Employer in huge financial trouble...idea? - Jemsite
Off-topic / Miscellaneous Talk about miscellaneous stuff off-topic and not related to music, guitars or bands. No music, gear or anything guitar related here please.

 
LinkBack Thread Tools Display Modes
post #1 of 14 (permalink) Old 09-19-2014, 11:15 AM Thread Starter
 
Join Date: Jul 2012
Location: Northern California
Posts: 2,511
Employer in huge financial trouble... ideas?

One job I do as extra weekend gig is for a city who while only 1,600 people has run a $41 million dollar debt. On the day to day running of the city, the budget has been stuck to but the state mandated (very generous retirement program) simply doesn't work for small cities.

Large scale cities can afford the generous retirement programs and have much more to draw on for tax money, but small bedroom rural villages don't have that and can't afford retirement. Not only has the retirement gone from a manageable 2% percent of gross per year of working for retirement, but to an expensive 3% percent number which is now $35 million or our $41 million dollar debt.

This small town lack of income also comes in a period in our history where Americans are living the longest. (Of course, American longevity may decline in next few decades due to diabetes type II, but that is another huge topic for another thread).

We have done everything possible to cut debt, such as selling off both performing arts theaters, ceding police and fire to neighboring cities, and firing more than half of the once 128 employees. But in the last round of firings, former employees sued and now the city has the extra cost of two years of court hearings and inevitable settlements.

My mother had a similar situation with employer (AT&T) making so many cutbacks that it led to less benefits and major class action suits against the company which they (AT&T) lost, but in the end both employer and employee ended up with less. She still got her retirement they tried to take away, but pennies on the dollar even though she and thousands of others "won" in court.

Well, what to do with $41 million in debt for 1 square mile resort village? Fire even more people, raise taxes again, or both?
63Blazer is offline  
Sponsored Links
Advertisement
 
post #2 of 14 (permalink) Old 09-19-2014, 11:44 AM
 
Join Date: Feb 2009
Location: Dalton GA
Posts: 246
Re: Employer in huge financial trouble...idea?

Maybe they can open a casino.
Angra1 is online  
post #3 of 14 (permalink) Old 09-19-2014, 11:54 AM Thread Starter
 
Join Date: Jul 2012
Location: Northern California
Posts: 2,511
Re: Employer in huge financial trouble...idea?

Quote:
Originally Posted by Angra1 View Post
Maybe they can open a casino.
Many small towns in state have done this and it's really not a bad idea. We have lotto so why not this? This recession sucks.
63Blazer is offline  
post #4 of 14 (permalink) Old 09-19-2014, 01:36 PM
site founder 0% owner
 
jemsite's Avatar
 
Join Date: Nov 2000
Location: NJ - USA
Posts: 11,475
Reviews: 1
Re: Employer in huge financial trouble...idea?

63 you basically can be creative and rearrange the chairs on the titanic as those who did your job in the past did hoping for relief due to growth or some unusual revenue windfall.

Is it a recession or actually our new economy? I don't know where people think growth is coming. Wages in the USA are at 1996 level and yet costs at 2014 level.

For example, Microsoft just paid $2.5BILLION for a company that has 40 employees (Minecraft). And that was a GREAT investment for them (overseas $ spent, avoiding US taxes) but certainly not for the US job market.

Cut costs & services... yup to the bone more each year offsetting costs to other towns. Raising taxes... yup.... glen
jemsite is offline  
post #5 of 14 (permalink) Old 09-19-2014, 01:45 PM
 
Join Date: Jul 2011
Location: Saint Paul, Minnesota
Posts: 2,646
Re: Employer in huge financial trouble...idea?

bake sale
GUITARMAGEDDON is offline  
post #6 of 14 (permalink) Old 09-19-2014, 01:47 PM Thread Starter
 
Join Date: Jul 2012
Location: Northern California
Posts: 2,511
Re: Employer in huge financial trouble...idea?

Quote:
Originally Posted by jemsite View Post
63 you basically can be creative and rearrange the chairs on the titanic as those who did your job in the past did hoping for relief due to growth or some unusual revenue windfall.

Is it a recession or actually our new economy? I don't know where people think growth is coming. Wages in the USA are at 1996 level and yet costs at 2014 level.

For example, Microsoft just paid $2.5BILLION for a company that has 40 employees (Minecraft). And that was a GREAT investment for them (overseas $ spent, avoiding US taxes) but certainly not for the US job market.

Cut costs & services... yup to the bone more each year offsetting costs to other towns. Raising taxes... yup.... glen
I definitely think it's a recession. The main shopping mall is only 2/3rds full when before the recession there was a waiting list to get in. What used to be over a dozen tour buses bringing in tourists is usually just 4 or 5. Many of the store spaces outside the shopping mall are vacant and there are no longer many long term shops and restaurants still open. Saks Fifth Avenue, I Magnin, Orange Julius, Sprouse Reitz, and others have pulled up stakes and CVS declined to move into one of the biggest vacancies. All bad stuff. That being said the major cities in area, SF and San Jose/Silicon Valley, seem to be pulling out of recession nicely.

One of the performing arts centers we put up to build as city's largest project at $9 million dollars had a lot of historical building and compliance issues and it ended up costing $22 million and are only halfway paid off on that debacle. But the $11 million is no longer a debt because we sold it off, plus debts to a company who can probably make it work.

We rearranged retirement within what legalities a city can work a state capital mandate retirement plan and saved $4.2 million in 2.5 years so that's commendable.

But the debt may make us a contract worker (like me) city with just paid oversight people. City Council already works for free. Though I am just a contract worker, a couple of friends of mine are volunteer City Council members and are having their behinds sued off. So much for free public service. When the money is non-existent, in comes the lawsuits and finger pointing and out goes all common sense. It's so dysfunctional that it even got the attention of the state capital and their regulatory agencies. I hope this makes them recant the stupid big city favoring legislation for lucrative retirement plans.

For a big city where many of the best and brightest are lured by big companies like Apple and Cisco, the municipalities can't match them on salary but have to try and get who they can through great retirement plans. No, you won't get rich working for city but they can give you comfortable weekly salary and adequate retirement plan where you can retire with almost all of what you made monthly. Cities can try and offer up richer retirement plans but you aren't going to have 20-something millionaires (with little or no college education) driving Italian sports cars down Bascom Avenue because they invented a video game or can hack/code like a maniac. We aren't San Jose and don't have Jobs, Wozniak, and Ellison and the jobs and tax revenue they provide making up our local entrepreneurs. We are a small retirement community with very few people and no hope of going big on anything so we will have to tighten already tight belts more and hope city folk start taking jaunts into the countryside more often.

I am sure many live in small tourist towns who are similarly hurting.

Last edited by 63Blazer; 09-19-2014 at 02:07 PM.
63Blazer is offline  
post #7 of 14 (permalink) Old 09-19-2014, 02:31 PM
site founder 0% owner
 
jemsite's Avatar
 
Join Date: Nov 2000
Location: NJ - USA
Posts: 11,475
Reviews: 1
Re: Employer in huge financial trouble...idea?

Forecasting for 100% occupancy, etc. is a slippery slope leaving no real margin for error. We have similar scenarios all over the USA leading to absurd city/county/state tax burdens. Around here it's over commitment to various stuff by state, county, schools, etc.

I know economists won't agree - and maybe they are correct - but 80% full might be more realistic (to budget against) considering the total overbuild in the USA. How many people still shop at Sacks that can move without walkers? Hard to rely on constant renewal of some new gimmick to sell to people who are getting tapped out of $. Old people are aging out of buying useless stuff they don't need.

After a while some towns & regions fizzle/age out and while NYC or SF can withstand any economy some isolated towns just cannot, see Atlantic City here for an example as a shining example of government and private mismanagement... glen
jemsite is offline  
post #8 of 14 (permalink) Old 09-19-2014, 02:36 PM
Vendor
 
Rich's Avatar
 
Join Date: Dec 2000
Location: South Jersey
Posts: 25,529
Re: Employer in huge financial trouble...idea?

Who continues to build billion dollar casinos in a city with a steeply declining revenue from gaming?! Revel being the most idiotic build of them all.
Rich is offline  
post #9 of 14 (permalink) Old 09-19-2014, 02:51 PM
site founder 0% owner
 
jemsite's Avatar
 
Join Date: Nov 2000
Location: NJ - USA
Posts: 11,475
Reviews: 1
Re: Employer in huge financial trouble...idea?

Ha, too many would when the governor supplied $550mil in pension funding. It's hard to say no sometimes in biz unfortunately.
jemsite is offline  
post #10 of 14 (permalink) Old 09-19-2014, 02:53 PM
 
Join Date: Sep 2013
Location: Dublin
Posts: 385
Reviews: 6
Re: Employer in huge financial trouble...idea?

Glen is correct, it boils down to economies of scale. I often thought that budgets should be managed and distributed on a national or at least state level. You see some cities that can manage lavish public arts projects while others can barely afford to keep police cars running and street lights on, I can't help but feel that there's something wrong with this.

Perhaps if there was a central pool which distributed a certain percentage from the prosperous cities to the less prosperous ones. The other big issue is that budgets are seen as targets to meet and exceed, not a limit. I know of cases where local authorities have discovered 100k left in the kitty in December and spent it quickly and frivolously so that their budget is not cut by 100k the following year. There is something deeply wrong with this too.

So maybe a combination of what Glen suggested, better division of funds and a central fund where surpluses are deposited for rainy decades such as this. It would not be a bad idea to generously reward employees with bonuses in local authorities who implemented methods to reduce expenditure without affecting services or cutting staff and managed to spend less than the allocated budget.

Honestly that sounds too much like reason to me, politicians are emotional people who generally manipulate the emotions of others to gain employment, reason is just not their forte!
Laobi is offline  
post #11 of 14 (permalink) Old 10-08-2014, 11:27 PM Thread Starter
 
Join Date: Jul 2012
Location: Northern California
Posts: 2,511
Re: Employer in huge financial trouble...idea?

Of the over $40 million in debt, the hatchetmen and women cut $4.2 million in mostly salary budget (in just three years) but it was just too much when it came to human cost.

Recently the hatchet people were so controversial for the layoffs that they themselves had to be fired. Interim employees were brought in to finish their job in leadership and HR but maybe they will hire back all the people who were laid off.

We may have to start from square 1 again with original number of employees and make other cuts, including everyone's pay without letting anybody go. The consensus is that laying off is not a good idea.

There's nobody left with less than stellar work histories so there may be a better angle than cutting off employees altogether.

Like some other organizations, hours may have to be cut back to stay underbudget and still retain everybody. The tiny restaurant and retail operations all around us have gone the route of cutting back hours. Since most places here have just one cook, or one host/hostess, one day and one night busperson, there's no leeway for laying anybody off and the only rational option is cut hours and maybe pay per hour (for now). It may be a few years before small towns like us feel the bounce back that the bigger cities have started to enjoy.
63Blazer is offline  
post #12 of 14 (permalink) Old 10-09-2014, 12:59 PM
 
Join Date: Nov 2001
Location: Somerville, MA
Posts: 6,200
Re: Employer in huge financial trouble... ideas?

Quote:
Originally Posted by 63Blazer View Post
My mother had a similar situation with employer (AT&T) making so many cutbacks that it led to less benefits and major class action suits against the company which they (AT&T) lost, but in the end both employer and employee ended up with less. She still got her retirement they tried to take away, but pennies on the dollar even though she and thousands of others "won" in court.

Well, what to do with $41 million in debt for 1 square mile resort village? Fire even more people, raise taxes again, or both?
Ok, as both someone with a strong interest in economics and in particular economic/fiscal policy, and as an employee of a municipal bond manager (where pension risk is rightfully so getting a tremendous amount of attention), I feel like there's a lot I can say here.

First, let's put that into perspective - $41 million seems like (and let's be honest, is) a tremendous amount of money. It also comes out to $25,625 a head, for 1,600 people, which isn't anything to shake a stick at, but at the same time is more of a "real number" than $41mm. It's also not really an insanely high per-capita public sector pension liability.

Now, "debt" is actually a very generic term. What are we talking about here, an actuarily-estimated pension shortfall? Or just outstanding city bonds? I started typing a much longer, more detailed response but in the interest of brevity let's just say that it's unusual for a city to issue bonds that AREN'T backed by a dedicated stream of revenue related to the project for which the bonds were issued. A transportation bond is usually backed by tolls or a gas tax or something, a water and sewer bond is backed by contractually-specified water payments, etc. So, while in our personal finances "debt" is considered a bad thing, in corporate or municipal finance it's usually a way of moving revenue recognition forward in time to provide financing for a project. This is why Apple is an excellent, well-run, and well-respected company, and the fact they're "in debt" to the tune of about $31 billion dollars doesn't scare anyone.

So, that's the good - debt isn't always a bad thing.

The bad is that there's a reason that corporations have broadly abandoned defined-benefit pensions; they leave the corporation bearing all of the investment (the chance the markets may lose money) and longevity (the chance a retiree may live longer than expected) risks. The problem here is these are all risks of things that will happen a LONG time in the future. The private sector has almost entirely moved from defined-benefit plans ("pensions") to defined-contribution plans (401ks and their like) where what an employee saves in their lifetime. If those savings run out, well, it's not your former employer's problem, and even in my life I've seen 401k matches fall drastically - a couple companies ago, I started with a 1-1 match up to the first 6%, which was pretty average at the time, and had it cut down to a 50-cents-on-the-dollar 6% match. My last employer previous to this one, we got a 3% match.

These plans are popular with employees because we're being told we can "take control" of our retirement planning (ignoring the fact that the vast majority of Americans don't know a thing about retirement planning, over and above the fact it's something you need to save for), and individualism plays well in America. It's popular with companies because 3% of an employee's salary a year is a current, not future, liability, and it's a lot cheaper than funding a % of final salary pension. So, we're in a situation where all of the retirement risk has been shuffled from the company to the individual.

That's a very bad thing. In principle there's nothing WRONG with it, but in practice, 1) very few Americans are saving at even CLOSE to the rate they need to in order to afford the sort of retirement income that used to come with a pension, and 2) most 401ks badly underperform the market and professionally-managed pension plans because most Americans have literally no clue how to manage their own money, and because the average 401k plan is probably going to pay higher expenses than the average pension simply because the former pretty much has to invest in mutual funds (which tend to have fairly high fees) while the later does not, and because your average, oh, IBM employee doesn't really have the analytical toolkit to make investment allocation decisons - not that he or she's not smart enough to, it's just that they have never had to learn how. The other problem is one of choice - people simply choose to contribute too little or not at all, figuring they can "make it up later."

I'm going on a little bit of a tangent here, but where I'm eventually going is this - we as a society may need to come to grips with the fact that the middle class retirement dream of working until you were 60 and then retiring and living comfortably for the rest of your life may have been an aberration and an anomaly, rather than something sustainable. Detroit and the auto industry probably did more to create that dream than anything else, and GM and Chrysler needed to be taken into government receivership because of its crippling pension obligations in an economic downturn, Ford merely succeeded in not going bankrupt, and the City of Detroit itself is currently going through bankruptcy proceedings largely because it simply can't afford to pay its future pension obligations, either. So far, the pensions are mostly intact, but one thing that hasn't gotten much media attention is that while the pensions came through mostly uscathed, the equally-large health benefit obligations were gutted for pensioners.

So, I guess what I'm saying here is we have to consider the fact that the whole paradigm may have been broken - that it isn't that city workers are "underpaid" relative to their private sector peers, but that if anything once you start looking at the future liabilities of the private sector employees vs the future liabilities of the public sector, the public sector's guaranteed pension income as it stands now is actually the much, much more generous deal, and theirs is probably going to have to come down, because stories like yours are less uncommon than you'd think - Detroit is the headline news example, but Illinois is also having some well publicized pension problems and recently New Jersey has been getting attention as well.

At the same time, it's a tough situation - cutting Detroit's pensions, when many/most of the remaining residents in a city whose population has fallen by three quarters in the last 50 years, is akin to gutting the economic base of the city. And one thing that public employees don't get is Social Security - they don't pay into it, they don't take out from it - so there's definitely a cap on how far you can cut. But, if a private company goes under, then anyone expecting a pension from them is going to come away with little to nothing, and this limits how far you can raise pension benefits. In the government, increasing benefits is a pretty cheap (today - less so 20 years down the road) way to earn support, and we simply haven't seen any major municipal bankrupties until just now. It's something that's going to need to be watched, but I think part of the discussion here needs to be too that for the majority of America, a "comfortable weekly salary and adequate retirement plan where you can retire with almost all of what you made monthly" is a complete pipe dream.

Idunno... Just thinking out loud/venting on my lunch break.
Drew is offline  
post #13 of 14 (permalink) Old 10-11-2014, 12:07 AM Thread Starter
 
Join Date: Jul 2012
Location: Northern California
Posts: 2,511
Re: Employer in huge financial trouble...idea?

^^^^^

excellent post and glad to hear from someone like you in the retirement biz

We got a little out of sorts when we started paying non-managerial beat cops $200K a year because "Sacramento" said so or advised us in that direction. It becomes really cloudy where a city's moves end and the state's decisions kick in on the everyday.

Without going political (I am of neither major party here), one leader (Dem) of our state legislature for many years helped to set up the retirement model for cities with great criticism from leaders from both parties. I don't want to go into the state and the specific politics, but after the king, I mean, State Speaker of the Legislature left, he wanted to head up the organization that took over the retirement program. Thankfully, he didn't get it but instead the savior of that program who took over got indicted on criminal charges related to the retirement programs. I guess this happens in quite a few states so that's no surprise.

I have often heard that state politics in my state is far worse than anything Washington DC can conjure up and from the issues we have had with a few governors and state legislatures, I now believe those proclamations which were often in context with the "retirement" crisis supposedly caused by the state capital.

My conservative CPA friend and and I go over many battles of right versus left on how to fix things in the state capital, but one thing we can't fathom are the $200K a year cops, building projects going 2x to 3x over budget, and the unwillingness of anybody trying to do anything about it.

How hard is it to run a city that is barely a square mile? (and why does a remodel of performing arts center (former middle school) go from $9 mil to over $20 mil, or beach restroom go from $240K to $750K, or any numbers men/women who try and solve these issues get such heat?
63Blazer is offline  
post #14 of 14 (permalink) Old 04-09-2015, 04:55 PM Thread Starter
 
Join Date: Jul 2012
Location: Northern California
Posts: 2,511
Re: Employer in huge financial trouble...idea?

Things are thawing out but there are small things to iron out. In the very small city I am in who employs a few of us, since we are a retirement community, a certain percentage of them live in the rest home I play music at. When you are old and if you survive cancer, diabetes, and heart disease, it's most likely some form of dementia that will get you but that's no surprise.

We have to obviously sign papers not to ever divulge who is there, but there are still some key city leaders/vendors there who aren't all there in the head who are either part time or full time rest home/care home residents.

In this retirement community, the few who are not senior citizens are not involved in local politics nor do they want to be.

But we have computer access in the home, so any person who feels like it, even though they may not know their children from the cookies in the panty, write into the small local paper and all heck breaks loose. Obviously weird things are said and sometimes acted upon. When there's a complaint by a citizen or business owner, in this small city it's always taken seriously and can be expensive. But it's extremely hard to say nothing about the person or people in question being stricken with dementia (like my mom right now). But the law currently allows all secrets and information to remain confidential and in our training even the court or law enforcement cannot step in (and thus the related issue about the medical information about the German Wings pilot getting out which was to always remain confidential, no matter what).

We had a situation at the hospital where one employee was very dangerous but we all had to sign saying we see or hear nothing. All patients and employees are protected, no matter what. But as it can with such a potentially dangerous person, they acted on their impulses and hurt a few people and the press kept on wondering why nobody at the hospital came forward. Well, if a hospital patient or employee, we cant' say a thing.

I sometimes wonder where something like this, and the right to privacy, trumps the public good. Personally I don't have an opinion on it but it's worth thinking about..

Some here may be scared of somebody who is in government who is "corrupt" but that pales in comparison to people who have the same power but who are suffering (secretly) from Alzheimer's or Lewy Bodies Dementia. This has all come to mean more now that my mom is showing major signs of dementia. I don't know how many people, who probably live in blended communities with people of all ages, can relate but it's a huge problem here. People in other cities laugh when they hear about the locals here getting into car accidents because they didn't see the stop sign or forgot which pedal operates the gas and which is the brakes. Sure, we don't have gang violence here in our town like some neighboring towns but our problems are not any lesser. When an oldtimer who shouldn't be behind the wheel kills a pedestrian, that death is just as horrible as the teenager who shoots down a rival teenager from another gang.

The people who are manning the wheel house of our local government may not even be "home". I don't like crooks but at least they can operate on some level of competence.

Last edited by 63Blazer; 04-09-2015 at 05:21 PM.
63Blazer is offline  
Reply

Tags
bankruptcy , financial woes

Quick Reply
Message:
Options

Register Now



In order to be able to post messages on the Jemsite forums, you must first register.
Please enter your desired user name, your email address and other required details in the form below.

User Name:
Password
Please enter a password for your user account. Note that passwords are case-sensitive.

Password:


Confirm Password:
Email Address

IMPORTANT: You will be required to activate your account so please ensure that your email address is correct.

If you do not receive your activation check your spam folder before using the CONTACT US form (at the bottom right of each page).



Email Address:
OR

Log-in










Thread Tools
Show Printable Version Show Printable Version
Email this Page Email this Page
Display Modes
Linear Mode Linear Mode



Similar Threads
Thread Thread Starter Forum Replies Last Post
Dell Financial (falls over) JJEMMER777 Off-topic / Miscellaneous 13 01-18-2008 05:14 PM
Current and dream guitar financial status?! rickcard71 Off-topic / Miscellaneous 28 12-18-2005 09:23 PM
Financial problems... King Knall Off-topic / Miscellaneous 14 10-31-2005 06:27 AM
Good idea: Cleaning your pickups. Bad idea: Using steel wool Kremlin Tech: Setup, Repairs and Mods 7 04-11-2003 10:11 AM
Brand New Finish - got an idea...need an idea. RSVampire Tech: Setup, Repairs and Mods 5 03-22-2002 10:39 AM

Posting Rules  
You may post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are On

 
For the best viewing experience please update your browser to Google Chrome