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Archive for January 15th, 2013

Unemployment insurance

JLF head John Hood’s column Monday was on unemployment insurance, and how higher UI benefits affect unemployment rates. A sample:

Here in North Carolina, the debate about proposed changes to the unemployment-insurance system have prompted left-wing analysts to ridicule the notion that the amount and duration of UI benefits have an effect on the propensity for jobless recipients to accept employment offers. The notion is far from ridiculous, however. It is the consensus finding among labor economists of all ideological stripes. They may not agree about the magnitude of the effect, but they do agree that both job-search activity and the willingness to accept job offers tend to rise as the expiration date of UI benefits approaches. States and countries with more-generous UI benefits tend to have higher unemployment rates, all other things being equal, than states or countries with less-generous benefits.

Seems pretty logical to me, but then again I am an economist.

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Meanwhile in Kannapolis

Little apparent payoff from the North Carolina Research Campus, on which the UNC system is spending $23 million a year. As Duke Cheston reports:

To date, though, the taxpayers have seen little return on their investment. Starting a biotechnology hub from scratch entails much financial risk with no guarantee of positive returns. A number of community-funded start-ups have not had much success, and “nutraceuticals” is a highly specialized part of biotechnology.

The campus has been in operation for roughly five years, and so far there are no spinoff businesses and no royalties being collected. Or in any case, none that any NCRC representatives would discuss, although a UNC-Chapel Hill scientist mentioned that research from scientists based at the Kannapolis campus have applied for two patents, one of which has been licensed so far.

And although some jobs have been created by the campus, the positions tend to be for highly trained specialists who are not from the area. According to the UNC-Chapel Hill scientist, however, for each Ph.D. hired, the campus has generated between five and eight ancillary jobs. Mike Todd estimates that between 300 and 400 people from Kannapolis have jobs on the site.

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Why a US Airways/American Airlines merger isn’t necessarily good for Charlotte

It’s really pretty simple. US Airways doesn’t currently generate the kind of revenues American, Delta, or United do. It compensates for that by having lower costs, particularly lower labor costs. A merger pushes US Airways’ portion of a newly combined operation to American Airlines’ much higher labor costs.

You don’t have to take my word for it. The US Airline Pilots Association, US Airways’ pilots union, just signed a memorandum of understand with American’s pilots union. It said in a message to its members that “If this merger transpires, we believe this MOU is the quickest and surest path to a better lifestyle for us all.”

Key points USAPA stressed include:

o US Airways pilots will be paid the same as American pilots starting on the Effective Date (of approved Plan of Reorganization).
o After the Effective Date, US Airways pilots will receive a retrospective payment based on the new pay rates back to the date of pilot ratification.
o These new rates will result in pay increases ranging from 13% to 35% over today’s rates for this year, plus substantial annual increases for the life of the contract.

Those higher labor rates will undoubtedly render portions of US Airways’ existing route structure unprofitable, including a percentage of the flying from Charlotte, the airline’s largest hub. The only way to compensate for that is by reducing the number of flights (capacity) at CLT and/or increasing fares.

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Charlotte City Council votes in secret to raise taxes

More details have come out about what city council did last night. It didn’t just listen to a proposal from the Carolina Panthers about public funding for improvements at the team’s privately-owned stadium. No, it went much further than that. The Charlotte Observer is now reporting that city council actually secretly voted 7-to-2 to approve an increase in the prepared food tax to provide $125 million towards the cost of stadium upgrades. All this with zero public input. Yes, they will have to take another vote in public but the die is cast.

With this action, the City of Charlotte has abandoned any and all pretensions of open or good government. It has instead embraced crony capitalism of the worst sort like some sort of banana republic, in which deals are secretly agreed to give vast sums of public money to favored special interests while taxes are increased on entire industries with no previous notice. And what the public thinks just doesn’t matter.

Some lowlights via the UPoR:

The city’s decision to discuss the Panthers request in closed session was different from how it handled a request last year from the Charlotte Knights baseball team for money to build an uptown baseball stadium.

When the Knights asked for city help, the issue was discussed in public meetings.

Some council members said Tuesday they didn’t know why the Knights stadium deliberations were held in public, while the Panthers were allowed to meet with council members in private.

“I don’t have an answer for that,” said [warren] Cooksey. He added that he would not discuss what was said in a closed session meeting.

[Beth] Pickering said the Panthers are “important” to Charlotte and that a public debate over the plan could have led to “mis-impressions.”


Bonus observations: Voting against the plan were Warren Cooksey and Michael Barnes. Patsy Kinsey left before the vote but probably would also have voted against the proposal. Patrick Cannon recused himself.

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The Panthers issue their demands

Want $125 million from the city for Bank of America Stadium upgrades. Apparently do not tell Charlotte City Council in closed session what exactly the money would buy in upgrades, or the total cost of the retrofit. And the city/county is considering paying for this through doubling the tax on prepared food, so that residents would be subsidizing Jerry Richardson and friends whether they ate at Hardees or not when they ate out.

The math here is rather strange. The current prepared food tax brings in $24 million. Doubling the tax rate won’t double tax revenues but then you don’t need anywhere near a $24 million a year revenue stream to finance $125 million in bonds at today’s interest rates. So what would the excess funds go towards?

City council again shows zero negotiating ability. A closed-door session to take the team’s request? Really? That amounts to sparing the team a considerable portion of the public relations hit that comes from asking for public money. And certainly there’s no tape of Jerry Richardson or Danny Morrison asking for a handout that can be used to gin up opposition to the proposal.

The move only makes sense if city council had already de facto decided to cave in to whatever The Big Cat asked for, and was looking to keep this as low key as possible when it gives the Panthers everything they want out of fear he’d move the team to Los Angeles. Less publicity equals less voter anger directed at council members for the tax hike that’s coming.

Bonus observation: If city leadership were minimally competent, they would have had the Panthers publicly define their stadium upgrade proposal before agreeing to a meeting. And that includes a cost estimate.

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January 2013
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