A Disaster Waiting To Happen -- Public Borrowing Without Limits; Menard's Wisconsin Workers Fly to Minot

Updates

December 9, 2012: School District Owes $1 Billion On $100 Million Loan

More than 200 school districts across California are taking a second look at the high price of the debt they've taken on using risky financial arrangements. Collectively, the districts have borrowed billions in loans that defer payments for years — leaving many districts owing far more than they borrowed.

In 2010, officials at the West Contra Costa School District, just east of San Francisco, were in a bind. The district needed $2.5 million to help secure a federally subsidized $25 million loan to build a badly needed elementary school.

Those bonds, known as CABs, are unlike typical bonds, where a school district is required to make immediate and regular payments. Instead, CABs allow districts to defer payments well into the future — by which time lots of interest has accrued.
In the West Contra Costa Schools' case, that $2.5 million bond will cost the district a whopping $34 million to repay.

November 29, 2012: it turns out that Wisconsin schools don't have the only recipe for disasters when it comes to borrowing. From today's LA Times:

Two hundred school districts across California have borrowed billions of dollars using a costly and risky form of financing that has saddled them with staggering debt, according to a Times analysis.

Schools and community colleges have turned increasingly to so-called capital appreciation bonds in the economic downturn, which depressed property values and made it harder for districts to raise money for new classrooms, auditoriums and sports facilities.

Unlike conventional shorter-term bonds that require payments to begin immediately, this type of borrowing lets districts postpone the start of payments for decades. Some districts are gambling the economic picture will improve in the decades ahead, with local tax collections increasingly enough to repay the notes.

CABs, as the bonds are known, allow schools to borrow large sums without violating state or locally imposed caps on property taxes, at least in the short term. But the lengthy delays in repayment increase interest expenses, in some cases to as much as 10 or 20 times the amount borrowed.

Put another log on the fire.

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Oh, I'm sure there are limits, but they can be raised. When it is other people's money, there really doesn't need to be a limit, does there?

A reader was nice enough to send me this little gem, link to wtaz.com:

Wisconsin schools are taking advantage of a three-year-old state law to catch up on maintenance and become more energy-efficient. According to Gannett newspapers, school districts throughout the state have borrowed $134-and-a-half million on energy projects since 2009, without having to get voters’ approval. The law lets school districts exceed their state revenue limits without referendums, in order to borrow for energy projects.

Last year the law was expanded to let schools spread their payments over a number of years instead of just one. And that spurred a big increase in borrowing – from about $9-million in fiscal 2011 to $93-million this year, with around 30 projects throughout the state each year.

The Racine School District has borrowed the most since the revenue cap exemption was adopted – around $42-million, covering almost half its deferred maintenance. Oshkosh officials said they handled about one-fifth of their maintenance needs with a $21-million project.

RSD may have borrowed the most, so far, but the others will catch up now that they see how easy it is.

Memo to self: file under "Recipes."

"For Disaster."

We'll tag this to follow up in 2030 to see how this worked out.

**********************

This story was carried alongside another Wisconsin story which was a bit more upbeat, link to

In Eau Claire, Menards’ is looking for 50 good employees to help cover a severe shortage of workers at its store in Minot North Dakota. And those people are needed so badly, the Eau Claire Leader-Telegram says Menards plans to fly them to Minot on a private jet to and from their jobs on a weekly basis – and give them lodging and food while they’re there. 

Data points

• booming oil patch --> thousands of retail jobs
• retail workers --> to the oil patch; stores "scrambling" to find workers
• offer: private jet from Eau Claire to Minot; 4 - 5 days/week in Minot; room and board paid; $13/hour pay + overtime, weekend pay.

I particularly like the "private jet" part.

Speaking of which: any update on the Menard's in Williston?

United Kingtom: Consumers To See Increased Utility Bills to Pay For Green Energy Investment

Updates

November 25, 2012: the UK and the faux environmentalists may talk a good story, saying they want to shift from natural gas to wind, but reality sucks. In today's WSJ: BP seeks deal to get Russia gas for Britain. My hunch: four, five, ten years from now, the UK will wake up and realize they just spent hundreds of billions on wind (when the math never did work) when they could have been preparing for the future through a) natural gas; and, b) nuclear energy. Just a hunch.

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This is being posted foror archival purposes only. It sounds like this is "only the beginning" as the UK tries to sort out its long-term energy policy. 

This is an interesting story: scanning through it quickly it appears no one is really happy -- even the faux environmentalists are unhappy that carbon emissions targets were not established.

But the "green" energy investment (including nuclear plants) seems to be as much about as volatility of natural gas prices long term as carbon emissions.

The link takes you to a BBC story:

The government has published details of its long-awaited Energy Bill, designed to keep lights on and emissions down. 

It will allow energy firms to charge households an extra £7.6bn until 2020, which will go towards the development of low-carbon electricity generation. 

A decision about setting carbon emission targets for 2030 has been delayed until 2016, after the election. 

Consumers will pay a bit more in energy costs next year; these costs will increase annually, reaching about $200/year/household in 2020.

Two data points from the article:

• Environmentalists condemned the bill, saying the lack of a 2030 emissions target would make it very hard to meet the UK's law on climate change.
• But business groups said more needed to be done to mitigate the impact on firms of these extra costs, pointing to the loss of 900 jobs at a major energy user such as Tata Steel, as it cut back its operations in the UK. 

Energy costs in the US were well below those of the UK before this new additional cost, and now the delta will widen. It certainly provides a window of opportunity for American industry. 

Memo To Self: File Under "You Have Got To Be Kidding" -- 15 Up-And-Coming Cities -- BusinessInsider

The fifteen:

• Brooklyn, NY
• Seattle, WA
• Austin, TX
• Portland, OR
• Boulder, CO
• Raleigh, NC
• Detroit, MI
• Philadelphia, PA
• Nashville, TN
• Bentonville, AR
• Burlington, VT
• Mountain View, CA
• Pittsburgh, PA
• Salt Lake City, UT
• Williston, ND

Another way to look at this list: give the list to the person sitting next to you, and ask him/her to select the one city that does not "fit" in with the rest of the list.

A huge "thank you" to 'anonymous' for sending me the link. I never would have seen it.

Permitorium in North Dakota? Don't Worry, Be Happy

Updates 

December 9, 2012: fracking is doomed, story posted July 27, 2012, at CNBC.  I don't know if fracking is doomed, but if anyone thinks solar and wind is going to replace oil and gas anytime in the next ten years hasn't followed the news. Or done the math.  We need to follow this up in 2030. 

Later, 9:00 p.m.: this article may help resolve some of the confusion regarding mineral oil, fracking, and several other issues. It's been linked before at this blog, but I had forgotten. A lot of information in this story but it explains a lot, and, to me suggests several options (all with good outcomes). 

Later, 7:40 p.m.:  See first comment. It almost sounds like diesel is no longer an issue. If so, diesel is another Hitchcockian McGuffin, or a "red herring."


Don't Worry, Be Happy, Bobby McFerrin

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Link here to Bismarck Tribune.

Helms said the permitorium, while better than a moratorium, could delay each oil well permit at least 45 days compared to the 15 days it takes now for a state permit.

“The activity level will be hugely impacted,” Helms said.

All but one well driller in North Dakota use diesel in fracking, where it activates certain chemicals and makes the frack fluid thick and slippery in the formation.

Helms said even 45 days to hold hearings and test water sources is a “best case scenario.

This will tie it up in red tape.”

Tripling the time needed for a federal permit is the "best case scenario." We've seen this movie before. It was the (non)-development of oil in the reservation about then-Senator Dorgan stepped in and got the BLM to streamline the process.

Not good news.

One step forward, two steps back. 

And just the other day someone sent me a comment telling me not to worry about the EPA. I didn't post it; it added nothing to the conversation. Whoever sent it was clearly "out of the loop."

What crazy science! The faux environmentalists are worried about a few bbls of diesel going down a pipe that will eventually produce 900,000 bbls of oil coming up that same pipe.

Two Three Four Five questions:

• if diesel is not used, will that allow the driller to avoid the EPA permitorium?
• how is that one operator that does not use diesel doing?
• can operators use Newman's Own Salad Oil instead of diesel? 
• what about Willie Nelson Biodiesel?  -- if you have not heard of this company, it's not too late
• could sunflower oil be used instead of diesel? This is a great initiative for the man who gave ND, SD, and IA farmers ethanol (then-Senator-turned-lobbyist Daschle). Wow, what an opportunity!