Hazleton’s Financial Problems Might Get Even Worse
Hazleton’s financial problems might get even worse. Or, possibly, stay just as bad. Mayor Lou Barletta and the city of Hazleton are asking a Federal judge to reconsider a ruling in which the city has been ordered to pay $2.4 million in legal fees incurred by plaintiffs when the city was sued over Barletta’s Illegal Immigration Relief Act. Hazleton claims that the city’s insurance provider, Scottsdale Insurance Company, should pay the money. In May, a judge ruled against Hazleton and now the city is asking, pretty please with sprinkles on top, the judge to change his mind.
According to The Standard Speaker…
“The city of Hazleton has asked a federal judge to reconsider a ruling made in favor of the city’s insurance carrier that would mean the city would be responsible for paying $2.4 million in attorney fees incurred by plaintiffs in the city’s Illegal Immigration Relief Act (IIRA).
Judge A. Richard Caputo decided in May that the city would need to pay the funds if the city loses its appeal of the IIRA in the Third Circuit Court in Philadelphia.
But Hazleton officials continue to maintain that the city’s errors and omissions insurance carrier, Scottsdale Insurance Co., Scottsdale, Ariz., should be responsible.
Caputo ruled in favor of Scottsdale on the legal fee issue. As for Scottsdale’s challenge against funding the city’s appeal, he ruled the issue was moot because the firm had represented and argued the appeal in Third Circuit Court.
In June, the city filed a motion asking Caputo to reconsider his decision, saying, in part, that the insurance form misinterpreted terms in its policy.
Scottsdale then opposed Hazleton’s request in a motion, saying that it had already presented those arguments to the court. Hazleton responded otherwise last week.”
So, unless this judge changes his mind for some reason, the city of Hazleton will be forced to pay for Lou Barletta’s stupidity. Keep in mind that the city is still fighting a completely seperate ruling in which the city has been ordered to repay almost $3 million back into the city’s pension fund after it was determined that Barletta and the city council misused the money. So, if that ruling stands and this ruling stands, the city will be forced to come up with close to $5 million. This will, without question, force Hazleton into bankruptcy. Hell, even if one of these rulings stands, the city could go belly up.
All of this is a direct consequence of Mayor Lou Barletta’s “leadership.” All of these rulings against the city are a result of Lou Barletta making really bad decisions. Now, as a result, his city is on the verge of financial ruin. Worse, Barletta is considering running for Congress. If elected, Barletta would leave Hazleton high and dry and be in a position to bring his destructive, incompetent leadership to the national level. The man has already screwed a city into the dirt and now he’s asking voters to let him try his hand at playing a Congressman. For the love of all that is sane and decent, he must not be given that chance.
Just look at the financial appocalypse that Barletta has dropped on the city of Hazleton. Barring some sort of legal miracle, the city will have to declare bankruptcy and it will take years for it to climb back out of the hole. In one of the worst economies since the Great Depression, Lou Barletta has found a way to make things even worse for the people of his city. When the economy finally starts to rebound, Hazleton will still be left lying in a gutter, paying for Lou Barletta’s disasterous leadership. Barletta is a disgrace of a mayor and should not be elected to any higher office, especially the United States Congress.
See also: Barletta Makes Mores Excuses for His Failures
-Dan Cheek
www.StopLouBarletta.com
StopLouBarletta@gmail.com
July 21st, 2009 at 1:26 pm
NO MORE FREE RIDES:
America should rigidly adopt a “points system” on immigration reform as many industrialized countries have? Only the cream at the top of the milk, should get priority to immigrate. Simply stated people with outstanding credential, who are Ph.d in scientific research, top grade engineers and highly rated professionals, will be readily sponsored for a good paying jobs, exceptional health care, a great pension on retirement, in major industries. They are not going to become bottom feeders who take advantage of federal state and county welfare benefits. They will not be illegal pregnant Mothers who intentionally steal across the border, so the good taxpayers will support her and her instant citizenship baby. They are not the 20 plus million who are going to suck America dry, because either political party patronizes the corporate parasites that have attracted cheap labor. We can never have a balanced health care program, as long as taxpayers are forced by federal mandate to give free education, health care and a host of other benefits. The border fence must be a two layer system, that goes from Brownsville Texas, to San Diego, California–with a permanent special National Guard unit.
E-Verify must be in-perpetuity, not voluntary, for everybody throughout the United States. Not employees who have just been hired, but everybody who is on the payroll. There should be a large formidable force of interior ICE inspectors who make lightening strikes on large and small business. The penalty for hiring illegal aliens should be extremely severe, as they are stealing jobs from Americans and legal residents. Confiscation of assets, heavy fines and certainly prison sentences. Without these pre-requisites, E-Verify will not be efficient enough. NUMBERSUSA for more details Without any question’s workers in industry should have be able to call ICE, and leave a message about their suspicions of illegal activity in their working location. Those illegal workers confronted by a upgraded application in the workplace, will soon shy away from any contact with employers who stipulate the use of E-Verification. Inferior enforcement for years of neglect and inefficiency whether intentional or not by previous administration, are to blame for the incessant illegal immigration that has clogged the American labors work environment. SAY NO TO ANOTHER AMNESTY! SAY NO TO ANY PATH TO CITIZENSHIP. RESCIND THE INSTANT BIRTHRIGHT LAW. RESCIND ANY KIND OF BENEFITS TO THOSE WHO CANNOT PROVE THEIR CITIZENSHIP! NO TO IRREVERSIBLE OVERPOPULATION! ERUPT YOUR ANGER IN THE EAR OF YOUR Senator and Congressman today at 202-224-3121—BEFORE IT’S TOO LATE.
July 21st, 2009 at 8:52 pm
In regards to the previous comment…I’m not sure what it has to do. With anything. Also, the “instant birthright law” really isn’t a law. It’s a clause in the Constitution. Apparently neither the author of the previous post or Lou Barletta (assuming Barletta didn’t write that last post, which he seriously might have) have actually read.
And in terms of only letting the “cream of the crop” in to the country, I think that would be a horrible idea. Unless you are a member of the Nazi Party. Keep in mind the inscription on the Statue of Liberty…”Give me your poor, your tired, your huddled masses. Yearning to breathe free.” But, hey, I guess Lady Liberty must be one of those “damn liberals”, too, right?
July 22nd, 2009 at 10:28 am
When you add a photograph or an image to something to an article that you lifted from another source, don’t add a photo that has nothing to do with it. The photo above appears to be from a NYC subway. It is not really relevant to the topic. However, given that the source of the article censors comments, the fact that you lift the article, or enough of it for readers to recognize it and remember the edition of the paper that it was published in, makes your web site useful.
As far as the debt, Hazleton can easily get out of this financial crisis by borrowing the money. This is especially true given the facts that interest rates are still at record lows and that those rates cannot stay their forever. If Hazleton borrows large sums of money now and holds on to it until interest rates rise, the impending inflation will greatly reduce the value of the money Hazleton must pay back in the future and the inevitable increase in interest rates will leave Hazleton with financial breathing room that other municipalities will be lacking.
July 22nd, 2009 at 11:22 am
“As far as the debt, Hazleton can easily get out of this financial crisis by borrowing the money.” Um, how does borrowing money (which is taking on debt) get the city out of debt? Also, your argument about Hazleton, which is already running a three-year deficit, taking on more debt and then emerging, as a result, stronger than ever is very uninformed. Taking on more debt does not get you out of debt. Read an economics textbook.
And as for the picture, it was not from the New York Times. The picture was obtained through Google Images, from the source: http://1.bp.blogspot.com/_l3fepOGyiK4/SJp5wijGLkI/AAAAAAAAATM/xqu3MrzuDKk/s400/head_in_hands.jpg. In addition, the picture appears on several other websites and is used in several different contexts. So there.
July 26th, 2009 at 9:10 pm
Dear Dan Cheek,
Not only have I read several economics text books but I have two graduate degrees from Columbia University. One of them is from the Columbia School of International and Public Affairs, where I concentrated in International Finance and Business. In addition, I have a Masters in Statistics and took a year of MBA classes in finance and many quantitative courses in finance with that second degree. The truth is, although counterintuitive, is that borrowing large sums of money at a very low interest rate can get you out of debt. But lets be clear, Hazleton is not really in debt. There is a dispute over whether or not it should have to pay fees and over whether it actually has pension obligations. That may be debt in a theoretical sense but it is not debt in a fiscal sense until a judge says it is and even then there are appeals to higher courts.
The bottom line with borrowing is that you borrow low and lend high. Interest rates are at an all time low. Therefore, now is the time to borrow, regardless of how much debt you have. When interest rates go up, it is the time to lend. For Hazleton, there is not other way to shore up the pension fund and there is certainly no other way to pay the legal fees for the immigration battle, if it has no other choice. But Bankruptcy for the city is an option to wipe the debt clean. The courts can’t in good conscious, liquidate local emergency service resources. So, if Hazleton declares bankruptcy, the money owed to both the pension and the legal fees will simply not be paid and the economy will just roll over and take it. It has no other choice.
The decision to borrow to make a new investment is and must be analyzed separate from any old investments that have already been made, even if they were flops. You must always look at the marginal revenue (read an economic book). But there is a much more important concept at play here, that is the relationship between the time value of money, interest rates and inflation. If you plan on borrowing large sums of money in life, do so before the advent of rampant inflation. If you do that, the value of the money is worth much more when you borrowed it than it will be when you pay it back. In fact, the very best thing for an undergraduate student (like yourself) if you have student loans, is the fact that the US is headed for steep inflation coming out of the current recession. This will make they money that you repay worth less when you repay it.
To keep up with inflation, the FED will eventually raise the overnight rate and also continue to manipulate the entire yield curve, as it is doing every day right now. When interest rates rise, the Present Value of any future cash flow goes down. The higher the increase in interest rates, the more the PV of a cash flow is decreased. Thus, if Hazleton borrows a very-very large sum of money now, the market price of the municipal bonds that it sells now, will go down later, when interest rates rise. Then Hazleton can buy its own bonds back for less than it sold them for (at least indirectly). But it need not even do that. All that Hazleton needs to do is hold on to the large sum of money for a few years and wait for interest rates to rise. When that happens, it can lend the money back out at a much higher rate than it borrowed at.
In addition to storing the bulk of the money in various accounts, the city could make an infusion if cash into the pension fund. The Auditor General wants Hazleton to invest 2 million into the pension but it could invest 10 million. The end result in the coming decade will be that the Hazleton pension becomes over funded to a a substantial enough magnitude to warrant future withdrawals from the fund by the city and still leave the fund in an over funded status. If you have not yet taken any finance classes, take a class about MPLA (Minimum Pension Liability Adjustments) and actuarial assumptions. A public pension may have different administrative rules but a pension fund is a pension fund is a pension fund. It is either under funded, funded or over funded.
There is one more issue that is related to the above but deserves more attention. Read a book on Monetary Theory and foreign exchange rates, as well as some B-School course readers on past government debt crises. If you do, you will learn about monetizing the debt. Listen to Ron Paul’s comments about the inevitability of the FED having to monetize the US debt. ( By the way, your do not borrow argument is very republican and Ron Paul sounding.) The FED will inevitably monetize the US debt. It has already begun to do so. The US money supply has been substantially increased and there is no real way to decrease money supply without chocking off the eventual economic recovery and the next economic boom. This will put great pressure on the FED not to act to tighten money supply. The congress may even go as far as to fire Bernanke if he tries to mop up liquidity.
The increased money supply has the effect of monetizing the debt. The FED can either print money and buy the US Treasuries or it can print money and give it to banks and the banks will buy US Treasuries. Either way, the debt is monetized. But the monetization does not only affect US Treasuries. Its a macro-economic phenomenon that affects all debt, all securities and all goods. Remember, Hazleton would borrow at a fixed rate. So even if the rates go up, Hazleton’s coupon remains the same. The inflation will drive the price of the bonds up and yield down but the higher price may not actually keep up with inflation. Regardless, the bond investors will be contented by increasing bond prices. The increasing interest rates will then drive the bond prices back down, making the bond worth less each time there is an interest increase. If rates tick back up to 10% and over 10% as we move out the curve, then those higher rates will erode the PV of Hazleton bond. The end result will be that if inflation goes up but interest rates do not go up, Hazleton will benefit from the fact that that the real value of the fixed coupons it must pay is decreasing as the years go by. If interest rates go up to curb inflation, then Hazleton benefits because the market price of its bonds will go down, allowing it to buy back its bonds in the open market for less that it sold them for (unless blocked from doing so) or it can just buy municipal bonds and Treasuries that have a much higher yield than the yield at which it borrowed the money.
The fact that Hazleton does or does not already have financial obligations is irrelevant to making future investments. Past investments are just that, in the past and are sunk costs. You don’t consider them in the analysis of future investments. If you did, I would take points off in an exam. If your professor is an economist or finance professor, he or she will do the same thing. If he or she is a political scientist, he or she may agree with your analysis. If he or she is an accountant, then he or she gets paid to look into the past. An accountant’s job is to keep track of what an organization did. A financier’s job is to invest in what an organization will do in the future. A leader’s job is to sit between those two tables and bring the plan together.
If you are a mayor you have three choices:(1) Don’t Pay the pension obligations. (2). Pay the pension obligations by cutting spending on salaries and services. (3) Pay the pension obligations by borrowing. In the current interest rate environment the third choice becomes very viable. In a high interest rate environment, it would not be equally as viable. Borrow low and lend high. Hazleton is in a unique position to do that but will no longer be in that position in the coming years so if it is to seriously consider this option, it must do so now. Borrowing at higher interest rates several years from now will make no sense.
Sincerely,
Sean M. Donahue
July 26th, 2009 at 9:14 pm
Dear Dan Cheek,
Regarding the photo, I did not state that it came from the NY Times. What I said was that it looks like photo of a lady sitting in the old wooded benches in the NYC subway. Therefore, it has little relevance to any issue in Hazleton. My suggestion is that you select images that symbolize the topic being discussed. A picture of something in Hazleton would have been more relevant or a picture of a pensioner losing his pension check or a picture of Hazleton leaders debating borrowing would be relevant. But a women in a subway terminal is not relevant to a city that has no subway.
Sincerely,
Sean M. Donahue
October 23rd, 2009 at 10:45 am
[...] See also: Hazleton’s Financial Problems Might Get Even Worse [...]
November 10th, 2009 at 12:44 pm
[...] See also: Barletta Makes More Excuses for His Failures and Hazleton’s Financial Problems Might Get Even Worse [...]
February 22nd, 2010 at 9:35 am
[...] decision after bad decision, bringing Hazleton to her knees and on the verge of bankruptcy. He wasted millions in trying to defend his mindless “Illegal Immigration Relief Act” in Federal Court. [...]