Lobbying, Finger Pointing, and Public Safety

By Ian Aikens | November 22, 2019

A recent letter to the editor in a local paper sparked my interest.  It concerned HB664, which would have mandated that “No insurance company, agent, or adjuster shall knowingly fail to pay a claim to the claimant or repairer (my emphasis) to the extent the claimant’s vehicle is repaired in conformance with applicable manufacturer’s procedures.”  The writer of the letter complained bitterly about the governor’s veto of this particular bill because it undercut support for “your local auto body shop.”  In other words, it is the job of government to “help” businesses and make sure they “survive.”

No, not really.  The last time I checked the federal and state constitutions, there was nothing in there about helping businesses and guaranteeing their survival.  I don’t always agree with the governor’s decisions, but in this case, he was right in butting out of this issue.  Forcing insurance companies to pay for steps in the repairing process that they deem unnecessary is an intrusion and would only increase insurance costs to consumers.  So, who cares if consumers pay more for car insurance?

Certainly not the hordes of repair shop owners and employees and related repair shop associations that made it a point to lobby in Concord earlier this year in support of the bill. In hours of testimony before legislators, they complained in earnest that they were unfairly getting stuck paying for repairs that were necessary for safety that the insurance companies wouldn’t pay. In other words, greedy BIG INSURANCE was squeezing out little repair shops and not reimbursing them for important repair-related steps that manufacturers deemed necessary for safety. Thus, this David vs. Goliath battle waged at the State House all centers on consumer safety.

Or does it? Let’s look at the big legal case cited the most as the basis for the necessity of HB664. It is Seebachan v. John Eagle Collision Center and came out of Texas. In this tragic car crash, a couple was trapped in their 2010 Honda Fit after being hit by another car, and they suffered severe injuries because the roof collapsed. The roof had been repaired earlier from damage due to hail, and the manufacturer’s procedures spelled out that the roof was supposed to be welded back together, but John Eagle Collision Center used adhesive bonding instead. In sworn testimony in court, a John Eagle Collision Center manager implied that it was due to pressure from the insurance company that corners were cut.  In other words, finger pointing.

A good ambulance-chasing lawyer will never waste a good opportunity to go after BIG _______ (fill in the blank: BUSINESS, CORPORATIONS, TECH, OIL, TOBACCO, PHARMA, INSURANCE, SODA, etc.), so after the Seebachan’s won their $31.5 million lawsuit against John Eagle Collision Center, their lawyer wasted no time in filing suit against State Farm on behalf of the plaintiffs. Had there been any merit to John Eagle Collision Center’s allegations against such big pockets, you would have heard about it. As it turned out though, the lawsuit was withdrawn, and both sides agreed to pay their own legal costs. So, in fact the big case cited as “proof” that “There ought to be a law” was an instance where a repair shop that had been I-CAR certified in proper repairs failed miserably in its obligation to its customer (the Seebachan’s). Ironically, it was these same businesses (repair shops) lobbying against BIG INSURANCE that were nevertheless lobbying now for BIG GOVERNMENT. But I guess it’s different when the government will help your business.

The first question that comes to mind is why any insurance company would take a chance on being responsible for sending unsafe cars back on the road when it could be held liable for any damages, deaths, or injuries that might occur. Of course, as the narrative goes, BIG INSURANCE is only out for BIG PROFITS, but where would the profits be if your company has to pay out millions in claims? This doesn’t make sound business sense. In fact, cost cutting to the point of sacrificing safety would make poor economic sense precisely because it would lead to BIG EXPENSES, not profits.

But let’s suppose for argument’s sake that an insurance company behaves foolishly and refuses to pay for repairs the manufacturer recommends that are safety-related. What can and should be done? The bill’s proponents have one simple solution: mandate the repair and make the insurance company pay for it, whether it likes it or not. A better solution of how the free market would (and does) correct the situation actually came from one of the comments I read from a repair shop employee who was very critical of insurance companies. She remarked that when her repair shop informed the car’s owner that their insurance company refused to pay for repairs the shop felt were necessary, the consumer took issue with their insurance company and sometimes changed insurance companies after the incident. Thus, unscrupulous and non-profit minded insurance companies would lose business, and if they do this often enough to their customers, they’d soon run out of customers and go out of business.

This clarifies the proper relationship between the three parties. The consumer pays a premium to his/her insurance company to restore their car back to its former state after an accident, and the insurance company fulfills its obligations by paying for repairs following an accident. The contract is between the consumer and his/her insurance company. The only proper role for the repair shop is to follow generally accepted repair standards and repair the car—not to race to the State House to rally for more laws on the books, which by the way would absolutely guarantee more revenue for repair shops. If the insurance company is unwilling to pay for repairs the shop deems necessary for safety, it should simply refuse to do the job—or at the very least inform the consumer what repairs it recommends and then let the consumer decide how to proceed. As the lady from the repair shop who complained bitterly about the insurance companies noted, consumers when informed are not shy about taking matters in their own hands and don’t need BIG GOVERNMENT to protect them like children.

By the way, a footnote to the vetoed bill says, “The (Insurance) Department is unable to predict the volume of additional queries and complaints, but believes it could be large enough to require an additional staff position.” So, between the vagueness of some of the language in the bill and the eagerness of repair shops to secure as many repairs as possible, that’s a virtual guarantee of yet another useless government bureaucrat with which taxpayers would be forever burdened.

I also checked how Milton’s reps voted on this bill. Sadly, Senator Bradley was a co-sponsor of the bill, but fortunately Abigail Rooney and Peter Hayward voted against it. The next legislative session is just around the corner, and you can be sure we haven’t heard the last of this bill. Pressuring politicians to pass a mandate and guarantee more business in the name of “public safety” never goes of style.

References:

Court Listener. (2018, October 3). In the United States District Court for the Eastern District of Texas Sherman Division: Seebachan v. State Farm. Retrieved from https://www.courtlistener.com/recap/gov.uscourts.txed.178606/gov.uscourts.txed.178606.16.0.pdf

Legiscan. (2019, September 18). NH HB 664. Retrieved from  legiscan.com/NH/bill/HB664/2019

Manchester Union Leader. (2019, August 30). Your Turn, NH – John Elias:  Hijacking consumer protection. Retrieved from https://www.unionleader.com/opinion/columnists/your-turn-nh—john-elias-hijacking-consumer-protection/article_e8580f94-fb5e-5039-8e63-b3f43ead0393.html

NH Governor. (2019, August 15). Governor’s Veto Message Regarding House Bill 664. Retrieved from https://www.governor.nh.gov/news-media/press-2019/documents/hb-664-veto-message.pdf

Repairer Driven News. (2017, August 23). Update:  Couple in $1M Texas body shop lawsuit drop case against State Farm – but only temporarily. Retrieved from https://www.repairerdrivennews.com/2017/08/23/seebachans-drop-case-against-state-farm/

Repairer Driven News. (2019, September 5). AASP, ASA, SCRS respond to N.H. insurance commissioner’s op-ed. Retrieved from https://www.repairerdrivennews.com/2019/09/05/aasp-asa-scrs-respond-to-n-h-insurance-commissioners-op-ed/

Repairer Driven News. (2019, September 19). N.H. Legislature fails to override Sununu veto of OEM auto repair procedures bill. Retrieved from https://www.repairerdrivennews.com/2019/09/19/n-h-legislature-fails-to-override-sununu-veto-of-oem-repair-procedures-bill/

Repairer Driven News. (2019, September 20). Insurers skip required test to help consumers, and other arguments made against N.H. OEM procedures bill. Retrieved from https://www.repairerdrivennews.com/2019/09/20/n-h-veto-supporter-insurers-skip-required-oem-tests-to-save-cars-from-totaling/

Railing About Rail

By Ian Aikens | July 31, 2019

The last public hearing I attended in the legislative session in Concord that ended on June 30, 2019 was anything but encouraging. It was regarding SB241, which would authorize funding for the “project development phase” of the capital rail project and extend commuter rail from Boston to either Nashua, Manchester, or Concord (or all 3 cities). For hours I listened to one proponent after another urge the committee members to approve the bill, and I ended up being the sole member of the public to speak in opposition to the bill.

One proponent called it a “no brainer” since 80% of the funding would come from the federal government. Just how a government that is $22,000,000,000,000 (and counting) in the hole has “free” money to dispense was never clarified to the committee members. One committee member asked one of the proponents if inserting the project into the 2019-2028 Ten Year Transportation Improvement Plan (a big black hole) meant that the remaining 20% needed would already be funded. In other words, the money’s already there, so why not spend it? Indeed, placing a costly project in a big black hole with little visibility for the taxpaying public would be great for special interest groups, and that’s how government boondoggles are born. Many of the speakers touted how rail would create jobs and revitalize towns, cut down on traffic congestion, increase business at Manchester Airport, improve the environment, bring tourists to New Hampshire, and keep the young from leaving the state. The only benefit I didn’t hear mentioned was that it would spur the return of the Messiah.

Now let’s take a quick look at the history of rail in this country. It served a practical purpose as the country was developing and spreading across the continent transitioning from horse and buggy and water transportation, but once automobiles and air travel become affordable to the masses, rail transport became outmoded and impractical. Passenger rail was always used more by the elite, and ridership peaked around 1920 and never recovered. Despite the rosy claims of its proponents, virtually every rail project in the country features overestimates of ridership, underestimates of the building costs involved, constant and ongoing taxpayer subsidies, deferred maintenance with incredible backlogs—and a band of highly paid consultants served well by the perpetuation of the myths of rail. Outside of a very densely populated city like New York, and possibly Chicago and San Francisco, rail transit in this day and age is not economically feasible. Planes are faster and less expensive for long distances, and cars and buses are more convenient and less expensive for short distances. A few examples of the dismal record of rail projects from around the country: 1) Nashville’s Music City Star, which began operating in 2006, was requiring a taxpayer subsidy of $28 per ride by 2016; 2) Orlando, Florida’s SunRail, a 32-mile commuter rail line, opened in 2014 to such low ridership that by 2016 the government agency running the line admitted that the fare revenues weren’t enough to even cover the costs of operating and maintaining the ticket machines used to sell tickets to riders; 3) Salt Lake City opened up a commute line north to Ogden in 2008 and another line south to Provo in 2012. Through 2015, the Utah Transit Authority had already spent $2 billion on capital improvements and maintenance of rail lines that carried only 8,330 roundtrips per weekday. That’s a cost of $1,000 per resident, and the actual fares collected covered only 18% of the total transit costs. At losses of $35 million per year, it would actually have been cheaper for the taxpayers to buy every daily roundtrip rider a new Toyota Prius every two years.

Rail doesn’t fare much better when you look elsewhere in the world. France’s first high-speed rail train, which ran from Paris to Lyon, did earn enough operating profits to repay its construction costs by 1992, but later lines built all lost money, and by 2013 the country’s rail program had accumulated debts of over $50 billion. While most people are aware of Japan’s “bullet train,” did you know that the Tokyo-Osaka rail corridor is the only line that has ever been profitable in Japan? The reason for this rare rail success story is because the corridor is extremely high density (about 50 million people) and automobile ownership is low. As the government built new rail lines in lower-density corridors where car ownership was higher, those rail lines were all big money losers for the taxpayers.

Closer to home, the Downeaster provides good historical data to see how rail has worked out locally. The Downeaster, which has been running ten trains daily between Boston and Maine since 2001, makes stops in Exeter, Durham, and Dover. The first thing rail proponents always tout is that rail creates jobs and spurs economic development. A study looking at job growth paired similar cities, as far as access to infrastructure, to see how they fared since the Downeaster started running. Epping was paired with Exeter and Dover with Rochester. After 12 years, the results showed that Exeter had lost 300 jobs, Durham’s total number of jobs was virtually unchanged, and Dover had added just over 1,000 new jobs. The study’s conclusion that having a rail stop in Exeter did nothing to stop the job loss there pointed more to general economic conditions in the area and the nature of local economies (more manufacturing-oriented or service-oriented). The study found that Dover’s impressive job growth had more to do with being a large service center than trains having a stop there because Epping and Concord also saw greater job growth over the same period, and neither city had passenger rail service. The study concurred with what the director of Harvard’s Rappaport Institute had to say in the summary of a study of the MBTA commuter rail system: “The history of commuter rail in Massachusetts suggests that while commuter rail can be helpful, it generally has not revitalized communities or reduced sprawl.”

So, if government is going to be involved in the transportation business, wouldn’t it make more sense to put those tax dollars to better use? And, if the goal is to get more folks to their destinations faster and cheaper, buses are a much better bang for our bucks. The express buses that run along the I-93 corridor move 550,000 people per year for $750,000. Compare that to the Downeaster, which, mind you, is considered a “successful” rail project, and moves 530,000 riders per year for a government subsidy of $8.4 million. Furthermore, with bus lines, changes in employment and development patterns can be adapted to much quicker and economically by adding or subtracting bus lines as needed (or not). The same flexibility will never be there with rail transit.

Looking to the future, rail makes even less sense with the imminent arrival of driverless cars. The new technology will allow elderly and disabled folks to get around so much easier. While this might add to congested highways, the new technology will be able to handle the additional traffic safer and more efficiently due to the reduction of human error. Furthermore, cars are getting cleaner and more environmentally-friendly every year, so we should applaud technology that makes life easier for more folks. Clearly driverless technology will mean even less people will choose to use rail transit.

One would think with the well-publicized rail disaster in California that was supposed to link San Francisco and Los Angeles in two hours that has wasted billions of taxpayer dollars and will never be finished, that should have quelled any enthusiasm for such a project in New Hampshire. But no, I heard at least one rail advocate at the SB241 hearing mention a possible future high-speed rail line between Montreal and Boston as a goal to strive for. With estimated subsidies of $10 per rider to maintain rail service from Boston to Manchester and $60 per rider from Boston to Concord—a price tag of $5.5 million per year—why would anyone think a Montreal to Boston project would turn out any better than the California debacle? I caution readers to consider the words of Willie Brown, the former Speaker of the California State Assembly and former Mayor of San Francisco (a politician I never cared for, but one who occasionally would cut loose with an unusually frank statement of political reality): “News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone. We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the Central Subway or the Bay Bridge or any other massive construction project. So get off it. In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in.”

Finally, to end on a positive note, even though SB241 became law on June 6 without the governor’s signature and millions of “free” taxpayer dollars will be spent to study the feasibility of the capital rail project, at least all three of Milton’s state legislators (Abigail Rooney, Peter Hayward, and Jeb Bradley) voted NAY on the upcoming boondoggle. A small glimmer of hope for fiscal sanity!

References:

LegiScan. (2019). NH Legislation | 2019 | Regular Session. Retrieved from legiscan.com/NH/rollcall/SB241/id/805575

O’Toole, Randal. (2018, October). Romance of the Rails: Why the Passenger Trains We Love Are Not the Transportation We Need. Retrieved from www.cato.org/events/romance-rails-why-passenger-trains-we-love-are-not-transportation-we-need

Eliott-Trafficante, Josh. (2015, May). Does Commuter Rail Create Jobs? Retrieved from jbartlett.org/wp-content/uploads/2015/05/Does-Commuter-Rail-Create-Jobs

San Francisco Chronicle column, July 28, 2013

Tax-Titled Property Auction Results

By S.D. Plissken | May 6, 2016

The James R. St. Jean auctioneers held an auction at the Emma Ramsey Center in Milton, on Saturday, May 4, 2019. Eight tax-titled (tax seizure) Milton properties were on the block.

The descriptions below appeared in their auction brochure (see References below). One of our correspondents found the sale prices quoted below in a social media posting by an auction attendee.

(Ed. Note: The sale prices of the following properties have been revised through receipt of exact figures: #2 (added), #3 (revised downwards), #4 (revised downwards), and #7 (sale cancelled) (May 7)).

A follow-up discussion of this auction is scheduled as the tenth agenda item on tonight’s Board of Selectmen (BOS) meeting agenda.


The Two Properties Sold with Covenants

The first two properties had some serious problems – health hazards – frequently mentioned in Board of Selectmen (BOS) meetings. The following conditions (or covenants) were attached to those properties.

Auctioneer’s Note for Sales 1 & 2: The Grantee agrees that within 45 days of the date of the execution of the deed, the Grantee will apply to the Town for a building permit for all work necessary to return the property to livable condition. Further, the Grantee agrees that within 1 year from the date of execution of the deed all necessary work will be completed and a certificate of occupancy obtained.

In effect, each of these two properties comes with a rather expensive albatross tied around its neck, even should they become “tear downs.”

(Their problems are not unlike those present on a much larger scale in the Town’s so-called Lockhart Field site).


Sale #1 is the so-called “Blue House” property discussed in so very many BOS meetings.

SALE #1: Tax Map 22, Lot 19, 1121 White Mountain Highway • Cape style home on a 2.64± acre lot includes 3,256± SF GLA, 4BR, 2 BA, & FHW/oil heat • Attached garage & detached shed • Zoned Low Density Residential • Assessed value $168,300. 2018 taxes $4,289. DEPOSIT: $5,000

Sold for $11,000. This would be 6.5% of its previously assessed value.


SALE #2: Tax Map 9, Lot 2, 16 Spruce Lane • Single family home on 0.4± acre lot on a dead end street • Property features 968± SF GLA, 1 BR & 1 BA • Storage Shed, FHA/gas heat, & wood deck • Assessed value $69,000. 2018 taxes $1,759. DEPOSIT: $5,000

Sold for $69,000. This would be exactly its assessed value.


The Six Undeveloped Lots Sold “As Is”

The following six properties are undeveloped lots. Note that in some cases there was a considerable variance between their auction prices – their actual value as determined by the market – and their assessed values. This variance should be a matter of some study by the assessors, who will likely want to make some adjustments in similar properties – for accuracy’s sake.


SALE #3: ABSOLUTE – Tax Map 43, Lot 24-6, Campbell Road • Undeveloped 1.51± acre lot located on a cul-de-sac street in the Briar Ridge development • Lot is wooded and gently rolling in topography • Zoned Low Density Residential • Assessed value $33,600. 2018 taxes $857. DEPOSIT: $2,500

Sold for $24,000. This would be 71.4% of its previously assessed value.


SALE #4: ABSOLUTE – Tax Map 43, Lot 24-8, Campbell Road • Undeveloped 1.58± acre lot located on a cul-de-sac street in the Briar Ridge development • Lot is wooded and gently rolling in topography • Zoned Low Density Residential • Assessed value $33,800. 2018 taxes $862 DEPOSIT: $2,500

Sold for $21,000. This would be 62.1% of its previously assessed value.


SALE #5: ABSOLUTE -Tax Map 5, Lot 7, Willey Road • Undeveloped 11.98± acre lot along a quiet paved road • Lot is wooded and slopes down from the road • Zoned Low Density Residential • Assessed value $45,000. 2018 taxes $1,147. DEPOSIT: $2,500

Sold for $12,000. This would be 26.7% of its previously assessed value.


SALE #6: ABSOLUTE – Tax Map 47, Lot 27-1, White Mountain Highway • Undeveloped 10.83± acre lot along heavily traveled Rte. 125 • Lot is wooded, level to gently rolling and has water frontage along the Salmon Falls River • Zoned Commercial/Residential • Assessed value $50,800. 2018 taxes $1,295. DEPOSIT: $2,500

Sold for $20,000. This would be 39.4% of its previously assessed value.


SALE #7: ABSOLUTE -Tax Map 37, Lot 64, Ford Farm Road • Undeveloped 0.4± acre lot along a paved road in a quiet residential neighborhood • Lot is wooded and gently rolling in topography • Zoned Low Density Residential • Assessed value $8,100. 2018 taxes $207. DEPOSIT: $1,000

This property reportedly sold for between $4,000 and $5,000. That would have been between 49.4% and 61.7% of its previously assessed value However, the winning bidder withdrew, so the property remains available. .

Quiet residential neighborhood would be one way to describe it. This property is situated along one of the proposed “no through trucking” routes mentioned at the BOS meetings of last year.


SALE #8: ABSOLUTE – Tax Map 39, Lot 9, Middleton Road • Undeveloped 4± acre lot along a paved road close to the Farmington Town Line • Lot is rolling in topography and much of the lot is made of wetlands • Zoned Low Density Residential • Assessed value $2,200. 2018 taxes $56. DEPOSIT: $1,000

Sold for $100. This would be 4.5% of its previously assessed value. The auction attendee described this as “the wetlands lot.”

Assessors should take note, with an eye to adjusting their cards, that the market values wetland properties as virtually worthless, at least for small-scale building purposes. Neither Rome nor Washington, DC,  achieved their current values until after they had drained their pestilential swamps. (Their actual swamps, rather than their metaphorical ones).


Overall, the seven properties, with a combined assessed value of $402,700, sold at auction for $157,100. That would be an average of 39.0% of their previously assessed value.

References:

Town of Milton. (2019, April 11). Tax-Titled Property Auction, May 4, 2019. Retrieved from www.miltonnh-us.com/sites/miltonnh/files/news/one_page_brochure.pdf

Wintry Mix – School Board Candidates

By S.D. Plissken | February 26, 2019

The Milton Meet the Candidates night went forward as planned. The winter storm had largely dissipated by late afternoon. High winds followed.

As for the presentations, they were … interesting.

They certainly revealed some differences between candidates, which may be helpful, but, sadly, more often than not they revealed differences between the candidates and reality.

Candidates for the School Board – Two Three-Year Seats

The candidates were incumbent Ms. Melissa J. Brown, challengers Ms. Emily Meehan, Mr. Carter Wentworth Terry, and write-in candidate Mr. Alfred “Mr. Al” Goodwin.

I usually stay away from school issues, although they are certainly the tax elephant in the room.

Many of the same issues that plague the Town are also affecting the School District. However, the School District has been generally more prudent than the Town in terms of the rate at which their demands increase. They have even returned overages. It is still too much.

Who Owns You?

Mr. Brown definitely “put the stick about a bit” when he asked for opinions about a bill before the legislature. It would allow for state grant money to be redirected – on a per pupil basis – to alternative vendors, such as charter schools, parochial schools, technical schools, etc. None of the candidates, including the former homeschooler, favored this purely theoretical proposition. Nor did much of the audience.

Both the candidates and some in the audience made it sound as if Milton-resident students somehow “belong” to the School District. No one should be permitted to study elsewhere and, thereby, take “our” state tax money with them. Astonishing, really.

Escaped slave and abolitionist Frederick Douglass once spoke to this conception:

I appear this evening as a thief and a robber. I stole this head, these limbs, this body from my master, and ran off with them.

Does the Milton School District “own” the students? Does it “own” State money set aside for them?

Accreditation

One woman asked about school accreditation. Was it true that Milton’s schools are not accredited? I looked into this accreditation issue myself some years ago. It seems that many, if not most, of New Hampshire’s schools are not accredited. It has more to do with infrastructure failings then academic ones. Which makes one wonder about the accreditation process.

Standardized Testing

Low test scores were also queried and not easily explained. Milton ranks near the bottom of statewide test scores and has for many years. In some years it has “won” the race to the bottom.

The candidates seemed to be agreed, to a great extent, that standardized testing is of doubtful value and legitimacy. According to them, they deform education by causing teachers “to teach to the test.” I have heard this argument many times over many years. Samples of prior years’ tests are publicly available, and seem to be pretty basic reading, ‘riting, and ‘rimatic. “Teaching to the test” should not fall much out of alignment with just plain teaching.

These “teaching to the test” arguments may not be as persuasive or comprehensive as some seem to think.

There is another explanation available, which comes from the business world: “Project teams detest progress reporting because it so vividly manifests their lack of progress.”

Meanwhile, Milton is paying about a quarter over the state average on a per pupil basis. So, insufficient expenditure can hardly be the sole explanation.

Where Does It End?

Several members of the audience asked if there was some upper limit to constantly rising school taxes. Will there finally come a day when there is “enough” – some high plateau where we might rest? Or must the increases go on forever?

For most of the candidates, this seemed to be genuinely a “poser.”

Evidently, an upper limit is a difficult concept. Sort of like: what lies outside the universe, or when was before time? And therein lies a problem, because there is such a limit.

Why are such expenditures never enough? Because of marginal utility. The first dollar spent might bring more than a dollar’s worth of utility, as might the second, and so on. Each additional expenditure is at the leading “margin” of an increasing sequence. But, and this is the point, somewhere in the sequence the value returned is less than the dollar spent. As one proceeds further out in the sequence, the value returned for each additional dollar spent becomes smaller and smaller. This is what is meant by the term “diminishing marginal returns.”

Once the point of diminishing returns has been reached, each additional dollar provides less value than the one spent before it. Eventually, it will bring no additional value at all.

Now, compare the expenditure of that next dollar – that expenditure that brings diminished returns – with the tax dollar extracted from a struggling taxpayer. You propose to take money from a new family setting out in life, or a pensioner struggling on a fixed income. (Businesses might struggle too). For them, that dollar is still returning value – mortgage, groceries, heat, etc. You propose to take dollars from where they have value still – productive value – and spend them where the value is diminishing, or even gone altogether.

Are you really so sure that you are making the world a better place by taking that next dollar?

So, for the School Board candidates: the answer was “yes.” We will arrive at a place where the next dollar is just wasted. There is such a place. (Some might say that we arrived there quite some time ago).

You need to know that, in order to represent us, you must justify each additional dollar spent as bringing increased value, rather than diminishing value.


See also: Wintry Mix – Budget Committee, Wintry Mix – Fire Chief, and Wintry Mix – Selectmen


References:

Town of Milton. (2018, February 24). Meet the Candidates Night (School Committee). Retrieved from youtu.be/nOmRUcqTf08?t=271

Wikipedia. (2019, January 27). Marginal Utility. Retrieved from en.wikipedia.org/wiki/Marginal_utility

Capital Reduction Program (CRP)

By S.D. Plissken | January 10, 2019

The Milton Board of Selectmen (BOS) approved a slew of so-called Capital Improvement Program (CIP) Warrant Articles at their most recent BOS meeting last Monday night.

Consider, if you will, the following explanation extracted from a standard economics text. It discusses how a property tax reduces the capital value of real estate properties.

One peculiarity of the property tax is that it attaches to the property itself rather than to the person who owns it. As a result, the tax is shifted on the market in a special way known as tax capitalization. Suppose, for example, that the social time-preference rate, or pure rate of interest, is 5 percent. Five percent is earned on all investments in equilibrium, and the rate tends to 5 percent as equilibrium is reached.

Suppose a property tax is levied on one particular property or set of properties, e.g., on a house worth $10,000. Before this tax was imposed, the owner earned $500 annually on the property. An annual tax of 1 percent is now levied, forcing the owner to pay $100 per year to the government. What will happen now? As it stands, the owner will earn $400 per year on his investment. The net return on the investment will now be 4 percent.

Clearly, no one will continue to invest at 4 percent in this property when he can earn 5 percent elsewhere. What will happen? The owner will not be able to shift his tax forward by raising the rental value of the property. The property’s earnings are determined by its discounted marginal value productivity, and the tax on the property does not increase its merits or earning power. In fact, the reverse occurs: the tax lowers the capital value of the property to enable owners to earn a 5-percent return.

The market drive toward uniformity of interest return pushes the capital value of the property down to enable a return on investment. The capital value of the property will fall to $8,333, so that future returns will be 5 percent.

The sum of those CIP warrant articles, should the voters pass them on the March ballot, would be at least $435,500.00 (some article prices were inaudible). That would be added to an already bloated $197,395.85 Budget increase (making a combined total increase of at least $632,895.85).

Chairman Thibeault: That’s not all of them, just all we have right now.

By the logic of the explanation above, the Town government proposes to further reduce the capital value of every single property in town, including Town property. The BOS voted unanimously to approve these proposed CIP warrant article capital reductions.

Whenever you hear a Town official talking about their Capital Improvement Program (CIP), you should know they are actually just talking CRP.


References:

McEvoy, Eleanor. (1996). Trapped Inside. Retrieved from www.youtube.com/watch?v=tiK-I-cRqfg

Town of Milton. (2019, January 7). BOS Meeting, January 7, 2019. Retrieved from youtu.be/qx6Nfzafn98?t=4424

Things Seen and Not Seen

By S.D. Plissken | November 10, 2018

The nineteenth-century French economist Frédéric Bastiat (1801-1850) revealed to us the important distinction that must be made between That Which Is Seen and That Which Is Not Seen.

He began his argument with his now-famous “Parable” of the Broken Window. A boy breaks a window accidently. Onlookers console the father by observing that the glazier benefits by six francs in replacing the window, which he will spend with some other tradesman, who will spend it with someone else again. The boy’s mistake has benefitted the economy to the amount of six francs. That is what is seen: six francs has been set in motion to benefit the economy and society, as represented by a succession of tradesmen, merchants and others along its way.

Bastiat points out that what is just as important, if not more so, is that which is not seen. Had the window not been broken, or wasted, the father might have spent the money on something else, something of his own choosing, such as a book or a new pair of shoes. That would have benefitted the economy too, but along a different path.

The father’s choice and that potential different path are not the only difference. The destruction of the window, or any  waste of resources, is a net loss to the society. If the father did not have to replace the window, he would have had the enjoyment of both the window and the book. As it happened, he paid twice for the window alone.

Bastiat goes on to apply this principle of things that are seen and not seen to taxes, maintenance of standing armies, publicly-funded arts, public works projects, and the support of bureaucracies in general. In each case, there is some obvious visible benefit or, at least, some visible partial benefit. (Those that exact the taxes, organize the armies, and administer publicly-funded arts, public works, and services, subtract their own carrying charges along the way). Those visible partial benefits are the things that are seen.

The things that are not seen cannot be known. They are what society loses. There might already have been a cure for cancer, an end to hunger and homelessness, shorter work weeks, sounder money, hover cars, everlasting gobstoppers, and a myriad of other benefits. Milton restaurants. Who can know?

We would almost certainly be living better lives in a better world than that which can be seen around us.

Our load would be lighter to the extent of not carrying the dead weight of things that bureaucracies choose for us. (A camel is a horse that was designed by a committee). We would certainly be enjoying more of our own preferences, which is in itself an essential element of a better life.

Modern economists express this same concept in terms of paying an Opportunity Cost. If you choose Option A, you cannot also choose mutually-exclusive Option B. Not having Option B is the opportunity cost that you pay for selecting Option A. And vice versa. It is expressed also in the adage “You cannot have your cake and eat it too.”

You may see the same idea deployed in the beloved Christmas movie It’s a Wonderful Life. Had George Bailey never existed – if he had remained unseen – then he could not have influenced events towards the satisfying life of Bedford Falls. The hapless residents would have been forced to live instead the less palatable existence to be seen in Potterville. (Back to the Future “reboots” the same theme).

It is well worth a read (below). You might enjoy also Bastiat’s devastatingly funny satire of protectionism: the Candlemakers’ Petition.

References:

Bastiat, Frédéric. (1850). That Which Is Seen, and That Which Is Not Seen. Retrieved from en.wikisource.org/wiki/Essays_on_Political_Economy/That_Which_Is_Seen,_and_That_Which_Is_Not_Seen

Wikipedia. (2018, November 4). Frédéric Bastiat. Retrieved from en.wikipedia.org/wiki/Frédéric_Bastiat

YouTube. (2016, January 30). I Call This Enemy: The Sun (The Simpsons) [a spoof of the Candlemakers’ Petition]. Retrieved from www.youtube.com/watch?v=L3LbxDZRgA4