time. Difficult to explain? I confess it is. 
b) The millage. Say your home is worth $100,000 and your taxes are $2,000 per year. Your millage is 2%. Figured it out? The millage is the percentage applied on your home value to calculate your tax. Of course it is on the net assessed value. The assessment is what the County Appraiser establishes as your home value. 
We have certain tax exemptions generally called Homestead which benefit residents' first home, and plus some minor additional benefits for some senior and low income or disadvantaged residents. The Homestead exemption reduces your assessed value by $50,000 for some tax components,  except for the school taxes which have a lesser exemption.
Let's analyze my specific property taxes, as an example.
Reading my 2010 proposed tax bill, (if the budget changes are approved)  I notice:
a) County taxes amount to 22.96% of the dollars total of the tax bill. 
Millage Last Year: 4.8889 - Millage  this year: 5.2256%  - 6.88% Millage  increase 
b) Public School taxes total a 33.61% of the dollars amount of my tax bill. 
Millage Last Year: 7.363% - This Year: 7.631% - 3.64% Millage  increase
c) South Florida Water management taxes amount to 2.16% of the tax bill. 
No changes in Millage rate  -  0.5346 % .
d) Everglades Construction Project taxes amount to 0.362% of the total tax bill. 
No changes in millage rate- 0.0894%
e) Florida Inland navigation taxes amount to 0.1396% of the total tax bill.
No changes in millage rate - 0.0345%
f) Children's Services Council amounts to 1.90% of the total tax bill.
Millage Last Year 0.4243% - Millage this Year 0.4696% - 10.68% Millage increase
g) Municipal (City Taxes) which amount for  31.15% of my total tax bill:
Millage Last Year 6.9934% - Millage This Year - 7.7% - 10.10% Millage increase!
h) South Florida Hospital District, which amounts to 5.90% of my total bill.
Millage Last Year - 1.2732% - Millage This Year 1.4572% - 14.45% Millage increase
i) Non ad-valorem assessments: 1.80% of the total dollars amount of the tax bill.
No change in millage rate.

I repeat:  Altogether, my 2010 taxes will go up between 9.4 % in the best case and 14.4% in the worse, depending on the budget discussions.


Is this fair? When property values have been plummeting  for four years now?

When inflation is close to zero? 

Can people hardly hit by this unending recession afford these increases?

Here is my analysis and my conclusions

The largest impact on my tax bill is by far the MUNICIPAL TAXES  item, followed by BROWARD COUNTY TAXES. Millage rates have increased a lot in one year on both counts.
Public School Taxes had a more moderate increase in the millage rate.
Hospital District Taxes had the highest millage rate increase (14.45% more). However it is only a 5.90% of my tax bill; so the impact is not so bad, and I can understand that in these recession times, hospital could be extending their services to more under-privileged citizens. 
What I can't easily swallow is the County and City tax increases. 
In spite of the present property values drops, the overall tax base (total of assessments for all properties) of my city has substantially increased since 2000. This increase is much higher than the rate of inflation in the same period.  How can be explained?  A couple of words may suffice: waste and mismanagement. 
Do I have actual proof of that? I do not follow these budgets and city commissioners'  decisions and meetings so closely.
On the other hand, services have not improved, and I have seen higher bills for my  sewer, water, trash services; In some cases, these services have been actually reduced.
But like any private corporation, what count for a shareholder at the end of the Business Year are the dividends of his investment.  And a conscious shareholder will compare them against previous years' returns and results, as well as similar corporations' results. According to this judgment, the CEO and Board of Directors will be confirmed or voted out.

Our taxes are a main consideration when assessing our governors' work. It's not quite the same as a corporation, but very similar. We can and should exercise our judgment and make our voices heard. 
It is done once every few years when voting for our commissioners.  

As a realtor, I am severely affected by the impact of property taxes (as well as insurance, maintenance expenses), on people's ability to sustain their home-ownership.  Foreign buyers often balk when confronted with the cost of maintaining a property in Florida. 

No doubt that, unleashed as it seems to be, this is a leading factor in the real estate recession.
This is the bottom line. 


I have read in The Palm Beach Post – August 27, 2010,  an article on the same subject.  That confirms it. I am not alone. This is what it says:

Home values way down but taxes often up; homeowners ask how it's possible
Many Palm Beach County homeowners may feel like they've been drop-kicked in the gut after opening their preliminary property tax notices this week.
Property values across the county have plummeted, leaving many owners owing more than they paid for their homes.
Even those who aren't under water felt the jolt. In many cases, not only did their property values fall, but they will pay more in property taxes next year.
"I thought to myself, 'How does that happen?' " said Bob Deacy, who is slated to pay about $100 more in property taxes next year for his home in West Palm Beach's historic Flamingo Park neighborhood. "I read it over three times."
The increase came despite a 22 percent drop in his home's market value.
Deacy bought his home $79,000 in 1997 and saw its value rise year after year. But to see it plunge this year from $189,143 to $147,296, is more upsetting than the proposed tax increase, he said.
"I am a realist, and I know that if you want improvements in your community you are going to have to pay," he said. " I didn't think in a neighborhood that is sought-after it would go down as much as it did."
By contrast, suburban Lake Worth resident Erna Altenor also watched her home's value plummet but has seen her tax bill fall. Altenor bought her home for $260,000 in 2007. Its market value is now $73,581, according to her preliminary tax notice.
"I couldn't take it no more," said Altenor, who stopped reading the notice after seeing the new value.
State law prevents homeowners from being taxed on more than their home is worth. As a result, Altenor's taxes have also plummeted to $1,055, down from $2,133 last year.
"That is good news," she said.
For those unhappy with the numbers in their preliminary notices, there is time to challenge them.
The county's value adjustment board can lower a property's assessed value after a hearing before a special magistrate. Petitions can be filed with the Palm Beach County Clerk and Comptroller's office.
And the county, cities, and other agencies won't finalize tax rates until next month. Before they do, they must hold public hearings on their budgets. Those who want to sound off about tax increases can speak out at those hearings.
The dates and locations are included on property owners' preliminary tax notices.
Property taxes rising
Many longtime homeowners will see their property taxes go up this year, even though the values of their homes have fallen. Here's one example:
West Palm Beach Year purchased: 1997
2009 market value $189,134
2010 market value $147,296
2009 property taxes $1,310
2010 proposed property taxes $1,413
Property taxes falling
Homeowners who bought during the boom will likely see property taxes fall this year, along with the values of their homes. Here's one example:
Suburban Lake WorthYear;  purchased: 2007
2009 market value $133,740
2010 market value $73,581
2009 property taxes $2,133

Tuesday, August 10, 2010

Don't worry it's just your money!

Throughout this blog, I have always advocated for thrift and good management of taxpayers' dollars by our cities, counties and the state of Florida.

As a real estate agent, I observe every day how excessive taxation has a major effect on home-ownership. At about 2% per year on the value of your home, added to Florida high insurance premiums, (as well as out-of-control condominium fees) it is an overwhelming factor that often discourages buyers.
Property Taxes and routine expenses are often higher than the basic monthly payment of the related mortgage loan.
The generosity with which taxpayers' dollars are spent with no other consideration than "if it's there we must get it", is far out of the traditional values of thrift and austerity that should be the norm in times of recession, hardship, and high unemployment.

The same criteria we follow in our home budgets should be applied by our city commissioners.
They can’t just spend and seek the revenue later. Because most possibly, you and me will be stuck with the bill.

I heard that a former manager of Hallandale Beach, who was making an outrageous salary, (and doing a pretty bad job), was fired at an usually high cost to the city.
The present interim manager assumed his functions just a few months ago.
He will possibly get a bonus of $15,000.
Why is it that the city had to consider this bonus request so soon?
Do you ask your boss for a raise two or three months after you were hired?

Trust me, I hate getting involved in local politics. I would just like to see less pomp and circumstance, less meetings and bureaucracy, less formalities, forms, regulations, and a more down-to-earth management of citizens' money.

Our elected officers should start understanding that they have a mandate to gradually reduce their cities' budgets, because they are inflated and unaffordable.

In South Florida, we are famous for our dozens of municipalities all along the coast, each with its commissioners, offices, firemen, water departments, police departments, and miscellaneous levels of managers, technocrats, and bureaucrats.
While this proliferation of local governments could, in some people's minds, be an advantage of de-centralized government, don’t you think that we can't afford it anymore? Is this really a good idea?

I'd like to hear some comments.

I read this on August 9th, in The Miami Herald:
You would think city commissioners and Mayor J.C. would know better by now. In 2007 the commission and the Mayor gave themselves a whopping $55,000 pay raise without bothering to notify the public first.
As a result, a hailstorm of outrage from local residents rained down on City Hall, and the chastised officials rescinded the raises.
But now city officials are up to the same old game: Hastily and secretly spending taxpayers' money like it grows on trees. First, they were so desperate to get rid of former City Manager Mike Good that they agreed to pay him an overly generous severance package worth $366,653 in total.
Now, the mayor and commission majority want to reward interim City Manager Mark Antonio with a $15,000 bonus on top of his $145,000 annual salary. And, if it hadn't been for Commissioner Keith London, they would have signed the bonus check without benefit of public notice or input.
The talk of a bonus for Mr. Antonio came at the end of long budget workshop session that lasted past midnight last week. Residents had left, and while a video camera was recording the session, the broadcast of the meeting had gone off the air.
The commission turned to an evaluation of Mr. Antonio and generally praised his work. That prompted the interim manager to ask for a $25,000 bonus. Mayor Cooper countered with an offer of $10,000.
Eventually the $15,000 figure was negotiated.

That's when Mr. London blew the whistle for a timeout, saying a vote on the award of the bonus should happen in a public meeting for residents to observe and comment on.
So, eager for some reason to ensure that Mr. Antonio gets his bonus sooner rather than later, the commission set a special meeting for 6 p.m. Monday at City Hall for the bonus vote.
Mysteriously, they just couldn't wait for the next scheduled commission meeting.
Commissioners and Mayor Cooper had better be prepared to justify why Mr. Antonio deserves a bonus simply for doing what he was hired to do.

Monday, August 02, 2010

The Real, Deep Cause of Real Estate Troubles

More than in any other branch of the country's economy, real estate crisis might be the thermometer of US middle class' distress and the looming disappearance of the American dream of home-ownership.

Mortgage abuses and frauds, banks games of hedges, CDO's and Credit Swaps, uncontrolled financial schemes are of course signs of the bad course we've been on. However, they are not the whole story.

They are in fact relatively correctable issues that can be addressed with regulations and government controls.

What hasn't been addressed and will not be any time soon is the continuous deterioration of employment and salaries.

We hear our legislators and our president planning on the creation of new jobs and new opportunities; at the cost of billions to the taxpayer.

This sounds so ridiculous when we read every other day about thousands of American jobs lost, small businesses closing doors, corporation shipping away their research and development departments, their calls centers, their accounting and their software engineering to India or China.

Who are we going to sell these condos and these homes to? Or are we going to end up as humorously said by somebody "selling insurance policies to each other" ?

A substantial part of realtors' activity has been switched to selling a large part of whatever is being sold now, to foreigners, Canadians, French, Japanese, you name it. Because these people are gradually becoming the only ones who can afford buying a home in America. And I am not being xenophobic, just observing facts.

Read for example the following article from the St. Petersburg Times in Tampa. It's the symbol of our times.
Observe that we are not losing blue collar jobs. They have been gone long time ago. It's not about U.S. Steel, or G.M. assembly workers.
What we see now are the very same high-tech class of workers that we are supposed to become, by going back to school to retool our knowledge, learn, and prepare for the new times and the new careers. These jobs, businesses, technologies, that were supposed to keep our country in its traditional position of economic dominance, and sustain the prosperity and livelihood of our middle class.

Read on:

PricewaterhouseCoopers to lay off 500 workers, mostly in Tampa
PricewaterhouseCoopers will lay off about 500 information technology workers, most of them in Tampa, as part of a broader push to outsource to cheaper labor.
The news is an untimely blow to Tampa Bay's economy, which is already battling a 12 percent unemployment rate, the fifth-highest among the country's largest metro areas. It also comes amid a recent resurgence in mass layoffs and growing concern nationally that the economy might slip into a double-dip recession.
"It's just terrible news," Tampa Mayor Pam Iorio said Friday. "It's a terrible job market for those people to find other jobs and I'm very sorry to see it happen. … They're moving jobs away from this community and that's a negative. And it's a negative to our national economy when jobs are moved overseas."
PWC spokesman Jonathan Stoner said the consulting powerhouse employs 1,100 in its information technology group nationwide. Of the 600 remaining employees, most will stay in its Tampa hub, he said. With four locations and 1,850 employees in the Tampa Bay area as of early this year, PWC has been one of the region's top employers. In March, it ranked No. 3 among large bay area companies in the Times' Top Places to Work survey.
Iorio said PWC did not approach the city asking for incentives to keep workers here. "If they're making a fundamental decision to move jobs overseas to reduce labor costs, that's a business decision," she said, "and I don't think there's anything any American city can do to compensate for that."
Stoner said the decision stems from a combination of PWC's information technology groups in the United States and United Kingdom.
"The U.S. and UK firms are combining governance, organizational structure and business processes and a single, Indian-based vendor will provide service to both member firms," he said.
Other reports identified Tata Consultancy Services of Mumbai, India, as the vendor, but Stoner said the company does not comment on clients or third-party contracts.
He also disputed one report that employees were told they would have to reapply for positions at Tata. "What we have told our employees is that they are all to be encouraged to apply for other positions at the firm, at PWC."
Throughout the recession, corporations have continued to outsource jobs to Indian vendors to save money, with Tata often reaping the rewards.
Idearc Media, which publishes the Verizon Yellow Pages, laid off 150 employees in St. Petersburg in December as it transferred much of its publishing business to Tata. Ratings agency Nielsen Media Research also turned to Tata for cheaper labor in laying off 170 information technology employees at its Oldsmar complex in 2008 and 57 in November.
Workers found out about the Pricewaterhouse layoffs on Thursday, coming in the wake of PWC cuts elsewhere statewide, including the shutdown of its tax practice office in Orlando.
A half-dozen workers exiting PWC's Lakepointe office complex on Dr. Martin Luther King Jr. Boulevard on Friday said they were in shock, but were warned by managers not to speak publicly. Workers said the company had not given details on severance packages nor a specific time line, except to indicate cuts would likely be completed by the end of the year.
One worker, an Indian contractor for PWC, said the project he's working on will likely be shut down, leaving him with bittersweet emotions: He's sad for his colleagues here and happy for people in India.
As recently as a month ago, Florida economists were pointing to a slowdown in mass layoffs as a sign that the economy was starting to recover.
But July has been a particularly brutal month based on recent mass layoff notices filed with the state. Among them: 892 workers affiliated with the Kennedy Space Center; 320 with the GEO Group in Graceville; 81 at LifeLink HealthCare Institute in Tampa; 245 at Lockheed Martin Corp.; 344 at Kehe Distributors; 221 at Mosaic Fertilizer in Fort Meade; 100 at Bank of America's Idlewood Avenue location in Tampa; and 67 at Enterprise Leasing in Tampa.
All told, 16 layoff notices have been filed in July affecting 2,864 workers statewide. That doesn't include this week's cuts by Pricewaterhouse.

And, as a Spanish poet said: The rest is silence

Henry B. Nathan is a Real Estate Professional. Please visit our website and learn about:
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Sunday, August 01, 2010

Red Light Cameras Might Just Be The Start

I still believe that we can do something about fighting traffic cameras.

I have no doubt that red-light cameras are just the start of a massive program for States and Cities to raise revenues through abusive punitive policies, which in fact are taxes, believe it or not.

Some say: "Relax, it's not as bad as it looks... just a new way of enforcing the law..."

Pundits said the same about Global Trade, US deficits, dismantling US industry, NAFTA, jobs outsourcing, and the mortgage looming disaster, and dozens of issues that are hitting us hard today.

We have grown comfortably accepting everything in the belief that "things will take care of themselves", that we live in the best possible world and nobody is going to change that, and other nonsense.

The truth is that every little issue and problem must be addressed and discussed. I firmly believe that, in time, Big Brothers will proliferate and prosper, at the expense of our liberties and quality of life. This is one notable example.

I totally agree with the following article, read in the Sun Sentinel on July 14, 2010.

Red-light cameras in South Florida – the start of an expensive ride?

Will cash-hungry governments keep expanding technological reach? With cash-hungry South Florida cities and the state in full money-grab mode, will red-light cameras be just the start?

"I don't see why they wouldn't do it for stop signs, too," said Daniel Karten, of Hollywood.

Or how about the state using SunPass transponders to detect speeding violations on toll roads?

Or how about cities using cameras to bust illegal U-turns?

"What's next? Probably speed cameras," said attorney Bret Lusskin, whose successful suit against Aventura's red-light cameras prompted the Legislature to rewrite state law and allow them. "If we don't stop this now, there'll be cameras everywhere, trying to catch anything you do."

Said Karten: "As a driver it stinks, but if I were a city council member sitting up there looking for revenue, it probably makes sense. They've got all this technology. All they have to do is start using it for different functions."

Karten was among dozens of readers who got in touch after I wrote about Hallandale Beach's red-light camera. The camera, on northbound Federal Highway at Hallandale Beach Boulevard, has rung up nearly $1 million in fines since January – a whopping 93 percent for slow-rolling right turns on red.

For now, Hallandale Beach is alone among Broward and Palm Beach County camera cities in enforcing right turn violations. But two cities in north Miami-Dade -- Aventura and Miami Gardens – have been mercilessly doling out right-turn tickets.

Karten said his wife has gotten multiple tickets at cameras near the Aventura Mall, as recently as June. I also heard from people who've been cited for slow-rolling rights at the corner of US 441 and Miami Gardens Drive. "Incredibly frustrating," said Karten.

Karten said he realizes people should follow the law, meaning coming to a full stop before turning. But in the case of these intersections, drivers making right turns often think they are acting safely because oncoming traffic is halted by the crossing street's left-turn signal. "They should put right-turn arrows in, so traffic can keep flowing when the other street has the left-turn signal," said Phil Kodroff, who got cited by the Hallandale Beach camera in May.

But that would cost money, instead of making cities money.

The new state law took effect July 1. It remains unclear what will happen to fines issued before that date, because an appeals court still must clarify that issue.

Still to be hashed out is the growing debate over right-on-red enforcement. The new law says drivers who make right turns in a "careful and prudent manner" may not be ticketed. But the definition of "careful and prudent" will have to be litigated, attorneys and city officials say. "Nobody knows what it means," said Lusskin. "If the cities keep issuing violations for right turns, I expect to challenge it."

According to the state's uniform traffic code, drivers must come to a full stop at a crosswalk or intersection before making a right turn on red. "There is no such thing as a 'rolling stop' and there is no grey area in state law," wrote reader Bruce Hogman, of Fort Lauderdale. Debbie Rozanski, of Pembroke Pines, wrote: "If people can't follow the law, then maybe we should stop allowing right turns at red lights." Mary Zervos, of Hallandale Beach, asked: "Why not have a sign installed, 'Stop here on red, then turn.'"

Under the new state law, a sign is required to mark red-light camera intersections, along with right-turn enforcement. In Hallandale's case, the sign is easy to miss, tucked 10 yards off the side of the road 130 yards before the intersection. "What driver is going to see that, especially at night?" Kodroff said when I showed him the sign last week.

Hollywood recently approved the installation of 10 red-light cameras by year's end, but it hasn't been determined if slow-rolling rights will be enforced. Ditto for Fort Lauderdale, which will have 11 cameras running by next month.

"When we gave approval, I never realized that cameras could be used this way," Hollywood Mayor Peter Bober said Wednesday. "I don't support playing 'gotcha' with drivers." Bober said he would like to see a middle ground, perhaps only ticketing those who go above a certain speed making a right on red.

"If you make a safe turn, but you're still going one mile per hour, I don't think that deserves a $158 fine," Bober said. "We should be trying to deter the most egregious and dangerous types of behavior, not giving people more reasons to hate municipal government."

From The Sun Sentinel - Michael Mayo - Columnist , July 14, 2010

Henry B. Nathan is a Realtor at United Realty Group Inc.

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