| Growth in Service PMI Shrinks Sharply Posted: 19 Dec 2015 06:22 PM PST On Friday, the PMI Flash Services reading registered growth that fell sharply, not only well below the Econoday Consensus estimate of 56.1, but also substantially below the lowest estimate of 55.8. The services PMI is slowing sharply this month, to 53.7 vs 56.1 for the final November reading and vs 56.5 for the flash reading. This is the lowest reading in a year reflecting the slowest growth in new orders since January and a fifth straight month of contraction in backlog orders. Optimism over future growth is understandably down, reflecting what the report says is a subdued global outlook, election uncertainty and softer demand in the energy sector. Price readings remain subdued with inputs at their weakest pace since February. Despite weakness in orders and the downcast outlook, hiring is described as "resilient". Given weakness in global demand, the service economy is the nation's bread and butter and today's report, though only one data point, hints at slowing for the economy. I tend not to report on the Markit readings for services, instead reporting on ISM readings. But this was sharp divergence. The next ISM services report will be interesting to watch. If services contract, recession will be at hand. Mike "Mish" Shedlock |
| How Chicago "Works": Tax and Graft; Who Benefits? Posted: 19 Dec 2015 02:28 PM PST On October 28, the Chicago City Council passed the largest property-tax hike in modern city history by a vote of 36-14, approving Mayor Rahm Emanuel's 2016 budget proposal. Taxpayers will have to fork over another $588 million property-tax hike to be phased in over the next four years. Some businesses and taxpayers will simply flee, joining what now is best viewed as the "Great Illinois Exodus". Taxpayers Lose, Who Wins?Someone always benefits from these tax-and-spend schemes. Who is it? The Illinois Policy Institute has the answer in Meet the politicians who stand to get rich off of Chicago's massive property-tax hike. The Players
As the tax hikes hit Chicago families and businesses, a who's who of the state's political machine will continue to line their pockets off of a property-tax game in which their connections are priced at a premium.
Illinois House Speaker Mike Madigan and Chicago Alderman Ed Burke both run law firms specializing in the lucrative field of Cook County property-tax appeals, one of the most inefficient, corrupt systems in urban politics. Illinois Senate President John Cullerton is a member of a large law firm that handles a range of issues, including property-tax law. The three have held political office in Illinois for a combined 126 years.
The Game
The property-tax-assessment process in Cook County is convoluted by design. But here's how it works in simple terms:
First, the Cook County Assessor's Office assesses the value of every property in the county. The value of any given property is reassessed once every three years. This "assessed value" is then used to calculate the property taxes owed by each property owner.
Property owners can then appeal that assessed value in a number of ways. They can file a request with the assessor asking for a reduction, appeal the valuation to the Cook County Board of Review, file a lawsuit in which a judge will decide the value, or the property owner and the Cook County State's Attorney will enter into a settlement agreement over the value.
Flawed property valuations and the process required to fix them are a cash cow for law firms, including those of Madigan, Burke and Cullerton, which know what strings to pull. These law firms handle the ways in which the assessed value of a property is appealed: the request with the assessor, the appeal to the Cook County Board of Review, and lawsuits.
The Cook County Board of Review – which exists solely to field appeals for assessments by the Cook County Assessor's Office – processed appeals for more than 400,000 properties in 2013.
What doesn't add up is nearly two-thirds of those appeals were successful: an astonishing number that reveals a faulty assessment process ripe for savvy attorneys.
Choose not to appeal your assessment and the government pockets the extra money. Choose to hire a politically connected law firm and that law firm typically pockets anywhere from 25 to 50 percent of the "winnings." And each reduction for a politically connected business means an increase in property taxes for those lacking the right political connections.
Investigative reporting from the Illinois News Network revealed Madigan's six-person firm, Madigan & Getzendanner, earned close to $10 million in tax refunds for its clients from April 2013 through April 2014. Madigan's spokesperson Steve Brown has said that the House speakers' law firm, which services mainly commercial clients, charges a flat fee for its services. The Chicago Sun-Times' Tim Novak broke the story in 2014 that Madigan's firm had saved Mesirow Financial Services $1.7 million dollars by slashing the valuation of its River North headquarters by 60 percent. Mesirow manages $300 million in state pension funds and employs Madigan's son, Andrew.
Every year from 2010 to 2014, Cook County Assessor and Democratic Party Chairman Joseph Berrios declared the building that housed Mesirow was worth at least $330 million. In each of those years, Madigan's law firm successfully contested that valuation to the tune of $5 million in tax breaks annually, according to Novak's research.
That's the game in a nutshell. Other WinnersIn addition to politically connected law firms specializing in tax appeals, the public unions benefit, and corrupt politicians who support tax hikes to buy votes from public unions also win. The losers are the businesses and taxpayers in Illinois. Great Illinois Exodus In increasing numbers, residents and businesses have voted with their feet as noted in Get Me the Hell Out of Here. For further discussion, please see ... - What Happens When Public Unions Control Everything for Decades? (Hint: Look at Chicago and the State of Illinois)
- Apocalypse Illinois: IOUs Projected to Hit $10.5 Billion, $163 Billion Total Accumulated Liabilities
Mike "Mish" Shedlock |
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