The Detroit Free Press, in an editorial yesterday, suggested that maybe, now that predominantly white cities, like Allen Park, are beginning to stagger toward financial collapse, and state takeover, our elected officials in Lansing might be willing to look at the underlying structural issues which are pushing our communities, one after the other, toward catastrophic failure. Apparently, you see, that’s the key to change – you just have to wait until white people begin to feel the pain… Here’s a clip.
…Without fundamental reforms, the problems of Allen Park and other cities are coming to a neighborhood near you — in fact, they’re probably already there.
“I think it foretells things to come,” said Paul Tait, executive director of the Southeast Michigan Council of Governments (SEMCOG). “I’m confident we’re going to see more communities in trouble, further out in the next ring (of suburbs) and even in the outlying areas.”
About 60 cities already have filed deficit-elimination plans with the state Treasury Department for budget problems in 2011, according to department spokesman Caleb Buhs.
Up to now, Allen Park has hardly fit the stereotype of a city on the brink. With a population of 28,210, the Detroit suburb’s median household income is more than $56,000 a year; its poverty rate 6.6%. The city is 93% white and 2% African American. The home ownership rate is nearly 90%.
Allen Park is home to the 80-foot roadside Uniroyal Tire and the Detroit Lions’ team headquarters. Ford Motor has several testing facilities in the city.
Despite a solid economic base, however, Allen Park shows a $4.2-million deficit for 2012-13. That’s chump change for the state or Detroit, but it’s a beefy 22% of the city’s $19-million budget for next year. More than half of that budget — $10 million — is earmarked for police and fire services.
In March, Allen Park City Council members asked state Treasurer Andy Dillon to conduct a preliminary review of city finances — the first step in a process that could lead the state to appoint an emergency manager, as it already has in Ecorse, Benton Harbor, Pontiac and Flint, or to negotiate a consent agreement like those in place in Detroit, River Rouge and Inkster. The state continues to review Allen Park’s request.
To be sure, some of Allen Park’s budget problems were brought on by a bad investment decision. In October 2009, the city sold $25.3 million in long-term, general-obligation bonds to buy 104 acres at Southfield and I-94 to create the Unity Studios & Village project. The enterprise fizzled even before Snyder eliminated the state tax credit for most movie projects last year.
This month, Allen Park voters defeated a millage proposal — with nearly 60% of voters against — that would have covered the $2.6 million a year in bond payments for the failed movie studio. The city is marketing the property and seeking additional tenants for the building.
In hindsight, it is easy to criticize the investment. But rolling the dice is tempting when property values, revenue sharing and other funding sources are drying up.
Nor can bad management account for the one-third drop in taxable values throughout southeast Michigan since 2007, or the $5 billion decline in revenue sharing Michigan municipalities have sustained over the last decade.
“That could buy some real quality of life,” said Arnold Weinfeld of the Michigan Municipal League. “Local officials could be much further down the road in creating communities that people and businesses want to live in.”
Between 2009 and 2010 alone, Allen Park’s taxable value dropped 10% — while the region’s decreased by 9.9%. Allen Park gets $7 million less in property tax revenue than it did in 2007, city officials say.
Drops in taxable values especially hurt mature cities like Allen Park, incorporated in 1957, with less space for new construction.
Allen Park officials are debating whether to put the 4-mill tax on the ballot again in November. As traditional revenue sources dry up, many Michigan municipalities have appealed directly to the voters, who have often responded with a thumbs-up, especially for millages dedicated to specific services such as police and fire.
Besides looking for more money, however, Michigan’s 1,800 municipalities must continue to merge departments and consolidate and share services, including police and fire, to increase efficiencies.
They also must re-examine the services and amenities they provide; many are overdue for outsourcing or outright elimination. Voters and their elected leaders must consider even more extreme measures, such as merging entire communities.
In the long term, however, solving Michigan’s municipal funding crisis will take more than improved efficiency, cutbacks and stop-gap millage proposals. Michigan must figure out creative and stable ways to sustain healthy cities.
The current system is untenable, leaving more and more communities without the means to provide even core services such as police and fire.
“We’ve been saying that the Michigan municipal financing system has been broken for over a decade,” Weinfeld notes.
At the core of this conundrum is the 1978 Headlee Amendment and Proposal A, which restrict property tax increases on existing development, making it impossible for municipalities to recoup enormous losses in property tax revenues in recent years.
As a start, Snyder ought to appoint a task force composed of representatives from the Department of Treasury, Michigan Municipal League, SEMCOG, Metropolitan Affairs Coalition and others to recommend ways to help sustain cities and local government services.
As Allen Park has demonstrated, it’s no longer someone else’s problem — it’s all of ours.
It’s just too bad that it wasn’t a problem of “all of ours” when cities like Pontiac and Detroit were being forced to sell their publicly owned assets, turn off their street lights, pack absurd numbers of students into their classrooms, and stop sending fire fighters when their buildings went up in flames.
[note: Our previous conversations on the Emergency Financial Manager Act can be found here… If you only have time for one, though, I’m particularly found of this one.]
111 Comments
“To be sure, some of Allen Park’s budget problems were brought on by a bad investment decision.”
Anyone see a pattern here?
“But rolling the dice is tempting when property values, revenue sharing and other funding sources are drying up.”
Municipalities should focus on essentials and never gamble with taxpayer funds. Drops in revenue should result in reduction of services, not added debt.
The 1978 Headlee Amendment and Proposal A were designed to limit the growth of local governments whose spending increased, year after year, at rates much faster than inflation. It has taken nearly 35 years, but local governments are finally being constrained to live within their budgets. The system is working.
The problem is not “all of ours”. The majority of communities didn’t gamble taxpayer dollars hoping for a windfall. The majority of communities understand that they have to pay their bills with the revenue they generate, and therefore, provide levels of service that residents can afford.
EOS: can you name some predominantly African American or working-class or poor communities in Michigan that are doing great, economically?
As we’ve discussed here before this is about people of means leaving their communities and refusing to pay taxes. This is what happens. When you stop taxing people, and you stop sharing revenue with your cities, they die. It should be obvious. Unfortunately, when it’s black people bearing the brunt of it, people think it’s got more to do with their ineptitude and criminal tendencies than it does with the system. That’s no big surprise. People are racist.
The city leaders that irresponsibly gambled tax payer funds, should be put in prison. So should the water street folk.
its mind boggling that this kind of thing is allowed to happen. Govt is not an investment firm.
unreal.
Edward,
Since you like stereotypes, I’ll continue some for you. People of means generally are more educated, and they flee cities that they know are being run terribly.
Smart people dont continue to throw money at bad decisions. black, white, yellow, orange, or green. Race doesn’t matter. If youre in a situation where people around you continue to do stupid things, it’s best to leave.
Maybe white people left Detroit because after the ’68 riots Coleman Young told them to stay on the other side of 8 mile.
Don’t tar and feather all cities and towns with a population of over 10,000 with the suggestion that they are near bankruptcy. All local governments are feeling the pinch of collapsing property values and Lansing’s rug-pulling efforts to take-back state revenue sharing and personal property tax revenue. However, only a minority are in the position that Allen Park and Ypsilanti find themselves. The large majority of local governments have managed their budgets prudently and conservatively, and so have been able to adjust to the reduced tax revenues successfully so far.
The suggestion has been made that somehow having an African-American population correlates to a greater likelihood of needing an Emergency Manager. This is ludicrous.
The real correlation can be found in where the majority of the elected officials predominantly fall on the Left to Right political spectrum.
BD,
That’s a good one. Poor communities that are doing great economically… Working class that are wealthy….
No.
Predominately African American? How about Southfield, Oak Park, Royal Oak Township. I don’t know much about these 3 communities, but I never hear it mentioned that they are struggling financially.
Busy Dying
what kind of question is that? “Can you name any poor communities in Michigan that are doing great economically?”
Can you name any poor people that are wealthy? WTF?
as far as “working class” communities that arent facing EFMs, there are thousands of them in michigan. 95% of our state is not facing an EFM or the threat of one. I’d guess 75% of those municipalities are “working class.”
you want examples, look at Macomb County. I don’t believe one city in the county is at threat of an EFM, and all of them are “working class.” And thats just an example i’m familiar with, because I have family there. you could say the same about almost any area in the state. The only cities that are at threat of an EFM, are ones that have a legacy of poor leadership and poor decisions.
the op-ed piece mark posted is the poster child for this. Allen Park is in trouble for EXACTLY the same reason Ypsi is. Bad decisions by poor leaders. Race baiting on this topic is shameful. It’s amazing to me that Mark looked for the black/white issue in that piece, and ignored the blatantly obvious bad government gamble correlation.
stop blaming white people for your bad decisions. c’mon.
The point is, no one gave a shit that we were forcing our communities to sell off their assets, and limit their potential for future success, until it started happening to affluent communities. Then, we acknowledged that perhaps there was a structural problem stemming from Headlee, and the recent changes in revenue sharing.
EOS, Designated, and Dan: you all share something in common, besides the fact that you’re fucking nitwits that bring these comment threads down: you get your political and economic talking points from mainstream media and/or God. You think ALEC’s (Snyder’s/Kasich’s/Walker’s) machinations aren’t racist and classist? You think the Koch Brothers and their minions will trickle anything but piss down on the planet? Ypsilanti’s an awesome, albeit struggling, town, and it will survive and persist via love, sweat, and imagination, not from the Vichyesque negative cheerleading from 1% parasites.
anonymous,
you really think anyone outside of Allen Park gives a shit about their budget issues? Someone from Bloomfield Hills didn’t write that op-ed.
Directly from his/her own statement, THIS is their problem:
“The common denominator is a legacy of promises — commitments to fund pensions and retiree health benefits, underwrite economic development initiatives, or forgo tax revenues”
poor decisions. bad management. end of fucking story.
Busy Dying,
I am much more liberal than most people. I just don’t tolerate and fund poor decisions. I hate the Koch brothers with a passion, I am an atheist, I watch Daily Show and MSNBC and never fucking turn on Fox News, and I am a staunch opponent to voodoo economics.
But please, continue with your labels and namecalling nonsense. It certainly is not “bringing down these comment threads.”
Rodney Nanney (designatedrepublican) –
Suggesting that your political foes are responsible for the woes of Michigan cities is an indefensible position. The problems with our cities can be directly correlated to the irresponsible, selfish, and destructive behavior of your party-mates in Lansing. It’s fine that you refuse to see that stripping cities of their resources and tools is only destructive but I for one am unwilling to let your vitriolic partisan falsities fly here or any forum. Blame Dems all you want. It only makes you look foolish.
Dan: so you’re a neolib. There are better blogs out there for you to troll. Martha Stewart Living, and maybe The New Republic. USA Today is often deep. And John Stewart’s great, if you need some laughs with your Big Mac.
Are there any Republican dominated communities that are faring poorly in these tough economic times?
Cool. I assume you only like to hear people agree with you.
Must be an interesting life you lead. Do you show up to the Wurst Bar and put name tags/labels on everyone?
And McDonald’s sounds good. I’ll stop there for lunch and maybe Kroger on my way home. And laugh at all of the hipsters paying extra at the co-op.
As usual Dan is getting off on trolling people who are smarter and savvier than him, and having his ignorance and closed mindedness exposed. Not a hobby I understand but it’s nice to see that he’s doing more and more of the work himself. Good job.
I know it’s probably unlikely, but I thought that I’d try to bring the conversation around to a productive place.
Can we agree that, while it’s true that some cities have made unwise decisions in the hopes of increasing their tax bases (like Ypsi with Water Street, and Allen Park with this film studio idea of theirs), that there are underlying issues that are making it more and more difficult for our cities to stay afloat? And, assuming we answer yes, should we explore ways to remedy those problems?
As much as people like to point out that Water Street, for instance, was a huge mistake, we’d still be in the same situation we’re in today, even if we hadn’t attempted it. In the case of Ypsi, it wasn’t mismanagement that brought us here. It was health care costs, Headlee, the housing bubble, and any number of other things. To suggest that the communities falling victim to the Emergency Manager Act are solely to blame for what is happening to them is to ignore reality.
And, in my opinion, it’s a good thing that we’re now seeing it trickle up to white, affluent communities. Maybe now we’ll see some action.
lol. Love the name calling being so prevalent on mm.com. But sorry Adam, I highly doubt someone that asks this question: “can you name some predominantly African American or working-class or poor communities in Michigan that are doing great, economically?” is smarter than me.
Again, please continue with the labels and name calling bullshit, if you can’t have a real conversation. But I’m the troll, right?
Knox,
35 years ago the municipalities in Michigan were made aware of the passage of Headlee and the need to limit the growth of budgets. Don’t you think that is sufficient time to have renegotiated union contracts to have employees pay a greater share of their health care costs or to have pursued more economical health insurers? Don’t you think that 35 years is sufficient time for retiree benefits to have transitioned to 401K plans like the majority of employees in the private sector? The current crisis has been caused by gross mismanagement. Locally elected officials kept spending and increasing their rolls and assumed that when the inevitable resulted that the State would bail them out.
By the way, I’ve never before in my entire life heard of Allen Park being described as an affluent, white community. It’s always been a “downriver” community which is definitely working class. lol
Maybe they’re right, EOS. WhyTF do I bother trying to talk sense in to these people? Label Allen Park as affluent, call anyone that disagrees a racist troll, ask which poor communities are wealthy, make governmental fiscal responsibility a racial issue? I mean, WTF is going on in these people’s worlds?
Dan,
Try not to get discouraged. There are far more lurkers than posters and those who can read and understand will see the logic in your arguments. I think many who post the stupid stuff know better as well, but are merely trying to get a hostile reaction for entertainment purposes.
“It’s amazing to me that Mark looked for the black/white issue in that piece, and ignored the blatantly obvious bad government gamble correlation.”
In my view this is all the Democrats have left, their policys are crap and the people are starting to wake up. If they want to continue to control the poor they have no other choice then to demonize conservative ideas. I for don’t care what so ever what the citys make is, if they cant take care of themselves, well someone needs to step in.
mark k, stop saying this bullshit, just fucking stop:
“…this is all the Democrats have left…”
Just as there are “25%-ers” on the right (“George Bush was a great president and you’ll have to kill me before I vote for a Muslim…”), so there are lefty 25%-ers. You are one of the most vile name-callers here and just kind of a general asshole. YOU are the reason that your own ideas will never take seed. Ponder that for a moment, you bitter little shit.
I believe that Dan (and, god help me, ever so slightly EOS) and others are actually trying to contribute something of value to the discussion – agree with what they’re saying or not. But halfwit 25%-ers like you and Busy Dying just drag the whole thing into the mud from both directions. Fuck both of you assholes for the way things are. The truth of it is that all of politics used to be more centered until spoiled momma’s-boys like you (and apparently the entirety of our state legislature and governor) decided you just knew everything because mommy always called you “special”. Sorry pal, your mom was not the sharpest pencil.
The rest of us floating around in the middle are just scratching our heads and wondering why we can’t have an adult discussion.
To those of you who would dismiss Water Street as the source of our woes: First, thanks to this article, the weight of evidence of bad management as cause is growing. It will continue. Second, even if Water Street itself isn’t the whole reason, it’s evidence enough for any thinking person that, if the city government couldn’t get that right, they probably screwed up a whole bunch of other things.
Just the other day, I was reviewing my pension… oh, that’s right. Neither I nor anybody else reading this blog has a pension. We have 401ks like mere mortals. Funny that.
Brainless I’m glad I have your attention, now how would you have me reply to a story with the title “White people, seeing Emergency Managers in their future, begin to demand change” Yet you have NO problem with that, why is that? The fact is citys and states that are headed towards financial collapse are democrat controlled. This has nothing to do with black, white, red, yellow people. This is about failed policies of the left. End of story. By the way I feel the same about you, and so will the people who you try to keep down when they finally wake up.
Mark was clearly trying to stir things up with his reference to “white people,” but it’s a valid point. Whether or not you’d call Allen Park affluent, they’re 98% white, and have an unemployment rate of just over 6%. That’s not the same as Flint, Detroit and Pontiac. The fact of the matter is that this EFM assault is creeping into more affluent, and whiter communities. And this this, finally, has people talking about the underlying issues. All of the name calling on this thread is a distraction. The facts are what they are.
Mr. X,
The “underlying issue” is clearly pointed out in the op-ed.
The city gambled with tax payer money, and now owes $2.6 million per year for it. Thats over 60% of the cities projected budget deficit.
The other 40% is similar to the rest of the state, and cuts need to be made. as pointed out in the op-ed
“They also must re-examine the services and amenities they provide; many are overdue for outsourcing or outright elimination.”
People who are claiming the logical high ground here ought to support their claims with evidence.
http://video.msnbc.msn.com/the-rachel-maddow-show/47395665#47395665
EOS,–As the article mentioned Allen Parks median income is $55000+, which is approx. 20,000 higher than Ypsilanti. Compared to Ypsi (or Detroit which has about the same median income as Ypsi), Allen Park is affluent But like Ypsi, Allen Park is totally surrounded by other municipalities. It is primarily the cities which are unable to continue to annex surrounding countryside that are in trouble. While doing a search, I came upon this link. My question is, When emergency management becomes the norm, is it still an emergency?
Emergency Management
http://www.amu.apus.edu/EmergencyMgmt
Earn an emergency management degree from an online college. Learn how
wobblie,
I don’t agree with your assessment. A household median income of $55,000 is not affluence. Annexing surrounding countryside is a necessity only if your goal is to grow municipal government. Many stable communities exist where the budget grows in proportion to inflation, as do revenues. The pressure to increase the tax base is largely due to the efforts of municipal unions. Emergency management is not the norm, nor will it be in the future. Only those communities that have neglected to balance their budgets with the expectation that state government would step in and bail them out are in danger of emergency manager appointments. And finally, I don’t understand your link to an irrelevant web site.
“The democrats did it. The democrats did it.”
Well, that’s some fuckin’ magical democrats who can do that while the republicants have controlled the legislature. The problem is the system, not the parties. But by all means, shut off your brain and point fingers because it’s so much more fun. God forbid you acknowledge your own culpability here.
You talkin to me??? I didn’t mention the “d” word.
EOS: How about Southfield, Oak Park, Royal Oak Township. I don’t know much about these 3 communities, but I never hear it mentioned that they are struggling financially.
Um. Royal Oak Twp’s median household income is a couple thousand lower than Ypsi’s, and they don’t have college students to blame it on. They’ve lost 75% of their population in the last 50 years, and they saw a 55% population drop from 2000 to 2010. You never hear that RO Twp is struggling financially because nobody ever talks about them one way or another. Take a walk or a drive through sometime, and you’ll quickly see it’s the case. They’ve raised their property tax rate 7 mills in the last two years to cover budget shortfalls.
Southfield now has an office vacancy rate higher than the City of Detroit’s, and climbing — over 30% — had a foreclosure rate more than 2x Ypsilanti’s, as of SEMCOG’s last data set, and lost 8% of their population in the last decade. They’ve also passed 5 mills worth of property tax increase in the last 2 years.
Oak Park hasn’t seen quite the population loss or property value slide — they’ve only had to raise their tax rate 3.5 mills in the past few years — but their foreclosure rate is higher still: 1 in every 29 homes. (Compare to one in every 77 for Ypsilanti City.)
So, EOS, just because you found some list of majority minority communities and picked a few you don’t know anything about doesn’t mean those communities are sitting pretty financially.
Also, none of those three cities have anything resembling a Water Street to pin the blame on — as Knox points out, it’s easy to dismiss the problem by pointing to WS, but even if the city magically sold it to developers tomorrow and it started paying its own freight, we’d still have the structural financial problems faced by every city in Michigan.
Murph,
Raising tax millages during an economic downturn does not equate with a situation requiring emergency financial managers. I’m also sure their millage rates are nowhere near that of Ypsilanti City. Every city in Michigan is not struggling to the same degree as the few who didn’t plan during the last 35 years for this foreseeable economic situation due to the Headlee amendment.
“Too white to fail!”
That’s what my tattoo says.
again
“The common denominator is a legacy of promises — commitments to fund pensions and retiree health benefits, underwrite economic development initiatives, or forgo tax revenues”
i.e., poor decision making, bad management.
Stop blaming Lansing for not bailing out cities that do not know what a budget means.
If you lose 10,000 buying bad stocks, your neighbors aren’t required to reimburse you for it. If you decide to promise to pay someone $1000/month until they die, that’s your promise, not your neighbor’s.
I always think it is funny how some people will choose to separate themselves geographically and otherwise from society’s problems and then will blame the poor people left behind for bad decisions. Puh-leez. So now we have a state system that favors richer communities and that is pretty bad but to blame left wing policies is just nuts. I wonder what happens to affluent cities with left wing policies? Are any of them facing the same kinds of budget woes? Is Ann Arbor in the same boat as Detroit?
“A household median income of $55,000 is not affluence.”
I guess you don’t know about the rich asshole teachers living it up on 60K a year.
EOS, my comment was to my bestest buddy, mark k.
kjc,
no one claimed teachers are affluent.
but 60k for individual income working 9 months of the year and having a pension and nice health care is pretty sweet. A family of 2 teachers would be considered affluent, imo. Around a 100k or more, with summers off and a pension? yeah, that family has it made. Too bad the city and school districts are crumbling, though, so they can support those unsustainable salaries.
then there are all those single parent families. making 60K it’s crazy. they might even be able send a kid to college.
as for pensions, it’s shameful for people to have something to live on in their old age that they worked for during their lives. especially if someone else doesn’t have it. they can live off their kids in their old age, if they’re lucky enough to have kids who’ll take care of them, even though their kids will have no pensions and god willing won’t make 60K when someone else doesn’t like their asshole parents.
no one knows what people’s expenses are. or what constitutes a “sweet” life (financially i presume you mean, since those are the only terms you acknowledge) or how much it costs, especially if you’re caring someone other than yourself. it’s silly to sit on the outside and make pronouncements about piddly middle class income relative to the wealth that’s out there. the union bashing is just misanthropy (and self-hate i imagine).
kjc,
my dad has a UAW pension. He retired at 55, in the first “buyout” period several years ago. Both of my grandfathers had/have UAW pensions.
It’s not self hate or jealousy. My parents couldnt live without their pension. But it’s a terrible business practice and is not sustainable.
When I retire from my job, I’ll have my 401(k) and maybe a nice watch from my employer for my work for 35-40 years. No one is promising to pay me a fixed stipend until I die. That’s how businesses stay in business.
Unions are destroying Michigan. It’s not really up for debate. As other’s here pointed out, even without Water Street fiasco, Ypsi would be in budget hell. Take a wild guess what the biggest reason for that is…
“EOS, my comment was to my bestest buddy, mark k.”
Well thanks Cupcake.
Whoa: http://bridgemi.com/2012/05/fighting-fire-better-from-manpower-to-money-2/
“East Grand Rapids has operated a joint police-fire agency since 1986. Nearby Rockford has taken the consolidation effort one step further: It now trains its public works employees to also fight fires and respond to medical emergencies.”
Innovation instead of increasing taxes. Imagine that..
Dan, I think it’s disingenuous to blame unions for the problems we’re in. They are merely a market force, inasmuch as buyers, sellers and owners (and voters) are. The problem is systemic and not the fault of any of the specific players in the game. You abolish the unions and you abolish all the benefits we all enjoy as a result of their struggle which have been enumerated many times, many of which are unassailable. Owners are assholes and, contrary to popular opinion, buyers will never stand up to them or fight for anybody’s rights; they will only fight for cheap goods. Only workers possess any power against them.
The idiot management at GM made the same stupid pension and healthcare promises to its employees that the city of Ypsilanti did. Both were run by morons. Somehow, the federal government will help GM, but not Ypsi. If anybody can figure that one out, you’re a better person than I. None of this is a union failure. The system is just horrible all around. How is it that GM gets a free ride and cities get taken over? If the Feds took over our pension liabilities, retiree healthcare and our undeveloped land, we’d be golden. This is pure folly.
As Murph has shown us, pitting cities against each other is a fool’s game. The system they planned for was torn out from under them – plain and simple – and the happy accident of Michigan’s automotive might is over – truth. They are each going to experience their own pain in the coming years. Add to that fact that NOTHING in our charters prevented particularly bad management in Ypsilanti and Allen Park. What these city officials did wasn’t criminal, but should have been. That any of these people can either defend these actions or sleep well at night is the true crime. (The 25%-ers cannot learn.) That we STILL haven’t fixed – haven’t touched, in fact – the system itself makes us all look like fools.
Now, which party caused this again?
Brainless,
That’s by far the best post in this thread.
I tend to blame unions in todays market but I certainly understand their role in the past. My #1 issue in all of this is that cities/schools/companies are being forced to pay unsustainable and unrealistic benefits.
Dan,
What does your father say when you tell him to forgo his pension for the good of the company, and the country? Or is it just teachers, fire fighters and police officers who you feel should do the right thing that stop suckling from the pension teat?
Eel,
I’ve never told my father to give up his pension, but I have on numerous times told him that it was the primary reason for the auto industry collapse.
He has agreed with me on that, but is not willing to give up his benefits. I don’t blame him in the least.
I blame the people that were too short sighted to realize the stupidity of offering it to so many people.
Same people I blame for the issues you mention.
Dan and EOS, your fetich about 401k’s is absurd. Pensions are the problem, my ass. Globalization, outsourcing and the relentless greed of the 1% are the problem. I get to watch my 401k gyrate like a hula dancer as the speculators play their casino game on wall street. Pensions require long term thinking by the mangers of the fund. 401k’s are all about how much I (as the manager) can make off the fund on a daily basis. The managers of pension funds need to be thinking in terms of 20 years, not 20 days. The one investment I have that actually pays a real interest rate (6%) is a land trust building a portfolio of investments (typically 20 year lease holds) to sale to pension funds that will provide the fund with a reliable source of income 20 years from today. That is what built America–building for the next generation. Pensions require that type of long term economic thinking. 401k’s are just another form of slash and burn economics.
wobblie
if you are adjusting your 401(k) funds on a 20 day basis, then you need some serious financial advice.
And your lack of knowledge on retirement vehicles is troubling. 401(k)s are the epitome of long term investments. You seem to equate them with day trading.
And thirdly, if you only have one profitable investment right now and its only paying 6%, you need some serious financial advice.
Good lord. If you are actually being truthful with those numbers, I don’t mean to be a dick but you’ve got to be insane. Did you put all your money in Circuit City stock?
I am no financial guru, but to me 6% is pretty good. Right now I’m losing money simply because I can’t keep up with inflation.
Besides selling heroin, what pays any more that that in this post 2007 world?
I only adjust my 401k investments on an annual basis (during the 07-08 debacle when it lost 40% of its value and vaporized the entire employer and my contribution I was more active in my attempts to keep some value in the fund). My most recent statement shows I am getting some thing approaching 3.5% (once inflation is taken in to account it works out to about 1.5% real growth). Of course if the stock market falls below 12000, I am likely to see my real earnings fall back down to what I could make in an insured bank account. State employee have been forced into 401k’s since Englers second term (about 12 years ago). Has done nothing to solve our states budget problems. Your entire solution to Ypsi’s problems have been cutting cost, of which putting people on 401k’s is your primary solution.
This kind of small thinking will never produce solutions for our communities problems. But I digress you folks could care less about community.
from the Insurance Forum
“In their fight to extend the definition of Fiduciary Duty, the DOL/EBSA has come out with some interesting statistics.
From 98-07, the average 401k return was 5.4%.
The average IRA return was 4.5%.
So lets think about this for a second.
401k participants take on all of that risk, but on average do not fair any better than a long term CD or FA holder…..
And while you can reallocate and whatnot with a 401k, the frequency of people reallocating is much less than normal brokerage/managed accounts, meaning that emotions play a lesser part in 401k returns than others.
Most people should have jumped on FA rates when you could get 6%, they would have come out a lot better, and certainly would not have lost as much sleep at night!”
This will of course help my 401k’s performance (sarcasm). Anyone hoping to retire in say the 1st. quarter of next year is likely to be screwed as more wealth gets vaporized.
U.S. Stock Futures Slide; CBO Warns of Possible Recession
http://www.bloomberg.com/news/2012-05-23/u-s-stock-futures-slide-cbo-warns-of-possible-recession.html
Allen Park eliminated Police and Fire protection at their council meeting yesterday. They are asking neighboring communities to provide free services. Couldn’t ask for better evidence showing the need for an emergency manager in that community.
wobblie,
you said ” The one investment I have that actually pays a real interest rate (6%)”
again, if that is your ONLY investment paying anywhere near 6%, you are investing unbelievably poorly.
My 401(k) has a year to date return of 10.9%, a 1-year annualized return of 9.5%, and a 3 year annualized return of 24.4%.
The smallest 10 year annualized return I have invested in is 6%, and the largest is 11%. a 6% return is decent OVERALL in the long term, but if, as you say, you only have one investment returning that, then you are not being smart with your investments.
your statement of “401k’s are all about how much I (as the manager) can make off the fund on a daily basis” demonstrates a lack of knowledge of investment vehicles. You should not be looking at market headlines and watching your 401(k) on a daily basis. And pretty much all of 401(k) investments are mutual funds managed by investment firms, not you or me.
and wobblie, you’re link about a possible euro collapses just exemplifies the problem you refuse to acknowledge.
If the rest of the world is in a recession and cutting back to make ends meet, why do union people think they should be immune to it?
They’re coming to get us, White People! I read it in a Ron Paul newsletter.
And I have evidence.
http://media.tumblr.com/tumblr_limk0oP4lG1qaj92f.gif
Dan, it is the cut backs that are causing the recession in Europe, and prolonging our depressio0n here. You can not cut your way to prosperity. And as you noted earlier 401k’s are long term investment vehicles, the fact that yours has gone up 24% tells me nothing. Tell me in stead what your 401k has done over 5 to 10 years, that is beginning to approach long term. If you had bothered to read my last post “From 98-07, the average 401k return was 5.4%.The average IRA return was 4.5%.” One of the so called selling points of 401k’s is the participants ability to reallocate investments. Prior to 07, being invested in funds that invested in emerging markets made well above average returns. The collapse in 07-08 wiped out all of that gain and some. So being able to get out of collapsing markets was a good thing. I obviously did not say what I meant very well. The money managers for the investment funds are the one’s who make most of the money. Dan, ask your self, how many people had to put off retirement in 07 and 08 because of the collapse in the value of 401k’s?
I have not even addressed the fact that the current value of our 401k’s is based in US dollars, which is worth about 75% of what it was worth 5 years ago. Having a 6% annualized return, while the dollars that your fund is valued in has depreciated by 6% vis a vis the price of oil, or other imports just means your are maintaining the value of your principle. I know my economics Dan, and would love to discuss what you are invested in so we can all get that”3 year annualized return of 24.4%.”
I can’t get a 401k.
Perhaps I should start investing in private fire fighters.
secondly,
anyone with a brain saw the 2007-2008 dow collapse as a huge investment opportunity. Personally, I doubled my 401(k) percent contribution during that time, knowing I’d be buying crap loads of stocks and funds that were way under valued due to economic uncertainty. once again, thinking long term, 20-30 years, not day to day
sure, if you wanted to retire in 2009-2011, you probably had to wait it out. But the dow collapse was actually a good thing for most small time investors. Unless you didnt know what you were doing in investing, you’ve recouped your loss from 2008, and then some.
My other post is delayed for moderation because it contains links. But wobblie, why should anyone expect a fixed paycheck every week until they die when the world is in economic turmoil and 99% of us have to deal with market forces
Who are the 1% again?
We can all play that game dan. I not only moved all of my investments, I also took a second mortgage on my house and invested it all in Apple on January 16th 2009 @ 82.33.
Sucker.
Dragon,
The bad thing is that you have 2 mortgages on a house in a city with a ridiculous tax rate. You sure you know who the sucker is?
Yes.
And, I also know who the complete bullshit artist is.
I assume you’re fond if mirrors
*of
And dragon, im not trying to get in a childish pissing.match with you. I responded to wobblies seemingly ridiculous investment complaints.
The real issue here is that a 401(k) obeys market dynamics. A pension is a fixed payment that doesn’t care what the shape of economy is. Why do people think that’s a good idea?
Come on asshole, since we are still in “economic turmoil” tell us all how to invest our money. Give us three stocks that will out perform. Where will the S&P be in 6 months, 1 year , 3 years. Put you money where your big fat mouth is.
Again the name calling. Christ.
I posted several investment links. Blame.mark. the moderation because takes some tine with links apparently.
I hope you enjoy the crude investment advice when that posts passes the mods. Im no financial wizard but I know that if you can’t beat inflation you’re not doing it right
The real issue here is that a 401(k) obeys market dynamics. A pension is a fixed payment that doesn’t care what the shape of economy is. Why do people think that’s a good idea?
They are exactly the same. Employers take a portion of an employees salary and invest it the same things a 401k would invest it in. Getting rid of pensions is only a way to reduce salaries. Where pensions fail at a rate higher that a 401k, can almost always be attributed lack proper funding by the company or looting by a “venture capitalist”.
Im no financial wizard
That’s not how I interpreted your earlier statements.
Exactly the same?
I think not. Pensions pay out a fixed amount, regardless of fund balance or economic health A 401(k) pays what was earned by the investment
So you are saying a pension fund manager, managing hundreds of thousands of employees contributions, over decades, using billions of dollars can’t be managed better than an individual 401(k)?
Im starting to think you don’t know what a pension is. There’s a reason they are called “legacy costs.” Cities/schools/corps that bought in to the union bullshit are on the hook to pay a fixed amount to all of their retirees. It doesn’t matter off the DOW drops to 100. The pensions stay the same. If the US GDP is twenty dollars the pension stays the same. It’s not a sustainable practice. Everyone else retires on the investment performance of the things they choose to invest in. If they invested in Circuit City, they got fucked. That’s how it works
I mean are you serious? Do you really not know what a 401(k)is? Its a group of.mutual funds run by the investment bankers. Its likely the UAW pension.fund managers invest in the same mutual funds that are available to 401(k)users. Jesus. You’ve got to b too young to be worrying about your retirement or im sad for you.
Where the hell did you guys get the idea that people like you and me are running mutual funds. 401(k)s funds are run by billion dollar firms
I know exactly what a pension is. It is a promise by a company to TAKE money from my paycheck every week and invest it wisely to assure that they can pay me back many years in the future. If they can’t comply with their end of the bargain they shouldn’t say they can. A contract is a contract.
dan
The real issue here is that a 401(k) obeys market dynamics. A pension is a fixed payment that doesn’t care what the shape of economy is.
Me
They are exactly the same.
Dan
Exactly the same? I think not.
.
.
.
Dan… later
Do you really not know what a 401(k)is? Its a group of.mutual funds run by the investment bankers. Its likely the UAW pension.fund managers invest in the same mutual funds that are available to 401(k)users. Jesus.
dragon,
Pensions are a lot like social security. The government takes our money and promises to provide for our future since, in their minds, we can’t be trusted to look out for our own interests. But, instead of investing the money they take, and growing the funds that will be used to pay future retirees, they put it into the general budget and spend it each year. I didn’t sign a contract. I have no choice. When it’s my turn to retire, there will be no nest egg of social security funds to draw on. There will be more living retirees than workers who pay to sustain those retirees. I won’t be able to even recapture the amount they have taken over the years. If we increase social security taxes to an amount like 75% of income, it might pay current retirees a meager amount but further compounds the crisis for the next batch of retirees. The ponzi scheme will collapse in our lifetimes.
Many school districts and municipalities have similarly unfunded pension plans that will destroy their budgets in the upcoming years. Go ahead and take your contract to court and see if you can recover your investment from an insolvent entity.
My problem with investments is that a large proportion of the most profitable sectors are things like defense, pharma and big tobacco.
One of my part time jobs offered me a 401 something. I looked at the information and wanted to puke. There’s obviously no way to live in a bubble. Our participation in the market leads to someone, somewhere getting killed or living a pretty awful life. It’s hard for me to consider retiring in good conscience knowing that my income depends on getting high school kids hooked on cigarettes or Prozac.
Fuck the numbers, we should just do away with the concept of retiring altogether. Work as long you can.
Retirement is a joke. I’ll put a bullet in my head before I sit around collecting checks brought from dividends on Raytheon and Halliburton stocks.
Back in 1950, my grandfather started working for a company that promised a lifetime pension with healthcare after 30 years. Shortly after he retired, in 1982, the company went “bankrupt.” After numerous court challenges, the “shell” of the company was sold off to a foreign owner, who, having shed all those pesky “legacy” costs, continued to operate it at a profit.
At the time, the idea that a company could renege on promised pension benefits was still relatively new, and somewhat shocking. However, as it began happening at more and more companies, it quickly became the the new “norm.”
Around the same time, the Reagan Administration’s “de-certification of the PATCO union in 1981 began to accelerate the steady erosion of private sector labor unions — including their power to fight to maintain promised pension benefits.
In my grandfather’s case — after 32 years of labor — and after all the court challenges were settled (and the stockholders and bond-holders mostly made “whole”), he ended up finding himself retired, without health insurance (yet still too young to be eligible for Medicare) and with a “pension” of exactly $38.50 a month (yet still too young for Social Security). In the end, he and my grandmother ended up doing odd jobs — in their late 50s and early 60s — to make ends meet.
Again, the shareholders and bondholders of the company he worked for enjoyed handsome profits for many decades … and the new “owner” continued to operate the company at a profit (post bankruptcy) for many years. Why was it, then, that only the workers (you know, the ones who actually PRODUCED all those profits over all those years ) were the ones who were left to hang out to dry?
Today, nobody under 50 who works in the private sector seriously believes they will ever see a pension. But what I can’t understand is why this fact is being used so blithely as an excuse to take away the pensions of public-sector workers, as well. (Disclaimer: I work in the public sector, but I do NOT have a defined-benefits pension.)
Shouldn’t we all be fighting for the rights of ALL workers (both private- and public-sector) to get the benefits that were promised to them, rather than pitting these groups against each other in a pointless “race to the bottom?”
Dragon,
If you still believe pensions and 401(k)s are “exactly the same”, then I have no reason to continue talking to you on the subject. Good god. Ive told you like 10to times what the difference is.
I’m still waiting for Dan to tell me what his 401 k made over 5-10 years, rather than the last 3 years. In fact pension funds do not invest in the same type of investment vehicles as 401k’s. Given the absolute looney toon gyrations of the stock market, most pension funds are invested in vehicles which are too rich for the individual investor. Example–Mid Ocean partners a management spin off of Deutsch Bank manages the investment portfolia of the Ontario Teachers Federation (by the way pensions are still the norm in Canada which enjoys a much more stable and prosperous economy than ours). A year ago they purchased a company which up to that point was a publicly traded company. They paid 2.5 billion for the company, and promptly took the company private–pulled it off the stock exchange so that the gamblers and speculators could not destroy the value of the company.
“anyone with a brain saw the 2007-2008 dow collapse as a huge investment opportunity” as will the next collapse, so Dan help us all out and tell us when that next collapse will be. I suspect the 01 bubble collapse was also a huge investment opportunity. The ongoing housing collapse is also a “huge” investment opportunity. Of course if you owned your house before the collapse–not so good maybe.
Dan and his ilk, love volatility. For those of us who see our homes loose 2/3rds of its value, or end up being unemployed for months–volatility is not so good. So again Dan, tell me what your 401k has done over the last 5-10 years.
I already did wobblie. Read my post. All of the funds my 401(k) is invested in have a 10 year return of 6-11%. And that includes the biggest economic collapse in almost a century
I posted links to some but they haven’t passed moderation yet apparently.
This is what the data looked like prior to the 01 collapse. Still looking for more recent data–Comparisons for Sponsors of Both Plan Types
“As in past studies, we included companies that sponsored one defined benefit plan and one 401(k) plan. By limiting our analysis to these companies, we were able to create a sample of companies similar to the samples we used in our earlier studies. This minimized the effects of company or employer characteristics on the results and allowed us to concentrate on differences in rates of return between the two retirement tools. Table 1 shows the year-by-year rate of return comparison between defined benefit and 401(k) plans for 1990 to 2002.
Table 1
Median Rates of Return for Defined Benefit and 401(k) Plans*
Year Number of sponsors Median return DB Median return401(k) Difference in median turns
2002 2085 -8.43 -12.26 3.83
2001 2239 -3.82 -7.30 3.48
2000 2058 0.00 -4.28 4.28
1999 1472 11.08 16.09 -5.01
1998 2958 12.31 14.27 -1.96
1997 2931 16.47 17.32 -0.85
1996 3034 12.88 12.69 0.19
1995 3063 19.53 17.45 2.08
1994 3181 0.00 1.60 -1.60
1993 3303 8.10 7.90 0.20
1992 2543 7.60 7.60 0.00
1991 3448 15.00 12.30 2.70
1990 3598 5.70 5.80 -0.10
Average 2763 7.42 6.86 0.56
http://www.watsonwyatt.com/us/pubs/insider/showarticle.asp?ArticleID=13811
In the much more stable and growth orientated 90’s 401k’s earned an average of 6.86%. In 2000 and 2001 when the dot com busted they lost nearly 20% of there value vs. 12.5% (approx) for defined benefit plans.
Fidelity Contra Fund K
One year 6.52
10 year 8.19
Dan,
“The smallest 10 year annualized return I have invested in is 6%,”, is this the actual results you have from your 401k portfolio for the last ten years? I think not. I’m invested in a number of instruments which “promise” returns above 6%, but as the footnotes indicate, “actual performance may vary.” I don’t care what “I have invested in”, I am interested in the results of that investment.
wobblie, yes, of course it is realized results, not promised.
I’ve tried to post example 3 times now. Maybe this time it will go through.
MERDX, SGOVX, PHIYX, RYPNX
i could post more.
EOS, I like that 10 year average–from the bottom of the 01 dot com bubble to the peak of the 11 rebound. Since things have been flat this year, that 10 year average next year, or last year will look substantially different. So retire now—since next year, or next week, who knows what the value will be.
wobblie,
Should we be fighting for the rights of municipal workers to receive the generous pensions that elected officials have awarded them over the years? We’re the saps that have to pay for those promises. We’re the saps that will have to forgo police, fire, and recreation programs to afford those luxurious benefits. We’re the saps who will have to work into our 70’s just to be able to afford property taxes and medical benefits.
“So retire now—since next year, or next week, who knows what the value will be”
again, retirement investments are long term, not “next week.”
stop looking at the DJIA daily, unless you are day trading.
wobblie,
YTD for Contrafund K is over 9%.
“So retire now—since next year, or next week, who knows what the value will be.”
That’s the nature of investments.
Dan, I’m looking at MERDX, and they seem to operate 2 separate funds. Neither of which seem to be performing as you state
1 year 3 years 5 years 10 years
Alpha* -0.38 2.76 5.87 4.07
Beta* 1.20 1.04 1.00 1.02
Their best fund over 10 years has a 4.07 % return—not the 6% you think
wobblie,
google MERDX and click the morningstar link.
10 yr = 8.26% return.
alpha is not the rate of return, it’s a risk metric. it is a comparison to a benchmark.
thanks
“I suspect the 01 bubble collapse was also a huge investment opportunity. The ongoing housing collapse is also a “huge” investment opportunity. Of course if you owned your house before the collapse–not so good maybe.”
of course. smart people take advantage of opportunities. The banks and Wall Street screwed 90% of us with their criminal gambling. You can either sit around and cry about it, or try to take advantage of the situation.
If your home is worth 1/3 of what you bought it for, then it’s likely your neighbors home is equally depreciated. Find the funds to buy your neighbor’s house and rent it out for 3 times what the mortgage payment will be. You probably think that is evil thinking, but it’s what smart people think about. And gentrification will help your neighborhood revive.
Dan, thanks for the investment ideas–but seriously, banks are not going to lend for purchases on Summit St. My neighbors houses are Kirtchers homes,(all of them on the market simultaneously at insanely inflated prices) though I understand the Nanny’s have been foreclosed on, but will probably not be on the market for years. My home is still worth more than what I paid (30 years in the same place). South Asians (using family members in the US) are buying up down river homes for 15 to 20 thousand, putting 4 to 6 thousand into them, renting them out for 900 a month (we have a rapidly growing Pakistani population–wonder why?) . Their 3 year strategy gets you your principle back, and an above average return. The important question becomes, will you have a tenant who pays rent for 3 years, and does not trash out the place when you are forced to evict. Canadians are also doing the same—these are of course people who do not need banks to finance their purchases. I suppose I could liquidate my 401k, but I suspect the tax penalties will greatly offset any profit I might make as a landlord. I could of course make a speculative bet that the housing market will be re-inflated, but given the huge shadow inventory in REO properties, I think we are going to bounce along the bottom for decades, ala Japan.
but thats the whole point wobblie. someone is taking a risk investing their money in your neighborhood homes, hoping that they can turn a profit. No one is guaranteeing them that they will be paid $900/month for the duration of their mortgage.
the parallel to a 401(k) vs a pension is too obvious to point out.
(except to dragon)
Dan, we agree–it is all about risk. Most of us want to minimize the risks we take in life. That was the whole purpose behind such things as pensions, insurance and god forbid–hedge funds.. Collectivizing the risk so as to minimize individual harm in the event of catastrophe. Pensions would never get you your 11% or even your 6% return. Most of us are willing to accept less with less risk. Collectively we place a floor under pensions (PGTC-which insures pensions so you will get at least 50% of the “defined benefit” in the event of pension failure). It is the American Way to help one another and pensions were a part of the social contract till the 80’s. The destruction of that social contract in favor of high rewards for the highest risk takers created what you accurately called, “. smart people take advantage of opportunities. The banks and Wall Street screwed 90% of us with their criminal gambling”, though few of the criminals have been held to account—why do you suppose.
oh, i completely agree that the financial system is corrupt as all hell, and sick to my stomach the ones that created this mess not only didn’t get thrown in prison, but got bailed out and were/are paid millions of dollars. The financial/political system is a fraud.
But so are unions. I am willing to invest in more volatile funds and stocks, because I am younger and can afford to make some wrong decisions without it killing my future. But I shouldnt have the luxury of not having to obey what the market produces. If I forecast my 401(k) withdrawals to be $5000/month in 10 years, that doesnt mean I am guaranteed that. As we’ve seen obviously, sometimes shit hits the fan, and everyone gets a kick in the ass and has to deal with some loss. Like you mentioned, some people had to put off retirement for a while because their 401(k) lost 30-40% of it’s value. That’s real life. It sucks, but it’s real.
But it’s not real in union-land. It doesnt matter if schools close down or cities get appointed an emergency manager. There is still a promised pension that doesnt reflect real economic conditions.
Speaking of Emergency Managers, a bunch of folks are caravanning out to Benton Harbor tomorrow to protest the PGA tour, which is taking place at a golf course built on land that was stolen [by Whirlpool Corp] from the citizens of Benton Harbor. Hope to see some of you there!
And what counter power do you look too to rein in the corrupt as hell financial/political system? As we have eviscerated unions, corruption in both our public and private spheres has grown. As the financial elites no longer have to worry about organized labor, they can now, thanks to Citizens United, out right purchase our elections. We are just about back to where we were before the great depression. Volatility will become the norm. Just as an example, MERDX, which pays you a very robust 8.2%, I see spends 25% of its fund in currency speculation. In other words they are not investing (at least 25% of the fund) on anything productive. Rather it is based on the high volatility of currency markets. Hardly some thing that I would want my daughters retirement to be based upon. The two pension fund purchases I’ve mentioned in our discussion are real assets, and that is because the managers of the pensions have long term fiduciary responsibilities. Creates a totally different type of investment strategy. You go ahead and be a rugged individualist, for me I’m sticking with the union. Thanks for the discussion.
like i said wobblie, us youngun’s can take the risks required to invest in market volatility. Thats why we get a higher rate of return. And again, some people choose to sit around and complain about their environment, others look at their environment, and look for opportunities.
you can invest all you want in savings bonds and public unions. I invest in things that turn a high profit margin. BTW, you didnt mention that the 3rd largest holding in two of my other funds (which returned 8 and 11% over the last 10 years) was Ford Motor Company. You also didnt mention that MERDX’s largest holding is a wireless communication company, or that it’s 2nd largest holding is Valspar (they of the greedy big paint lobby), or that it’s 3rd largest holding is a flooring company. You also neglected to mention that MERDX’s 4th largest holding is another industrial paint company employing nearly 10,000 people, and you also forgot to mention that MERDX’s 5th largest holding is those big bad guys at Advance Auto Parts. They employ over 50,000 people, FYI.
I think i’ve made my point, but if you want to keep going, feel free. the top 10 rounds out with such assholes as Family Dollar, PetSmart, and Matell.
No comment from you about currency speculation. I didn’t bother to look at your other funds, so of course I had no comments. Are they also engaged in various speculative ventures as well? No comment from you about how you intend your dollars to help correct the corrupt political financial system that you clearly recognize. You can make as much money as you want Dan, dosn’t matter to me. The question is what do you do with your money. While you are investing in market volatility , you contribute to the uncertainty of others retirement. Since it it clear from all of your comments–it is mainly about you making money, we have pretty much reached the end of things to talk about. For my self I want to help build an economy which works for all Americans, not just the privileged or the smart.