I’ll see you in court – the costly abuse of eminent domain

Wednesday, November 18th, 2015


It’s bad enough for a local government to use eminent domain to seize personal property, but it’s even worse when that land grab happens immediately through an expedited process known as “quick-take” eminent domain. In public projects involving the “making or repairing” of a road, local government can take possession of a disputed property immediately after it files for eminent domain. The case does not have to go through the normal court process.

This was the situation facing two Ohio homeowners. In October, they suddenly found their front yards in jeopardy as the city of Perrysburg, Ohio tried to grab their property via “quick-take” for a road expansion.

The grab did involve making a road, but there were two problems with its legality, according to the homeowners’ attorney, Maurice Thompson. First, and most significant, said Thompson, Perrysburg did not have authority to seize their property because it lay in Middleton Township, outside the city’s jurisdiction. Second, the city intended to take the land to build a sidewalk, which is not covered by quick-take law.

What was the city’s reason for attempting the “quick take” in the first place? Councilman Todd Grayson, the one councilmember who voted against the eminent domain grab, simply said it’s cheaper than expanding the road on the other side, across from the property owners. The only thing on the other side of the road is a drainage ditch, and no one has any objections to moving it other than that it would increase the estimated cost of the project by $1 million.

Grayson doesn’t believe the extra price tag is a good enough reason for taking and tearing up the front yards of several citizens. “When your justification is ‘it’s cheaper,’ that’s not a legal reason for taking people’s property,” he said. He also suggests that the city attorney downplayed potential legal costs that would arise from homeowner opposition and that those costs were not factored into the financial comparison.

Sure enough, the homeowners pushed back against the city’s land grab, and two weeks later, Watchdog reported, an Ohio court ruled Perrysburg cannot use “quick-take” eminent domain to seize their properties.

“This Court finds that if the legislature intended for ‘quick-take’ procedures to extend to other areas, those other areas would have accordingly been referenced somewhere… They are not,” said Wood Country Probate Judge David Woessner. As a result, the city must wait for the traditional eminent domain process to run its course.

The story ended in “a victory for private property rights across Ohio,” according to Thompson. But abuses of eminent domain are not limited to “quick-take” methods, and many are not successfully challenged. As Watchdog Opinion writers have pointed out a number of times, local government sometimes uses eminent domain on behalf of corporate interests – in the name of “economic development.”

shutterstock_334669748Eminent domain “was originally set up to be used only if somehow taking property was really for a ‘public use,’ like a road expansion,” writes Watchdog Opinion contributor Samuel Friedman, but cases like 2005’s Kelo v. City of New London “created an entirely new problem where governments used the clause to seize property for private use if somehow the argument that doing this was in the ‘best interest of the community’ would stand.”

In Kelo v. City of New London, the city of New London, Connecticut wanted to provide Pfizer, a large pharmaceutical company, with land around a research facility the company planned to build. The company would have attracted jobs and helped boost the region’s flagging economy. In order to do this, however, they would need the property of two families who were not interested in moving, so the city invoked eminent domain. The case went to the Supreme Court, which decided 5-4 in the city’s favor, and the neighborhood was seized and destroyed. Yet in a tragic turn of events, the private developer could not obtain financing for the project. The land now sits empty and abandoned.

Similar incidents involving the use of eminent domain on behalf of private developers threaten to crop up elsewhere. In Illinois, for example, Watchdog Opinion writer Hilary Gowins says Northeastern Illinois University wants to bulldoze six properties so a private developer can build dorms and retail stores instead. University president Sharon Hahs is considering pursuing eminent domain to wipe out the properties of these six businesses, even though they have invested in the neighborhood for years.

In Delaware several years ago, a major developer named Harvey Hanna and Associates wanted to build a shopping center next to the property of a retired truck mechanic named Jack Slawter. Slawter depended on renting that property for much of his income. Even after Harvey Hanna made him an offer, he didn’t want to sell his land. Harvey Hanna needed the land to build an entrance to the proposed mall, so it summoned the state Department of Transportation (DelDOT) to use eminent domain to take Slawter’s property. He responded by retaining a lawyer who argued DelDOT was abusing its eminent domain powers. After both sides dug their heels in, Slawter appealed to the statehouse for help. Lawmakers passed some property-rights reforms to reel in abuse of eminent domain, but ultimately did little to help Slawter’s situation. DelDOT was exempted from the new rules. Eventually the state agency and Harvey Hanna would settle with Slawter. He couldn’t win.

Friedman argues that the state of Delaware has spent much more handling the case than if they had never gotten involved with Harvey Hanna in the first place. At the end of the day, it seems, the only real winners in these incidents are lawyers. This is the case in Minnesota’s Carver County, where Minnesota Watchdog reporter Tom Steward covered a dispute in the Twin City suburbs over a two mile stretch of land obtained from 14 different land owners by eminent domain. Legal fees in the county have soared in the three years since condemnation and destruction. The private attorney litigating settlements for the county stands to collect more than $800,000 – almost four times more than original anticipated. County taxpayers also face tens of thousands of dollars in additional costs as landowners settle.

All these costs shouldn’t come as a surprise to Carver County. With their estimates for the price of land running on the low end of the spectrum, and landowners’ appraisals reaching several times that ($845,000 versus $4.1 million, in one instance), disputes are bound to flare up as landowners vent frustration with the county’s lowball appraisals.

In any case, the lesson from all of these stories is clear. Legal fees will always haunt eminent domain grabs, especially when the government doesn’t move forward in good faith.

Meet Watchdog editor John Bicknell: journalist, author, history buff

Tuesday, November 3rd, 2015

10.16.15 004Watchdog’s new executive editor, John Bicknell, has been a journalist for more than 30 years. He came to Washington, D.C. in 1999 as an editor at Congressional Quarterly, where he led the production team for CQ Today and was a team editor for the publication. When CQ merged with Roll Call, he continued as national security editor, co-editor of the 2012 edition of “Politics in America” and eventually became editor of the opinion pages.

Bicknell’s hiring marks the latest step in the Franklin Center’s plan to expand beyond its 16 state bureaus, while growing staff in key states. As executive editor of Watchdog, he will work closely with our extensive network of investigative journalists and develop relationships with other media outlets.

Bicknell recently took a break from working with reporters to answer a few questions about his path to journalism and the state of today’s media:

Franklin Center: How did you first become interested in journalism, and what has kept you working in the industry for 30 years? 

John Bicknell: I grew up in a family very interested in politics and the news. And I always knew I wanted to be some kind of writer. So, while I didn’t major in journalism in college, it was always in the back of my mind that I might go into journalism. I’ve survived for 30-plus years by always looking to do something new, something different every few years.

FC: In addition to journalism, you’ve written a book about the presidential campaign of 1844 and have another one in the works. Clearly you’re a history buff, so how does that inform your approach to journalism and today’s rapid-fire news cycle?

JB: Studying history helps provide a long-term view of issues. When somebody says “this is the dirtiest campaign ever run,” or “this is the most important election of our time,” knowing something about history can provide perspective, as well as a way to debunk such claims. My new book, for example, is about John C. Fremont’s 1856 presidential campaign, the first Republican campaign and the first in American history to involve women and blacks in a substantial way. It was contested in perhaps the most violent peacetime atmosphere of any U.S. election, and though Fremont lost, he set the template that Abraham Lincoln followed four years later in winning.

FC: What is one issue or story you wish more Americans were paying attention to?

JB: It’s hard to narrow it down to one, and I have a different answer every other day. I think people are generally paying attention to issues of national security, probably immigration, maybe even the debt. So today let’s say it’s the decline of the notion about what it means to be an American, the idea of citizenship with responsibility. That might have something to do with studying history closely and seeing how much progress we’ve made in 200 years. Too often, I think, people ignore progress because they benefit from the culture of complaint.

FC: What is the biggest obstacle or challenge facing journalists today? 

JB: The biggest challenge facing journalists today is a self-inflicted problem: too many activists with bylines posing as neutral observers, and they’ve been found out. Once you’ve destroyed your own credibility, it’s very difficult to get it back, and we see that in many, if not most, legacy newsrooms.

FC: What opportunities are you most excited about as you join Watchdog’s network of investigative journalists?

JB: As I said, our opportunity is to fill the wide, wide space left empty by legacy journalists who believe their job is to defend the status quo at the expense of reporting facts and explaining why things happened the way they happened.

The feds’ cash-for-visas foreign investor program: What could go wrong?

Wednesday, October 28th, 2015

Grassley EB-5 ss

Earlier this month, U.S. Senator Chuck Grassley (R-IA) took to the Senate Floor to call for reforms to a government program that most Americans probably haven’t even heard of: the EB-5 Regional Center Investment Program. Simply put, the program allows foreign investors to invest large sums of money in American projects in return for a green card, but as Grassley pointed out, the government hasn’t always followed the spirit of the rules for such investments.

The program is divided into two different investment thresholds. The lower level, requiring a minimum investment of $500,000 is supposed to help Targeted Employment Areas – poorer and rural regions – get a nice economic jolt, but gerrymandering of these regions has instead led to the EB-5 program funding lavish building projects in wealthy urban areas. The New York Times and The Wall Street Journal, Grassley said, have covered cases where wealthy areas like Midtown Manhattan had projects funded by EB-5.

“The EB-5 program is supposed to favor distressed economic areas,” said a Washington Post editorial, “but the definition of a needy zone has been stretched to include nearly the whole country, including hot downtown real estate markets.”

Embedded in the heart of Grassley’s speech was Watchdog’s coverage of the program. Specifically, Grassley cited reporter Kenric Ward’s investigation into the program’s abuse in Dallas, where a luxury apartment project in uptown Dallas, one of the most affluent parts of the city, cashed in on funding from 100 overseas investors who each provided $500,000. Acquiring visas through investments of that size is supposed to be reserved for ventures in federally designated Targeted Employment Areas: usually rural or impoverished areas in need of jobs. The fact that EB-5 was used in this way to help develop an area with 0.8 percent unemployment indicates the areas designate by federal regulators as in need of improvement have been badly gerrymandered.

The EB-5 Immigration Investment program was originally established by the Immigration Act of 1990. It took more than a decade for it to gain traction, spiked in use during the Great Recession and now has achieved its full capacity of 10,000 immigrant investors (which includes family members of investors, so the total number of spots for individual investors is more like 3,000). Initially it required a minimum investment of either $500,000 or $1 million, depending on the affluence of the area being invested in, and was required to create at least 10 solid jobs for every investor. In return, investors would receive green cards for themselves and qualifying family members. To stimulate interest, however, the jobs requirement was changed to include “indirect” jobs created, a figured calculated by complex equations.

shutterstock_331350053Grassley’s speech only covers one area of the problems associated with EB-5. The complicated calculations and debatable economic assumptions used to determine the number of indirect jobs created by investments make it difficult to evaluate the true economic impact of the program. The agency also has yet to adequately address questions and concerns over national security. About 85-90 percent of EB-5 investors come from China.

As is often the case, concerns about the effectiveness and integrity of the EB-5 program run all the way to the top. Last spring an Inspector General’s audit accused Alejandro Mayorkas, former director of U.S. Citizenships and Immigration Services, which administers the program, of improper conduct in his handling of EB-5. After the audit, Mayorkas testified before a House Committee on Homeland Security hearing about the program. His answers were curt and evasive, and they did little to bring any much-needed transparency to the program. He described himself as a “hands-on manager,” for example, yet admitted he had significant gaps in operational knowledge. He was unable (or refused) to say how many jobs had been created or whether the thousands of visas issued led to any breaches in national security. When House Homeland Security Committee Chairman Michael McCaul asked whether Chinese nationals who acquired visas through EB-5 were properly vetted on national security grounds, Mayorkas simply answered “I would hope so.”

That’s hardly a ringing statement of confidence.

With critics of EB-5 resigned to its inevitable renewable, many are pinning their hopes on Grassley’s proposed reforms in the American Job Creation and Investment Promotion Reform Act, which would focus on ensuring smaller investments go to high-unemployment zones and rural regions, raise the investment thresholds by several hundred thousand dollars, and require foreign investors to actually prove the creation of direct jobs before receiving permanent residence.

In addition to the abuse of gerrymandered targeted employment districts, however, EB-5 has seen its fair share of woes elsewhere across the country. In South Dakota last year, a meatpacking plant funded by Chinese investors through EB-5 went bankrupt, leaving investors without their promised visas (their investments likely won’t be recovered either). And U.S. Sen. Harry Reid once infamously pressured the feds to expedite more than 200 visa applications through a Las Vegas casino project funded by EB-5.

Neither of these cases, unfortunately, are all that surprising in light of a recent Government Accountability Office report on the program, which found that USCIS does not properly track the economic effects of the program. The agency, the report showed, rarely conducts site visits to verify claims of economic activity, never interviews investors before issuing them green cards, and has left itself open to fraud and abuse through its reliance on “paper-based documentation.”

Mayorkas has been gone from USCIS for almost two years now, but it remains to be seen if the agency can take steps to improve the effectiveness and security of the program – or if Congress will act to prevent future abuse.

Red ink rising: Texas’ massive local government debt

Wednesday, October 21st, 2015


A Texas-sized price tag

A few miles beyond the outskirts of Houston lies Alvin, a humble town of 25,000 that could soon be home to five of the most expensive public schools in the history of Texas.

Why such expensive school for such a small town (at least by Texas standards)? The answer lies with Alvin Independent School District, which is trying to sell voters on a $285 million school construction package that would put county taxpayers on the hook for about $1 billion over the life of the bonds.

How can the school district justify such a huge chunk of spending in a district that only has $6.5 billion in total taxable property? The state’s Permanent School Fund Guarantee Program plays a big part in enabling local spending because it promises to repay bondholders in the event of a local default. The district also projects substantial growth in the coming years, but as Texas Watchdog reporter Jon Cassidy reports, its population will have to explode to keep up with the interest payments and keep local property taxes, which fund Alvin ISD, from skyrocketing.

“Alvin’s growth puts it in either tenth or eleventh on the list for homes sold, homes started, and vacant developed lots (among the fastest growing school districts around Houston),” wrote Cassidy. “And yet the district projects it will be the third-biggest grower over the long term based on an analysis of how many homes might one day fit in its empty fields.”

Indeed, for Alvin, every projection is big. No matter how you slice the numbers, the schools Alvin ISD proposes to build with its massive bond will cost twice as much (about $25 million) as a typical elementary school in Texas. Each would rank only behind a $36 million elementary school in Orange as the most expensive schools in the state, and the Orange school has double the student capacity.

Despite its unprecedented costs, local board members don’t seem concerned about the price tag. At an Aug. 18 school board meeting when officials approved the bond package, none of them raised questions about how much the schools cost. The only concerns about cost came up in questions about whether taxpayers in a rural district were ready to swallow a $41.5 million bill for a new 10,000 seat football stadium.

“It’s not an extra, it’s not a boondoggle,” said board member Vivian Scheibel. “It’s something that every part of our community is going to benefit from.”

Unfortunately for Scheibel, the numbers suggest otherwise.

Drowning in red ink

Though Alvin is one of the most flamboyant users of municipal bonds, the problem is widespread. Dallas is pitching a $1.6 billion school bond, Comal County is pitching a $76 million jail bond, and Ysleta Independent School District wants taxpayers to fund new campuses, athletics, technology and security to the tune of a $430.5 million bond – a figure twice the size of its current debt load. These are just a few examples of the $8.8 billion local governments are asking Texas taxpayers to shoulder this fall.

Texas schools, cities, counties and special taxing districts currently carry $322 billion in outstanding debt, ranking Texas second among the ten largest states in local government debt at $8,627 owed per person. The trend becomes especially worrisome, notes Watchdog reporter Kenric Ward, in off-year elections, when low voter turnout (typically just 10 percent of registered voters) and a lack of information give an edge to special interest groups and companies eager for a cut of these lucrative, multimillion government contracts. Public entities themselves, of course, can’t campaign for bond referendums, but the architects, contractors and various vendors that stand to gain from them can. So for the few people who do vote, most have little access to objective information about what they’re actually voting on.

“With bond initiatives, voters are generally uninformed. All they know about them are from the newspaper of the pro-bond committees,” said Peggy Venable, policy and legislative director of Americans for Prosperity Texas. In the case of San Antonio’s North East Independent School District, which has proposed a $499.9 million bond referendum, even the press has widely supported more government spending. The San Antonio Express-News has supported the bond wholeheartedly (according to Watchdog’s count, it’s been 23 years since the newspaper opposed any school bond referendum).

“So many taxpayers are asleep that the government entities don’t have to do their homework on pricing. It’s all about empire building for the people who have the ability to tax,” said Douglas Kirk, a newspaper editor in Comal County, where he estimates the cost of a new jail bond will end up totaling twice as much as the $76 million figure being pitched to taxpayers – and that’s before annual operating expenses are added.

This is not to say that all bonds are inherently bad ideas for local government. State Sen. Kelly Hancock notes that like a home mortgage, financing can be appropriate if the terms are managed, but voters rarely have all the information about interest expenses. And for that matter, the legislators themselves don’t even always have a sense of the true costs.

Some lawmakers in Texas have seen the troubling pattern and attempted reform. State Rep. Matt Shaheen, R-Plano, for example, introduced HB 1750, which would ban the use of capital appreciation bonds that come with balloon payments. But his bill failed.

Another bill designed to shine a light on local government accounting, HB 1378, did pass. It will require government agencies to do two key things: provide a per-capita breakdown on all bond costs, and disclose the total principal and interest required to pay all of their outstanding debts on time and in full. The law, however, does not go into effect until next year. So for the remainder of 2015 the largesse continues as usual.

Is all that public data actually helping us keep government accountable?

Wednesday, October 14th, 2015


Earlier this year, the Pew Research Center released a report that attempts to gauge public sentiment concerning open government data. It suggests there are two major factors paving the way for new ways in which people engage with government today.

“The first is data,” say authors. “There is more of it than ever before and there are more effective tools for sharing it. This creates new service-delivery possibilities for government through use of data that government agencies themselves collect and generate.

“The second is public desire to make government more responsive, transparent and effective in serving citizens — an impulse driven by tight budgets and declining citizens’ trust in government.”

Not surprisingly, Democrats have a more upbeat view of open data than Republicans, but that appears to be a reflection of their more optimistic view of government in general. Overall, Americans are divided or ambivalent about the prospect of more open government data, but they lean toward optimism. Fifty six percent said government data allows journalists to cover government activities more thoroughly, and 53 percent said it makes government officials more accountable to the public.

Americans are split right down the middle, however, on the question of whether more open data improves the quality of government services and whether it allows average citizens to have more of an impact on government affairs. And 53 percent of respondents don’t believe that open data results in better decisions by government officials.

For the Franklin Center’s Watchdog journalists and citizen contributors, those first two figures are evidence that success in our mission to bring greater accountability to government is possible. The last two figures, however, indicate that we still have a long way to go. As the report says, “most Americans have yet to delve too deeply into government data and its possibilities to closely monitor government performance.” This is what needs to change.

It’s easy for one’s eyes to glaze over in the face of government data, but a government transparency movement has been at work in recent years trying to help us make sense of all the information available to the public. In a Q&A with Watchdog, open data guru Waldo Jaquith, who works with government and private sector groups to make government data available for public consumption, points to a number of tools and organizations that help make government data more accessible and transparent, including the Sunlight Foundation and, which helps citizens track proposed changes to legislation that could affect them.

As an example of how far the transparency movement has come, Jaquith points to OpenFDA, which takes the raw medical data driving decisions by the U.S. Food and Drug Administration, and makes it accessible to everyone.

“You the public are paying for this medical data,” he says. “You’re already paying us to do this research. Instead of leaving it on a private server somewhere, we’re going to put it up for anybody to access. It’s yours. We should give you access to it.”

Access to government data has allowed Watchdog to break a number of significant stories exposing questionable uses of taxpayer funds. Reporter Arthur Kane’s investigation into questionable loans dealt out by the Small Business Administration was featured in Forbes earlier this year. Kane has partnered with the Washington Times for an front-page exclusive look into how the Export-Import bank was shipping U.S. jobs overseas and allowing companies to keep profits offshore to avoid taxes.

Access to digital public records has also allowed Watchdog reporters to uncover patterns of welfare abuse and sparked reform legislation in several of their respective statehouses.

Strangely, the Pew study seems to leave little room for those who are both innately distrustful of government and those who believe open data initiatives can improve government services and performance. Holding both of those positions simultaneously, after all, is the key to reform. It requires skepticism and sharp eye to find areas of improvement, but also trust that through bringing the truth to light, the government can indeed serve its people better. We believe such change is possible.

U.S. Senator Grassley credits Watchdog’s coverage of EB-5

Friday, October 9th, 2015

U.S. Senator Chuck Grassley, R-Iowa, singled out as he spoke on the Senate floor Wednesday for its great work on the controversial EB-5 program.

“, a national watchdog group that has followed abuses of the program closely over many years, has also identified another problematic, gerrymandered targeted employment area,” said Sen. Grassley. “They reported that a 21-story residential building project, which included trendy restaurants and shops, was built with foreign investments despite its location in an upscale neighborhood with only 0.8 percent unemployment. These are just a few examples, yet they point to a clear problem with this program.”

Watch Sen. Grassley’s statement below:

Opposing transparency: Gov. Christie hides media list against court orders

Wednesday, October 7th, 2015

Image courtesy of L.E.MORMILE /

Image courtesy of L.E.MORMILE /

What’s in a list of names?

When it comes to politics, it’s always about the names. Or in the case of New Jersey Watchdog’s lawsuit against New Jersey Governor Chris Christie’s administration, it’s about the 2,500 names in a “secret” list of media contacts and VIPs.

A powerhouse PR Rolodex, the high-tech list was compiled by 16 state employees from Christie’s communications staff, who together earned $1.36 million in salaries last year courtesy of New Jersey taxpayers. It has helped the governor establish an impressive media and digital presence that stretches the Christie brand far beyond state lines.

For New Jersey Watchdog, the argument was simple: the list was assembled at taxpayer expense and the public has good reason to be interested in the governor’s media strategy. Reporter Mark Lagerkvist first asked for the list in January through an Open Public Records Act request. Christie’s office turned it down and claimed it was “unclear.” Lagerkvist offered further clarifications and specifics, but to no avail, and the dispute went to Mercer County Superior Court.

Superior Court Judge Mary C. Jacobson agreed with us in her decision issued last May, ordering Christie’s office to turn over a copy of the list by June 12. But the state attorney general countered at the last minute with a bizarre appeal, claiming the list is a “valuable asset” that would give New Jersey Watchdog an “unfair competitive advantage” over other media outlets.

The court, however, stuck with its decision. Jacobson denied the motion for reconsideration, ordering the governor’s office to release the record by August 17 and pay for New Jersey Watchdog’s legal fees.

“The media strategy of the governor seems to me to be something that is of general public interest,” she said, adding that the motion “contradicts the spirit of the Open Public Records Act” and was an “inappropriate” try by the Christie administration to get “a second bite of the apple.”

Local media lit up in response to New Jersey Watchdog’s case for transparency with high praise. The editorial board of the Star-Ledger, the state’s largest newspaper, said that “for better or for worse, the list belongs to all of us.” It went on to suggest Christie “has probably already shared that media list with a few special friends – such as his political action committee, or party affiliates.”

shutterstock_205634149The attorney general had one more last-minute trick up his sleeve, though, and asked Jacobson to grant a stay pending appeal, on the grounds that release of the record would cause the governor “irreparable harm.” If the stay were granted, it could push back any political damage Christie might suffer from the list being released until after the presidential primaries.

Once again, Team Christie lost. Jacobson denied the governor’s plea for a stay and gave Christie until Sept. 16 to persuade a state appellate court to grant relief on the premise that release of the record would cause “irreparable harm” to the state.

Finding the bigger story

Even after months of court battles, the real story may only be just beginning. When Christie finally coughed up the list, it only had 1,229 entries – half of the reported 2,500. Judge Jacobson will hear arguments this week to find out if the record was altered before release – a move that would potentially violate the court’s order.

Why such a big fight over a media list? Even though it may seem trivial at first glance, it is significant for several reasons.

First, the response of the Christie administration is telling. The governor’s office has fought tooth and nail at every turn to keep the list under wraps, and refuses to say whether or not it has been shared with Christie’s PAC. In fact, the media list is just one of 23 court battles the Christie administration has been fighting this year to keep state documents secret.

Second, it falls into a larger trend in the Christie administration of misusing taxpayer funds and hiding information from citizens. Headlines exploded earlier this year, for example, when New Jersey Watchdog found Christie has spent more than $300,000 on food and alcohol during his five years as governor – including more than $82,000 from the company that operates concessions at MetLife stadium, which Christie has been known to frequent. If you do the math (factoring in that some of those expenses were reimbursed by the New Jersey Republican State Committee) that means Christie spent an average of more than $2,500 a game on concessions.

Furthermore, no one is quite sure how much his state police-provided security costs. Citing security concerns, his office has refused to release records explaining the $1 million his state police team has charged to pay for out-of-state travel. This issue is particularly relevant to state taxpayers as Christie hits the campaign trail. His out-of-state security costs run much higher than those of his predecessor, Gov. Jon Corzine, and unlike other candidates in the GOP presidential race, his campaign has not indicated it will reimburse taxpayers for security costs incurred by Christie’s pursuit of greater political ambitions.

At Watchdog, we believe public officials ought to be transparent so that the citizens they represent can hold them accountable. Given that Christie is running for the highest office in the land, holding him to a high standard of transparency becomes even more important, but so far he hasn’t made it easy.

In the hole: Report finds states hiding $1.3 trillion in debt

Tuesday, September 29th, 2015

FranklinSlider Capitols

Much is made of the federal government’s debt, but what about debt at the state level? It may not have reached such eye-poppingly high figures, but it’s still a matter of concern. In its sixth annual Financial State of the States report, the nonpartisan accounting group Truth in Accounting (TIA) took a full account of government assets and liabilities. It found that even though many states claim to have balanced budgets, state governments have in fact accumulated a combined debt of $1.3 trillion.

“As a CPA looking at government finances, I found they were not being truthful and transparent about their financial condition,” Sheila Weinberg, founder of TIA, told “For years, citizens have been told that their home state budgets have been balanced. If that were true, state debt would be zero and Taxpayer Burden would simply not exist.”

She argues the generally accepted accounting standards the government uses are flawed for two reasons. First, she suggests that Government Accounting Standards Board that controls how the standards are set is not as independent as it sounds. Second, she notes that the government always has the power to tax, which reduces the incentive for sound fiscal policy – because if and when it comes up against a wall, it can always tax its way out.

Watchdog reporters covered the report and looked at the ramifications for their states. Here’s a state-by-state snapshot of what they found:

Seeing red in the Green Mountain State

Vermont’s $3.2 billion in debt may not seem huge compared to many of its counterparts, but with its relatively small population, Vermont’s budget shortfall works out to $14,300 for every taxpayer.

“The most common budget trick involves excluding pension benefits from annual budgets, according to the report,” wrote Watchdog reporter Bruce Parker. “Financial officers keep those liabilities off their balance sheets because the expenses don’t have to be paid until state employees retire. By ignoring expenses incurred in the present but paid in the future, states can claim to be balancing their budgets. In reality, the costs are being shifted to future taxpayers.”

These accounting tricks mean states like Vermont are in for a rude awakening next year. Weinberg said 2015 will be the last year they are used nationally, as standards have changed. Next year, states will have to add their pension liabilities to their balance sheets, and in 2017, retiree health care liabilities will also be added to state balance sheets.

A fuzzy picture

In Mississippi, Watchdog reporter Steve Wilson found that his state’s taxpayers weren’t getting the entire picture of Mississippi’s financial health. The law requires the state legislature to send the governor a balanced budget, so in order to eke out more spending, the proposed budget uses certain accounting principles to show only $139 million of the pension fund’s liability.

In reality, however, the Public Employees’ Retirement System of Mississippi, the state’s defined benefit pension plan for most state, county and municipal employees, has $4.6 billion in liabilities.

shutterstock_68403097More trouble in the Northeast

Ranking just below Vermont and well below Mississippi in debt-per-taxpayer is Pennsylvania. The state neglected to list $53 billion on its balance sheets, ranking third among the 10 Northeast states in hidden debt. In total, the Keystone State’s debt works out to $15,600 per taxpayer, the 11th highest in the nation.

Watchdog reporter Andrew Staub explains how spending can get out of control but still remain largely hidden: “Much of that debt can be traced to retirement benefits, which represent more than 50 percent of state bills. The unfunded liabilities have accumulated, as the state promised billions of dollars in benefits to retirees without adequately funding them, according to Truth in Accounting.”

The New York exodus

New York State was another hefty spender with $77 billion in unfunded liabilities for an average of $20,700 per taxpayer – second highest in the Northeast. Watchdog Arena writer Nicholas Fondacaro noted that each taxpayer’s share could grow even larger if New York’s exodus of workers continues.

Not so sunny in Sacramento

When California Governor Jerry Brown released his spending proposal last June, the Los Angeles Times wrote that California’s budget was “flush with cash.” The state claimed it had cut spending by $6.6 billion from 2013 to 2014, but due to obfuscating by the aforementioned accounting methods, TIA found that California’s hidden debt actually amounts to $111 billion.

From bad to worst

At the bottom of the pack is New Jersey, which TIA ranks as the worst spender with $160 billion in debt, or $52,300 per taxpayer. Upon further investigation by New Jersey Watchdog, however, reporter Mark Lagerkvist noted that the report actually understates the debt, and the proper figure is actually $10 billion higher. The discrepancy stemmed from a new valuation in State Treasury records that found New Jersey’s responsibility for unfunded retiree and employee health benefits has increased to $65 billion.

Local governments in New Jersey have troubles of their own. “The $170 billion hole does not include the debts of New Jersey’s local government units, which face a collective shortfall of $50 billion for pensions and health benefits,” wrote Lagerkvist. “Nor does it encompass the bond debts and other liabilities of the state’s 21 counties, 565 municipalities and 610 school districts.”

Not all doom and gloom

Though the overall picture is bleak, the debt situation isn’t quite as troubling in some states. Nebraska’s financials, for example, are actually in decent shape. The state has $5 billion in liquid assets and $3 billion in bills, for a “surplus” of $2 billion — or $2,800 per taxpayer. Even though Nebraska’s pension funds are mostly funded, the report found that it still hides some debt, but it’s in a much more manageable position than any of the aforementioned states.

Is there any hope?

Even though 49 out of 50 states have balanced budget requirements (Vermont being the exception), TIA identifies 39 states that have dug “financial holes” for themselves, while only a handful currently run true budget surpluses. The first step in reforms of any kind is transparency, which TIA and have focused on providing in our coverage of state debt. Government has proven more responsive to the electorate and much more capable of reform at the state level, so there’s still an opportunity for many of these states to turn their financial situations around.

Regulating community: Local government cracks down on Little Free Libraries

Wednesday, September 23rd, 2015

Little Free library1

In the age of The Shallows and Bowling Alone, which raise concerns over Americans’ tendency toward isolation and distraction, many citizens are pushing back through the Little Free Library movement. The idea is simple: foster community and literacy by sharing books, usually presented in a crate or small structure in one’s front yard where neighbors can access them at their leisure.

It’s hard to image such a movement stirring up controversy, but that hasn’t stopped local governments from using every technicality and clause in their ordinances to crack down on the popular book-sharing system. In a recent piece for The Atlantic covering the travails of Little Free Libraries, Conor Friedersdorf summarizes the problem in a scathing indictment of the governing class.

“Alas, a subset of Americans are determined to regulate every last aspect of community life,” he wrote. “Due to selection bias, they are overrepresented among local politicians and bureaucrats. And so they have power, despite their small-mindedness, inflexibility, and lack of common sense so extreme that they’ve taken to cracking down on Little Free Libraries, of all things.”

Friedersdorf goes on to quote an L.A. Times column by Michael Schaub that calls out local governments for their misplaced priorities in targeting the libraries.

“Crime, homelessness and crumbling infrastructure are still a problem in almost every part of America,” Schaub wrote, “but two cities have recently cracked down on one of the country’s biggest problems: small-community libraries where residents can share books.”

As Watchdog reporters have found over the past year, however, the abuse hasn’t been limited to just two cities, but many – everywhere from Wisconsin to Los Angeles. Last summer in Nebraska, for example, Watchdog reporter Deena Winter wrote about how city officials in Lincoln ordered a church to remove a library on the curb of its front lawn just two weeks after it was built – or face a potential fine of up to $500.

IMG_1490Members of the Indian Village Neighborhood Association, which erected the library, were quick to voice outrage. Director Barbara Arendt looked up the city code referenced in the letter to the church. It talks about an “immediate public hazard” and “public nuisance.”

“A library? Excuse me?” she said. “Does our city have its priorities messed up or what?”

Earlier this year in Shreveport, Louisiana, resident Ricky Edgarton received a cease-and-desist letter from Caddo Parish officials after he built a Little Free Library to share some of his many books. The parish, apparently, considered it a commercial enterprise, even though Edgarton wasn’t making any money off the venture. And even though a number of other Shreveport residents have similar libraries in their front yards, the Metropolitan Planning Commission singled out Edgarton because an anonymous caller complained about it.

Edgarton said it would cost him $500 to appeal the MPC’s decision, so in symbolic protest, he responded by putting a padlock around the structure (rather than moving the books back into his house). Eventually parish officials decided to temporarily suspend the rules on his structure.

Perhaps the most high-profile incident took place in the city of Leawood, Kansas, where 9-year-old Spencer Collins faced city citations after he worked with his dad and grandpa to build a Little Free Library as a Mother’s Day gift. To comply with the code, the Collins would have had to attach the storage box to their house – which largely defeats the purpose of having the library in the first place, as it reduces curbside visibility and makes it less accessible to potential users.

The city, in a massive lack of foresight, was blindsided by the backlash. Many of those who heard about the situation exhorted the city council to amend its code to permit the Collins family to keep their library in place. Bolstered by widespread support online and national media coverage, Spencer made his case to city officials in Leawood.

“I think Little Free Libraries are good for Leawood, and I hope you will change the code,” he said.

In response, the city granted him a temporary stay against their municipality ordinance until they could decide what to do about it.

Kansas’ Poet Laureate Wyatt Townley, who spoke out in support of Collins, made perhaps the most eloquent case for the homemade libraries.

“There’s something about a little free library, the intimacy of it … that as a small home for books, and as neighbor reaching out to neighbor, gives us something that a large library cannot,” she said. “And so, I think we need more, not less, community in this day and age. I think we need more, not fewer, readers and thinkers in this day and age, and I think that the Little Free Library addresses both these needs in a single, graceful gesture.”

Showdown in the Show-Me State: Missouri unions vs. right-to-work

Tuesday, September 15th, 2015


It’s been years in the making, but the right-to-work wave that swept into the statehouses of Michigan and Wisconsin crashed into Missouri this year, when state lawmakers voted to pass legislation that would ban unions from making membership a condition for employment.

Right now, half of the Union’s 50 states have right-to-work laws, but that figure will rise if Missouri lawmakers can gather enough votes to override Democratic Governor Jay Nixon’s veto. The first time around, 92 state representatives and 21 state senators supported the right-to-work bill. They will need 109 and 23 votes, respectively, to overcome the veto. But it’s not as large of a jump as it might seem. The statehouse has already overridden Governor Jay Nixon about two dozen times. Democrats are staunchly united against right-to-work, but a number of Republicans also opposed it.

What’s in a name?

Not surprisingly, union opposition to right-to-work has been staunch, but it has also been subtle and potentially deceptive at times. One of the groups fighting against the state’s right-to-work bill, for example, is The Committee to Protect MO Families. On paper, the group has a lot going for it – a name that resonates with voters, the support of Gov. Nixon, and a “broad-based coalition” that it says includes hundreds of supporting businesses and individuals.

In reality, however, Watchdog reporter Jason Hart found that 98 percent of the funding for The Committee to Protect MO Families last year came from just one source, Carpenters Help In the Political Process. CHIPP is a political action committee run by the Carpenters’ District Council of St. Louis & Vicinity and operates out of the union’s St. Louis headquarters. So, essentially, Hart explains, the group is a carpenters’ union front.

Hart found a similar case in a group called Preserve Middle Class Missouri. Like The Committee to Protect MO Families, its name doesn’t suggest union involvement,and it is the state-focused branch of Preserve Middle Class America, a nonprofit that bills itself as “a grassroots coalition of citizens and organizations.” What it doesn’t advertise, however, is that it is run by the Teamsters union.

Yet another organization, We Are Missouri, is even more shadowy about the groups behind it. Its website lists no union affiliation, no leaders’ names and no mailing address, but Hart found leads that point to its union backing. In 2013, for example, Missouri AFL-CIO president Hugh McVey was quoted in a news story as one of several spokespeople for We Are Missouri. Furthermore, in 2012 the group was paid $45,861 by AFL-CIO headquarters in Washington, D.C. for “state legislative advocacy,” and the AFL-CIO hosts a number of call-to-action forms on We Are Missouri’s website.

The “solidarity” of the bosses

It’s popular to harp on the problem of inequality these days (a concern often raised by opponents of right-to-work), but there’s still one place where huge pay gaps are apparently acceptable: in organized labor. As Hart found in his investigations into Missouri unions, executives and staffers of the state’s carpenters union earn nearly twice as much, on average, as the workers they represent. The average employee of the Carpenters’ District Council of Greater St. Louis & Vicinity earns $88,680 (50 of whom earned more than $125,000), compared to $50,120 for the average Missouri carpenter.

The trend holds true for many other Missouri union leaders. For example, Jim Kabell, the primary Missouri contact for the aforementioned Preserve Middle Class America, was paid a total of $177,081 by Teamsters headquarters and Teamsters affiliates in 2014 – that’s more than three times as much as the average Missouri family.

The hypocrisy also extends to the national level. AFL-CIO president Richard Trumka, for instance, is a fiery critic of CEO salaries, but Trumka himself earned $322,000 last year – all taken from union dues.

Union supporters argue workers shouldn’t care that union bosses are paid six figures because, they claim, executives at huge corporations are paid more. But according to data from the U.S. Bureau of Labor Statistics, average corporate CEO pay last year was $216,100. Not only does Trumka’s hefty salary top that by more than $100,000, but he is not even one of the 100 highest-paid union bosses in America.

The political reality

Regardless of how the votes in Jefferson City pan out, the fact remains that unions are on the decline nationally, having dropped from around 30 percent of all workers in the 1960s to around 11 percent last year. Missouri itself has seen a drop in union membership from 27 percent to 8 percent of workers in that span. But the most recent right-to-work progress has happened in union-heavy states like Wisconsin and Michigan.

In his report on how labor unions’ dwindling muscle in Missouri mirrors their national decline, Watchdog reporter Eric Boehm sums it up like this: “Right-to-work laws aren’t causing this trend, they’re a result of it.”

What opponents seem to fail to grasp is that right-to-work is not inherently destructive to unions. All it says is that workers in any given industry should have a choice whether they want to join a union or not. If the worker believes the cost of their dues outweighs the benefits of being part of a union, he or she should not be compelled to join. There’s even an argument to be made that right-to-work will help strengthen unions because it will foster competition, forcing them to improve their services. As Jason Hart found, it turns out that a majority of Missourians (and a majority of Americans, more broadly) do not believe that union membership should be a condition for employment.

As a result, it has become a losing issue politically. The fact that a veto-proof majority in favor of right-to-work is even a possibility speaks for itself. In the long run, it likely won’t matter whether the state legislature can pull together the two-thirds majority. Come 2016, Missouri politicians who threw their hat in with the unions are going to face a tough battle.