All posts by Tim J. Clark

2020 Assessed Home Values

Stats Indiana provides another link to the  Indiana Real Estate Market reports that includes information by county.

Example: 2020 Brown-County Local Market Update – 2019-2020 and Year to Date Sales provided by Indiana Association of Realtors.

Department of Local Government Finance (DLGF).
FACT SHEET – Trending – Annual Adjustments of Assessed Values

Brown County GIS System. Includes 5 years of data on assessments, tax payments, and description of properties.

Overview of the process.  The Indiana Association of Realtors provides information on sales to include the breakdown by counties.  The county assessor reviews sales by “neighborhoods” that cover an area broader than the immediate area in order to identify the trend of sales.  The calculation of assessed value accounts for “outliers” — property sold statistically higher than the norm.  The median value (the middle point where half of the homes are higher and half are lower), is used to calculate the assessment.

A further check on the assessment is for the property owners to obtain an estimate on market value from local realtors.

The County Auditor uses the information provided by the assessment to calculate the tax payment and the County Treasurer bills the property owners and collects the payments.

MORE INFO – Department Local Government Finance (DLGF)

DLGF – Property Tax Terms and Definitions

DLGF Property taxes are due twice a year. You will receive a statement with upcoming due dates in the Spring.  Current property tax due dates are:

  • May 11, 2020
  • November 10, 2020

DLGF Tax Bill 101

DLGF: Graphic – Assessment_to_Tax_Billing_Start to Finish 

181101 – Assessment-to-BudgetProcess

 

The State of the Union – Perspective from the Atlantic

The Atlantic was founded in 1857.  Their December 2019 Issue:  The Atlantic Devotes Its December Issue to a Special Report: “How to Stop a Civil War”  Essays consider how America is coming apart—and prospects for rebuilding a more civil, functional, and unified society.

June 2020 Issue Atlantic – Special Preview.  We Are Living in a Failed State.  The coronavirus didn’t break America. It revealed what was already broken.  By George Packer

  • When the virus came here, it found a country with serious underlying conditions, and it exploited them ruthlessly. Chronic ills—a corrupt political class, a sclerotic bureaucracy, a heartless economy, a divided and distracted public—had gone untreated for years. We had learned to live, uncomfortably, with the symptoms. It took the scale and intimacy of a pandemic to expose their severity—to shock Americans with the recognition that we are in the high-risk category.

Apr 28, 2020. Commentary on the article at at RealClearPolitics.com.  The Perilous State of Our Union, and How We Got Here by Les Francis

May 2019 National survey of citizens sponsored by the American Bar Association

  • The nationally representative poll of 1,000 members of the American public found troubling gaps in their knowledge of American history and government, as well as constitutional rights. One in 10 think the Declaration of Independence freed slaves in the Confederate states and almost 1 in 5 believe the first 10 amendments of the U.S. Constitution are called the Declaration of Independence instead of the Bill of Rights.

  • In [the] 2018 version of the Woodrow Wilson foundation test, only 13% of Americans could accurately tell you when the Constitution was ratified, 60% didn’t know who the U.S. fought in World War II, and only 24% correctly identified a single thing Ben Franklin was famous for. (Some 37% believed he invented the lightbulb.) In the 2019 version of the survey, only 43% knew that President Wilson was the U.S. commander-in-chief during World War I, which was particularly galling to the poll sponsors.

 

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Music Center’s Sustainability and Future

Updated: Apr 25, 2020

As a result of the Covid-19 pandemic, the Brown County Music Center (BCMC) can’t make their mortgage payments. On April 15, 2020, the county council approved a loan for $150,000 to pay the next three months interest payments.

The $150K was borrowed from the county motor vehicle highway (MVH) fund which has to be reimbursed by the end of December.   A six-month extension can be granted.

Economic Assessment – IndyStar Pandemic could lead to deficits in millions 20200426

  • The city of Indianapolis and its tourism industry are bracing for budget shortfalls stemming from the coronavirus pandemic, an unknown economic impact that has already prompted a multimillion dollar budget cut for the city’s marketing agency and hiring freezes elsewhere.
  • Convention and visitor bureaus throughout the state are going to have to rethink their mission, Hicks said.  “I think this is an existential moment for the tourism industry and the way it’s supported in the state,” he said, noting a potential need to end marketing efforts in smaller counties and spend the money in more efficient ways.

Questions

  • Does the county have a legal liability to pay the mortgage? No. Per councilman Darren Byrd who is also a member of the Maple Leaf Management Committee, “This (150K) was an emergency loan to make the interest-only payments. It wasn’t done because of an obligation; just to mitigate a disaster. As with any mortgage, default could lead to eventual foreclosure.
  • How will the 150K loan be paid back, when, and by whom?
  • Are county taxpayers legally obligated to pay the mortgage?
    • No. Per councilman Darren Byrd who is also a member of the Maple Leaf Management Committee.
  • Would a default negatively impact the county bond rating?
    • Yes. Per councilman Darren Byrd who is also a member of the Maple Leaf Management Committee, a “foreclosure could have a negative rating effect.”
  • Why would a default affect the credit rating?  The county only loses a marketing budget for tourism which is a relatively small contributor to the county tax base.
  • What is the impact of a negative bond ranting?  Would this lead to higher interest rates being paid for loans and possibly make it difficult to even borrow money?  
  • If there was a downside to a default, was this fact and the details communicated by the attorney (s) to county government officials?
  • If taxpayers are not currently liable for paying the debt as currently structured in contracts, can this be changed to obligate the taxpayers?
  • Will there be a recurring need to loan money from the MVH fund and then pay it back with other tax money?  Is this a work-around to claim that income and property tax is not being used to pay the mortgage or any other operating expenses the venue may need?
  • If a default on the mortgage, what happens?  Would the venue appraise – at or over the amount borrowed?  Is it correct that all the revenue from the innkeeper’s tax would be transferred to the bank until the debt is settled?
  • The Convention Visitors Bureau (CVB) relies on revenue from the innkeeper’s tax for marketing and promotion of tourism – that includes funding of the Visitor Center.  Will they also be requesting a subsidy from the county taxpayers?

What Is a Credit Rating?  A credit rating is a quantified assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money—an individual, corporation, state or provincial authority, or sovereign government.

What is a Bond Rating .  A bond rating is a way to measure the creditworthiness of a bond, which corresponds to the cost of borrowing for an issuer. These ratings typically assign a letter grade to bonds that indicates their credit quality

Health and Safety.  Without a vaccine, treatment, immunity, what will be the risk from tourists to county residents?  Brown County has one of the oldest populations in the state.

Promise to County Taxpayers

At the time this project was approved by the county council, Council President Dave Critser identified the worst-case scenario as the economy crashing and “told the audience twice that income and property taxes would not be used to pay for the venue.”

  • Brown County Democrat, Council approves pledging innkeepers tax to fund Maple Leaf venue by By Suzannah Couch – Nov 28, 2017.

    • Resident Tim Clark asked if the resolution could be changed to put county taxpayers on the hook if the project runs into “difficulties or the strategy changes.” … Critser said that would require a new resolution to be passed, and county commissioner Diana Biddle said that the county “can’t do a bait-and-switch that way.” …  “They can’t choose to add the property taxpayers later,” Matthas said. “They would have had to get it approved now, and they didn’t.”
  • Brown County Democrat.  Steps taken to fund Maple Leaf venue By Suzannah Couch – Nov 17, 2017 – Quotes:
    • “With the loan, the bank requires only the innkeepers tax and the mortgage as collateral (Herring)
    • County commissioner Diana Biddle asked attorney Pitman if Maple Leaf debt could ever be put on the county taxpayer in the form property or income tax
      • Pitman said the debt would not be put on the county taxpayer; it’s on the innkeepers tax. Pitman said the loan documents will limit the financial liability only to Maple Leaf revenue and the innkeepers tax.  
    •  Commissioner Dave Anderson said there are no liabilities to county taxpayers under the deal. “This is a good thing for Brown County. I can see no exposure to liability for our taxpayers, and that’s a biggie for me,” he said.

The innkeeper’s tax is collateral for the loan.  The innkeeper’s tax, by statute, is a county asset and is controlled by the county council that would be surrendering this asset. On default, the bank then takes control of the revenue stream provided by the innkeeper’s tax.

  • If the county directly opted to borrow money via a bond for this venue (as opposed to using the revenue from the innkeeper’s tax as collateral), taxpayers would have had the option for a remonstrance. The Redevelopment Commission (RDC) was the lead with this option and was doing the analysis and planning for the public meetings. The RDC was cut out of the process when it was determined that the innkeeper’s tax could be used as collateral.

Background Info

Summary of the project  GUEST OPINION: Time will tell what music center’s impact will be by Tim Clark

Project History and Timeline  BCMC: Brown County Music Center (Maple Leaf): For the Record By Tim Clark

Summary of issues impacting the decision-making process

Leverage.  The bank does not want the building and it may be difficult to dispose of the venue with the uncertainties in the market. In addition to the recent 90 days adjustments in payments (interest only), what additional options is the Bank willing to consider?

What’s the new norm?

  • Best Case. The pandemic is temporary and things return to normal. County funding helps bridge the gap.   How much should the county fund and for how long? Will the taxpayers be reimbursed?
  • The situation does not return to normal. How long do county taxpayers subsidize the venue? What additional funding would be needed to support the venue? WIll the county also be asked to fund marketing for tourism?

Fairness and Equity.  Is a subsidy for this venue and tourism industry fair?  Most county businesses and most if not all county taxpayers are financially impacted by the pandemic.

Cost-Benefit.   The justification for the subsidy (150K) per Commissioner Biddle: “…the music center is part of the foundation for the county’s economic recovery so it’s important for the county to step in and help now.

  • Tourism – $42.7 Million in gross revenue, 543 jobs, avg salary of 19K. (2017 Study – Rockport Analytics)
  • County residents – Adjusted Gross Income in 2018 – $408 million, reported on 7,000 tax returns. (About 7.400 residents in the labor force with over half commuting outside the county for work. (StatsIndiana).
  • County funded by income and property tax. The “State” is primarily funded by “Sales Tax” and Income tax. Thus the incentive for an innkeepers tax to promote tourism.

Patrons of the Arts.  Can money be raised from supporters of this venue and other benefactors?

Financials.  What is the financial condition of the venue? What financial information has been made available? Income Statement, Balance Sheet, Profit and Loss statement. Accounts Payable and Receivable reports? Cash flow and break-even analysis?

Community Support. What is the community support for a bailout?  What is the risk of protests and boycotts by county taxpayers of an industry that is a relatively small contributor to the overall “county” economy?  Will the issue create animosity against tourism?

Political Change.  Will the issue results in a demand for political change?  The Republican party has a monopoly on political power and were vocal advocates for this Music Venue.  All three commissions and 6/7 council members that voted for this project are Republican.

Covid-19 Impacts.  Uncertainty is expected to remain until there are effective treatments, a vaccine, wide-scale testing, and herd immunity.

  • Impacts on Large 2,000 seat venues? – TBD
  • Brown County has one of the oldest populations in Indiana.  Three gas stations, one Pharmacy, and one grocery store. No hospitals and no 24×7 medical clinic.  What will be the risks posed from tourists to the county?

Economic Outlook:  Depression, recession, quick recovery ….?

County Finances and Tax Increases.  What will be the drop in income and property tax? How much will the county be able to borrow? How much can the county increase property and income taxes? What expenses can be cut?

Support for a better (open) political system?

Brown County is a 2.0.   As a former defense and military analyst, assessing the capabilities of groups, organizations, countries (e.g., systems) was one of the tools of the trade.

One of the simpler models for assessing capability used a scale of 1 (low) to 5 (high capability). The norm is a 2.0 which can be defined as “good enough – it works for us.”

In the case of Brown County, we have a “closed” political system as a result of a one-party monopoly on political power which can be reinforced in every election. The plus side for some in this closed system is that major decisions, despite any opposition, can be made relatively quickly with no repercussions at the ballot box. The downside is that this is less effective than an “open” system that can assimilate feedback and work to identify the best solutions for the county.

The risk of a closed system is not only suboptimal decisions and abuse of power which is a given, but you can build up a simmering opposition to the status quo that can eventually lead to conflict. This conflict can be expressed on social media, at public meetings, and through protests and boycotts.  In a military context as we’ve seen throughout the world, a closed system provides the motivation for insurgencies, revolutions, and war.

In anticipating the local impacts that the Covid-19 crisis is having and may have on the county, to include potentially unprecedented amounts of borrowing, potential tax increases and subsidies for favored projects, groups and industries, we do have choices.

For over the past two years, volunteers in the community have been working to discover and develop a more collaborative and transparent leadership approach. We are in the “test” or proof-of-concept phase.  More info via link below:

Brown County Leader Network – a collaborative and transparent leadership approach.

COVID-19 – Quality Management and Models

May 4, 2020. LinkedIn Post – Control Charts – Ontario

May 4, 2020Waiting for the Covid-19 Peak.  While this worldwide, unintended experiment continues we won’t immediately know if we have passed the peak.  By Donald J. Wheeler and Al Pfadt.

  • Sweden began to flatten its curve around April 12, but the Swedes were less aggressive in their efforts5. By the end of April they had lowered their average growth rate to 2.9 percent and had a total of 20,300 cases. Thus, while starting from the same amounts, in one month Norway added only 3,200 new cases while Sweden added 15,900. Such is the marvel of compound growth rates.
  • With a growth rate of 2.9 percent per day Sweden is on track to double its number of confirmed cases in 24 days (May 24). If the Swedes can further flatten their curve they can postpone this doubling and gain time before reaching 40,000 cases. With a growth rate of 0.7 percent per day Norway’s doubling time is 99 days. If the Norwegians maintain this rate of growth, they will not reach 15,000 cases until mid-July.
  • And we need to continue to try to flatten our cumulative curves simply because a flatter curve buys more time.

May 4, 2020. Quality Digest – Comment. An interesting contrast to our approach

  • I hope it is not bad form to be the first person to comment on our article, but I wanted to call attention to a link that I just discovered today that represents an entirely different approach to the one Don and I illustrate in this article.
  • The web address http://covid-measures.stanford.edu/ presents interactive models that permit one to ” try out” different assumptions regarding various aspects of Covid 19 in terms of certain parameters such as demand for hospital beds or the anticipated number of fatalities associated with certain containment scenarios.
  • I hope readers don’t get the impression from our article that we reject the utility of such models.
  • However, they serve a very different purpose than the one we take and both should be thought of as complementing each other.

Model – Stanford Univ.  Potential Long-Term Intervention Strategies for COVID-19

Coronavirus Policy Response Simulator: Health and Economic Effects of State Reopenings

Apr 28, 2020. Deming Institute.  India Fights COVID-19 with Control Charts BY 

April 15, 2020.  Can SPC save the world?  By Thomas Pyzdek

Apr 6, 2020. Quality Progress. Tracking Covid-19. How to let the data tell you what lies ahead By Donald J. Wheeler,  Al Pfadt. Kathryn J. Whyte

  • The first three intervention models—case isolation, home quarantine, and social distancing of those at risk of severe disease—make up an optimal mitigation policy. 
    • “The fourth NPI model was social distancing of the entire population. This model assumes this will reduce contacts outside the household, school, or workplace. The fifth NPI model was the closure of all schools and 75 percent of all universities.”

Mar 26, 2020. US News and World Report.   America Is Approaching a Deadly Tipping Point in the Coronavirus Pandemic, U.S. News Analysis Shows.  An examination of daily coronavirus deaths by country shows the U.S. is on a dangerous path that’s poised to worsen. By Steve Sternberg and Gaby Galvin  

  • Includes a control (SPC) chart.  Viewing the data in its entirety and over time offers a clearer window into the trajectory of the outbreak, one that isn’t clouded by noise and can detect meaningful differences in patterns that can inform official public guidance and decision-making.

    “With all the talk of ‘flattening the curve,’ we think the approach we used and our analysis sheds light on early signals of when the increase in new deaths peaks and the curve begins to flatten,” Perla and Provost say.

Mar 25, 2020. Quality Digest. The One Huge Mistake Quality Professionals Make in Preparing for Covid-19. Businesses need to think pessimistically in order to survive

  • The current guidance assumes a highly optimistic scenario, where we get very lucky. That’s not good advice, at all. We need to prepare for a moderately pessimistic scenario if we want to protect quality in our organizations.

Mar 25, 2020. Zero-Hedge. 12 Experts Question The COVID-19 Panic by Tyler Durden

  • Storm in a Tea Cup? LinkedIn. There is no question that the media is effective in whipping up emotions. Is the COVID-19 panic a storm in a tea cup?  by Dr. Tony Burns.

 

A Way Ahead – Post Covid recovery and prosperity

 A Way Ahead – Post COVID-19 recovery and prosperity
by Tim J. Clark

The government response (national, state, county) to the pandemic has been overly influenced by fear, emotion, politics, and ignorance.

Transitioning from Response to Recovery – Getting back to work

The 24×7 media coverage that thrives on controversy does not help.  I support the assessment identified in the article in Quality Digest magazine – “Tracking Covid-19 – How to let the data tell you what lies ahead”  that “case isolation, home quarantine, and social distancing of those at risk of severe disease—make up an optimal mitigation policy that will guide getting the country back to work.”  The issue that is just starting to surface is about community (herd)  immunity.

  • Community (Herd) Immunity. A situation in which a sufficient proportion of a population is immune to an infectious disease (through vaccination and/or prior illness) to make its spread from person to person unlikely. Even individuals not vaccinated (such as newborns and those with chronic illnesses) are offered some protection because the disease has little opportunity to spread within the community. Also known as herd immunity. Reference: CDC

Economic Depression

I’m also following the discussions on the macro-economics. The current situation has been assessed as being similar to the period between 1930-45. The Depression (1930) contributed to conditions that created conflict between competing powers that led to WWII, followed by a “new democratic world order” led by the U.S where the dollar became the reserve currency for the world.  In some future scenarios, the pandemic is projected to lead to a “depression,” heightened by tensions between the U.S. and the emerging power (China).

Hedge fund billionaire Ray Dalio participated in a Tedx discussion on the topic – “What coronavirus means for the global economy” where he states that  “This is not a recession; this is a breakdown. You’re seeing the same thing that happened in the 1930s.”  Comments on the discussion at Forbes:

In contrast to Dailio’s conclusions, CNBC in their review ” Ray Dalio predicts a coronavirus depression: ‘This is bigger than what happened in 2008’ by Tom Huddleston Jr.  remarks:

  • ” …. However, other experts believe this financial crisis is unique because it is a result of a health issue, a global pandemic, rather than an otherwise unstable or unproductive economy.  As such, they are more optimistic that the economy will rebound quickly once the coronavirus pandemic subsides.” 
  • “I would point to the difference between this and a normal recession: There is nothing fundamentally wrong with our economy,” Federal Reserve Chairman Jerome Powell told NBC’s “Today” in an interview last month.  In a follow-up interview with CNBC on Thursday, Powell reiterated his belief that the U.S. economy can have a “robust” rebound once the pandemic ends, though he is reluctant to offer a precise timetable for how long that could take.

Brown County

Regarding Brown County,  the Community Organizations Active In Disaster (COAD) works within a four-phase cycle:  Preparation-Mitigation, Preparedness, Response (the phase we are in now), and Recovery.

An optimal “Recovery” strategy is not likely without a successful transition to a “whole-of-county” strategy and plan that is supported by the Brown County community.

The county is funded by income and property tax and a depression/recession will reduce revenue. The county cannot print money and options of increasing revenue include a combination of cuts, borrowing, and raising property taxes.  The most optimistic and unrealistic scenario is that things go back to the way they were – this may be wishful thinking.

Regarding increasing county debt, the “temptation” may be to borrow money to fund a variety of special projects with the promise of economic miracles.

The economic engine for the county is residents that reported adjusted gross income (AGI) of $401 million dollars in 2017.  Tourism has been identified as the economic engine for the town of Nashville.  In contrast, in 2017, the gross revenue generated from tourism was estimated by Rockport Analytics at $42.7 million with a total economic impact of $22.6 million.

Relying on past county methods and practices to determine the priorities and direction of the county will likely be the preferred and initial approach. However, this approach is not capable of producing optimal results where everyone benefits, or at least, are not any worse off in the long-term.

Systems determine 85-100% of results and the capability of a system can be assessed on a scale of 1 (low) to 5 (high).  Brown County is governed through a one-party monopoly on political power that represents a closed system which would be assessed at a Level 2.

A Way Ahead? 

Albert Einstein remarked that  “We can not solve our problems with the same level of thinking that created them.”   For over the past two years, volunteers in the community with the support of the Indiana Office of Community and Rural Affairs, Purdue and Ball State, have been working to develop a new leadership approach as part of the Hometown Collaborative Initiative (HCI).  It introduces an open-system approach to economic growth and community development.

The initiative is referred to as the Brown County Leader Network. We are in the process of developing a website to help share information. In the interim, additional information is provided at the following. “Brown County Leader Network.

References

COVID-19 Recovery – Small Businesses, Unemployment, Govt

Small Business.  Below is information for small business owners (under 500 employees). Also included is information that addresses unemployment details for both workers and employers.

U.S. Small Business Administration page where businesses impacted by COVID-19 can apply for emergency assistance.

For Government, the Office of Community and Rural Affairs (OCRA) is also a source of funding for infrastructure-related (mainly water and stormwater), projects, but also public facilities and main street revitalization programs. (The county is in the process of applying for a grant for Phase II of a Stormwater project in Helmsburg.)

Sign-up for the newsletter to stay updated on likely future support to benefit Indiana communities adversely affected by COVID-19. It is expected that the balance of current funds (in the millions) will be redirected into a program whose sole purpose will be to benefit Indiana communities adversely affected by COVID-19.