On October 23 of 2008, this blog had a post titled, "A few words from our local station", that referenced an op-ed column in the Philadelphia Inquirer by Jon Hammer, former Exec. Asst. to Mayor Heydt and current Bethlehem Township Manager. That post garnered 38 comments including several that defended the city's finances by Councilman Michael Donovan.Hammer was predicting impending financial doom for most cities and municipalities: Calling the coming situation a "perfect storm" of decreased services and increased taxes, he said, "If your local government is telling you something different, it's not true".
Welcome to the tornado: Declining taxes, fees and revenues, pension funds that have lost half their value, disappearing jobs, and homes that are worth 20% less than 2 years ago.
As if everyone isn't already stressed enough about the future, a headline in Sunday's Morning Call warned, "City pension funds may cost taxpayers". But the best part is...it won't cost us anything until 2010. That would be the year AFTER the mayoral election in 2009; a fact not lost on Mayor Pawlowski who, showing an ability to ignore the facts worthy of Illinois Governor Blagojvich, stated "No one knows which way the market is going".
In a public display of independence, City Controller, Bill Hoffman, has been sounding the alarm for several months. His frustration obvious, he said, it would require a "phenomenal world stock market rally" for Allentown to not have to compensate for a $4 million shortfall every year for the NEXT TWO DECADES.
Batten down the hatches folks, this storm is just beginning. The pension shortfall warnings would be dire enough for any city, but in Allentown they are more than enough to sink the ship. You see, the ship's been taking on water for quite some time. Kind of like the Titanic...the wealthy passengers don't know there's anything wrong because the captain and the crew keep telling them the ship is unsinkable. Meanwhile on the lower decks, the water is rising and people are drowning.
The combination of the city and ASD tax bill that is going to come due for the citizens of Allentown in the next few years is, I predict, going to be more than many of its citizens can handle. Even the wealthy may head for the life boats.
I have no idea whether Mayor Pawlowski is going to have to explain himself out on the campaign trail this year, but I hope so. There are a lot of people who are not going to lulled into complacency by another Power Point presentation. He certainly did a masterful tap dance last time out. I can still see him sitting across the lunch table from me earnestly looking in my eyes, promising he would conduct a full audit of the city's finances and make the information public. He won my vote that day. I won't make the same mistake again.
And speaking of mistakes, here's one I didn't make. The last paragraph of the October 23 post reads like this: As one of the lone voices in the wilderness, who has been saying for two years that the city of Allentown's finances is a game of smoke and mirrors, I shudder to think of what the financial future is going to look like for the city's taxpayers when the full impact of this financial crisis comes home to roost.
Maybe when they do come home to roost, we can teach those chickens to swim.
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27 comments:
Jon Hammer's Inky op-ed was quite powerful.
Yes, Bernie, it was...
And unfortunately, it was also very accurate.
Jon is an extremely bright young guy who I hope will run for mayor of Allentown some day.
Why do people who have seen their 401 K's shrink have to prop up those of Public employees?
That's where I see an inequity of "Haves" and "Have nots"
My company 401 K took a hit, they aren't making it up. It's my problem.
I know I'm going to hear all about "promises", but I want to talk about reality.
How any politician of any party can talk about shared sacrifices while guaranteeing income for one constituency at the expense of another is blatant hypocrisy.
Don't get me wrong, I support the principles of unions, but I don't support money grabs.
Someone needs to point out to public employees that they should be happy they have jobs. There are many people who don't, and the government (especially Pennsylvania State Government)compensation system is far too generous, much more than you would find in the private sector.
The financial burdens need to be shared equally. under the present system it isn't.
Chris, the benefits of state employees is more generous than the private sector but the wages earned are not. I encourage you to actually look into those number and get some stats. Such broad strokes are bad.
Pam, who are the alternatives. I'm sorry, but tony philips is horrible. nobody has laid out a viable vision for the city that recongizes reality and the extremely tough choices that have to be made. We can't cut taxes to get out of this. We can't raise taxes to get out of this. Cutting back staff leads to decrease in services. I hear rhetoric coming from both partisan camps. "There are 40 new managers at the city level" yet nobody has proved a shred of evidence (my guess is that 40 people were hired to replace people who left). From the other side I hear tails of how the city has improved.
Is there anybody willing to run that has a shred of reality and perspective or are we stuck with Pawlowski vs Tony?
sorry, benefits are, not benefits is. english teachers recoil.
The frustrating part is that mayor's throughout the country are sounding the alarm bells. Nutter in Philly, Bloomberg in NY,
everywhere. Except, of course, our mayor.
Just keep repeating the mantra: there is no crime problem, and there is no finacial crisis in Allentown.
The Mayor says....'No one knows which way the market is going'.
True statement, but he doesn't say where the market has already been.
Most defined benefit pension plans
figure on a 7 to 8 % return per annum. If you lose 30 to 40 % of your fund balance in one year, actuarily, Hoffman is dead on correct.
Hi Pam,
I am not optimistic for the financial future of Allentown. I think our local, and the national, economy is going to be stagnant for quite awhile. Hopefully Mr. Obama can get thigs started on the right course for a relatively quick and smooth recovery.
I do feel obligated to make a correction to your housing numbers. In the past 2 years the median sales price of a home in Lehigh and Northampton counties is down about 12%, and the average sales price is down 7%. Since home prices in the Valley did not skyrocket as in other parts of the country, we should not see the precipitous declines that those areas are experiencing.
There are some in the Real Estate business that believe our market will pick up steam this spring and return to a steady market of about 2% to 3% annual appreciation. I hope they are correct.
Chris,
You make excellent points: Employees in the private sector have taken tremendous hits while those in the public sector are going to be "bailed out".
It's not that police officers, teachers, etc., don't deserve to have good retirement packages...they certainly do, but not at the expense of everyone else.
We should all have to share the burden of this economy.
Anon 7:22,
I initially planned to stay mum on the mayor's race, but I'm so frustrated as to make that plan untenable.
I'm afraid we are stuck with Pawlowski vs. Phillips.
It will suffice to say that this will be the first election since I've been voting that I will deliberately not vote for either candidate. It's a painful decision to not have one's vote counted, but I cannot in good conscience support either one.
You make excellent points about not being able to cut or tax our way out of this situation. The reality is and has been that the city is bankrupt; it's been living on borrowed money.
Anon 7:59,
I know, it would be funny if it weren't so serious.
Even in the face of the City Controller sounding the alarm, the mayor is still singing "We're off to see the wizard" as he skips down the yellow brick road.
What's even more amazing is how no one except the blogosphere is calling him on it.
Although, I was very pleased to see that well researched and written piece by Jarrett Renshaw in Sunday's paper.
I'm hoping being out on the campaign trail will make the mayor more "forthcoming".
Anon 8:29,
No one with a pension plan or any investment in the equities markets are going to recover for a long time.
For those of us on the leading edge of the Baby Boom generation, we're in deep doo-doo.
Most of us have worked hard all our lives, only to see 50% of it disappear with no time to rebuild.
The full impact of this economy won't really hit home for another 10 years. Then it's going to be very ugly.
Bob,
Thanks for weighing in from your local perspective.
The 20% that I used is an overall number for the industry. Although as with all things real estate, the percentage drop that people see in their housing value, very much depends on their location.
As for the spring rebound/3% annual appreciation scenario, I think that is very optimistic, but we can always "hope".
I'm glad I don't live in Allentown. A choice between Ed and Tony is an election between dumb and dumber. What are the R's thinking recruiting Tony Phillips? have you heard this guy talk?
He has about as much intelligence and grasp of the issues as my cat. "Meow, the mayor is bad, Meow!"
That he is Not Ed Pawlowski is nowhere near enough to win votes.
He has to have an intelligent, comprehensive plan, and so far all I've seen is a plan to promote himself. If I lived in Allentown I would write in a vote, but I don't so I will pray for you.
Tom,
The Republican Party in Allentown finds itself in a deep hole when it comes to registrations...the Dems have such an edge as to make it almost impossible for a Republican to win.
Therefore, the R's who would make good candidates aren't willing to spend the time and the money just to bang their heads against a brick wall.
I think it is likely that we will not see another Republican elected in Allentown for some time.
"Hopefully Mr. Obama can get thigs started on the right course for a relatively quick and smooth recovery."
Bob -
Mr. Obama is promising more of exactly what got us into this mess.
The last thing we need is more government spending, more redistribution of wealth or more bailouts. If government spending were the answer, we wouldn't be in this mess - we're already spending at record levels (at the federal, state, and local levels).
We just tried this a few months ago and it didn't work. And it was passed with the same need for urgency that is now being claimed as necessary for the next round.
I liken this to a train speeding toward a missing section of track on a bridge, high over a deep ravine. Instead of hitting the brakes, the Engineer-Elect wants to increase the speed of the train.
In the movies the train might make the jump, in reality you (and your children) end up in a heap at the bottom.
Greetings:
So how do I begin? First, I'm sure that whatever I say here will encourage those who agree or disagree with me. That is what makes politics so much fun.
Second, the pension fund has declined in value, and I agree with Mr. Hoffman that the implications are serious. Pension accounting rules do allow for methods to spread the unrealized losses that help limit the amount of contribution that must be made annually. However, right now the smoothing process is limited. There would have to be a significant change to minimize the damage. (We face this issue going forward. We cannot wish it away. This is what good management is all about -- dealing with reality.)
Third, I will note that I did question the revenue projections of the administration. I worry about 2010. I worry about the water and sewer funds. I worry about the ability to attract investment. I worry about keeping Allentown safe. I worry about encouraging residents to stay. I worry about mitigating the poverty and racial tensions that exist. I do know that other cities have faced similar problems. The challenge is for council to begin looking at what has worked elsewhere and be creative. I believe that we have missed opportunities because we tend to not learn from others.
Fourth, even with those worries, I did not pursue this position because I felt they were insurmountable. I do believe that cities are very, very difficult to manage. You are talking about a 108,000 heterogeneous population. I suppose some will wish for a homogeneous population (that is why some run to gated communities), but the reality is that we are heterogeneous. Get use to it. The true challenge is managing within that situation. I welcome the challenge and believe it can be accomplished.
Finally, I might be the only person in this region who believes that Allentown is a gem. Of course, I recognize that it has blemishes, and I do not discount them. Nevertheless, I will not give up in watching the finances, understanding its urban sociology, expecting solid management practices, and calling for an understandingg group of leaders who know that most peole are good, even if they are poor.
Best regards, and Happy New Year,
Michael Donovan
ps...for those who call me Mr. Kumbaya (did I spell tha correctly?) This is who I am. You may not like it, but it is me. I'm a quant guy who respects the reality of sociological differences.
While I did post this prior on "molovinsky on allentown", I will repeat it here also
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How did we in this country start down slippery slope?
For years the only retirement anyone could receive Social Security. Pensions were up and above that. Shouldn't they still be a private choice? Pensions should not be borne by either government nor business. We started down this road and now it's time to backup and dig ourselves out by stopping it, unpleasant as that may be. It simply doesn't work and we can no longer afford to continue this mistake!
Instead of divvying up public monies, if anything, we should focus on SS that everyone benefited from in order to strength it [if that's the road people still favor]. As far as anything beyond that. No matter whether taxpayers or employees like it or not.. the system's crumbling beneath us at this very moment. If someone needs more then SS can provide, that should be the individual's call.
That's what I call a compromise [bipartisan ideals] between capitalism and social needs.
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May I further add.. we have two choices. Make the changes through organized sacrifice and compromise or be forced through city insolvency.
DITTOS on my 401k.. 50% zippo/gone!
Anon 2:56,
In principle, I agree that the bailouts are wrong-headed, but for the life of me, I can't see how the alternative leads to anything but massive unemployment and possible anarchy.
We are not, as a people, who we were in 1930...today's citizens will not stand quietly in soup lines or pack up their belongings and move on.
This is a disastrous choice for the future of the country.
Michael,
I'd like to publicly offer my congratulations on your appointment to VP of City Council. You certainly have your work cut out for you.
As for being one of the few that thinks Allentown is a gem, I will take exception to that: There are many of us who feel it's a gem, which is why there is such a level of frustration and anger at the current conditions.
This financial crisis has moved beyond sociological analysis and is now threatening the very future viability of the city.
There are no easy answers, but your promise of vigilance is reassuring. Best of luck...
pam, i suppose if i was diplomatic, which i'm not, i would let this alone, but; the reason glenn reposted his comment here, was that i posted essentially the same blog two days earlier, without all the horn blowing. most objective readers of other blogs and city news would have to credit joe hilliard for putting up red flags about allentown's finances, not you. finally, you did make one astounding revelation, that you voted for pawlowski!!! now that would be something original for you to elaborate upon.
MM, joe hilliard has declared everything in gov't bankrupt at one point or another, even before it was true.
Even dead clocks are correct twice a day.
Dear Pam;
You are right to note that my comment was poorly written and implied meaning that I truly did not intend. I apologize and glad that you drew attention to the topic.
Sometimes I do feel I may be one of the few who, like you, look to move forward and stay away from blame. Events and trajectories occur, often well beyond our control. The trick is what we do with what we have.
I look forward to working with you on the critical issues that face us.
Best regards,
Michael
Allentown does need fresh young experienced "blood" as Mayor. Jon Hammer is the only fellow in Allentown that is experienced and able to begin the work to save the train wreck known as Allentown. As a life long resident of Allentown, Jon knows where the City was and knows what needs to be done to fix it.
anon 8;54, if jon hammer is preparing to announce his candidacy for mayor, your comment is appropriate as a supporter; otherwise, it is rather absurd to claim he is the only qualified republican
i,too, congratulate mr. donovan on his election to council vp.
i trust the extra responsibilities will deflect time and energy away from some of his more silly politically correct fantasies and towards the hard, pragmatic work of hammering out a working majority on many of our most important issues.
i fully and enthusiastically support his efforts . . . at least until the time he would open a TWITTER account. there are some viewpoints that don't really need to be actualized on a moment to moment basis throughout the day.
Dear anon 11:47pm
I will never have a TWITTER account. And, I find myself not really into Facebook reporting.
Thank you for the congratulations. I will continue believing in the potential of all, even i that means being poitically correct.
Best regards,
Michael
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