Monthly Archives: July 2012

Taking “Underwater” Mortgages by Eminent Domain (Cont’d.)

The avalanche of news items concerning San Bernardino County’s idea of taking mortgages on “underwater” homes at their fair market value, agreeing with the homeowners who  would assume the debt obligation at a new, reduced figure (as opposed to the nominal loan balance), and then live happily ever after is gaining steam — at least in press coverage — like a runaway locomotive.

But the problem is that the press has presented us with contradictory stories on how this scheme would be implemented. Would “bundled,” securitized mortgages be included? Would only performing mortgages be subject to this scheme? Some reports say “yes,” to both questions, while others say “no.” Also, no one seems to give much thought to how those “underwater” mortgages would be valued under eminent domain valuation rules — not as simple as it may seem at first.

Most of these posts out there are not addressing the valuation problems inherent in this scheme. So don’t be hasty in drawing any firm conclusions, at least until we see what emerges from this sausage machine. Stay tuned.

For our earlier posts click here.

 

High Speed Railroad (Cont’d.)

A new dispatch from the Los Angeles Times informs us that the transportation nabobs who say they are about to give us our very own, la-la land “bullet train,” had been consulting successful high-speed train operators, namely the French SNCF and the Japan Railway Co., operator of the Shinkansen “bullet trains” over there. Dan Weikel and Ralph Vartabedian, High-Speed Rail Officials Rebuffed Proposal From French Railway, L.A. Times, July 9, 2012. http://www.latimes.com/news/local/la-me-rail-advice-20120709,0,4539140.story

The French wanted to work with us but they thought that it would save money to select a route along the Central Valley’s Interstate 5 corridor. One would have thought that they know what they are talking about, being that they have been successfully operating their Train a Grande Vitesse system with 1100 miles of track, running 800 high-speed trains a day. Which goes to show that the French may know something besides good cooking.  According to their approach,  money would be saved by using existing state-owned rights-of-way along a shorter, more direct Central Valley route. Their conclusion: “California has a wish list, not a plan.”

As for the Japanese who successfully  run the famous Shinkansen train, they “turned their attention elsewhere when the [California railroad] authority decided to save money by sharing tracks in major urban areas with freight and passenger trains.” Which sounds like a sensible thing for them to do. And if your memory runs that far back, you may recall that the Japanese are also experienced with the concept of Kamikaze, and they know that you don’t do it with trains, so they prefer dedicated high-speed tracks for high-speed trains.

High Speed Railroad (Con’t.)

 
Big news from California. The State Senate and the Governor worked out a deal whereby the senate gave its imprimatur to the funding of construction of the high speed rail, by voting in favor of issuance of some $5.9 billion — including $3.2 billion in federal funds, and $2.6 billion in state bond funds, and — here it comes,  folks — another $2 billion for “other projects, such as electrification of of Cal Train tracks in the Bay Area and improvements for Metrolink in Los Angeles County.” The latter expenditure is evidently the price the senate insisted on to fund the initial link of the high speed rail. And that link will be — ta, da! — in nthe California Central Valley  between Bakersfield and Modesto.
 
If you are thinking of hopping on the Central Valley choo-choo anytime soon, you can unpack your bags. The completion date is now estimated to be 2028, and the project has yet to overcome a few obstacles:
“It is unclear when construction on the largest infrastructure project in the country can begin: the state still needs a series of regulatory approvals to start the first 130 miles of track in the Central Valley. The plan also faces lawsuits by agriculture intertests and potential opposition by major freight railroads. Chris Megerian and Ralph Vartabediean, Vote Keeps Bullet Train Alive, Los Angeles Times, July 7, 2012, at p. A1.
 

The Eagle Flies in New York

Remember the Gyrodyne case? That was the one in which the New York State University took  245.5 acres of Gyrodyne’s land in 2005 for its Stonybrook campus expansion, and deposited $26.3 million. Nice try. It turned out that the value determined by New York courts was much highher ($98.8 million) and with interest and costs it came to $167.5 million, which we are informed by Long Island Business News has just been paid to Gyrodyne. David Winzelberg,  libn.com, NY State Pays $167.5M Gyrodyne Settlement, July 7, 2012. Click here .

The Obamacare Decision Revisited

A couple of days have gone by since the Obamacare SCOTUS decision, during which we have been treated — if that word can be used without doing violence to the English language — to the spectacle of the usual suspects, the assorted academics and other intellectual grandees, jumping through semantic hoops, explaining one of two remarkable propositions to the Great Unwashed: (a) that a penalty is actually a tax, which is another way of saying that a creature that looks like duck, quacks like a duck, and waddles like duck is really an ostrich, and (b) how losing a big landmark case before the U.S. Supreme Court is really a grand strategic victory.  And whichever of these two odd propositions they espouse, what a genius Chief Justice John Roberts is, for being able to pull this political rabbit out of his doctrinal hat.

The basic fallacy of these folks’ arguments is the assumption that SCOTUS will be vigilant and consistent in future cases in curbing the excesses of the Commerce Clause, and cautious in applying this newfangled when-is-a-penalty-a-tax notion. Not necessarily. There is a lesson to be learned from the court’s recent treatment of eminent domain law.

A scant eight years ago, SCOTUS announced that property rights and the Takings Clause that protects them are every bit as good as the revered freedom of speech protected by the First Amendment, and are not the law’s “poor relation.” Dolan v. City of Tigard, 512 U.S. 374, 292 (1994). Sure sounded good. But look at what happened shortly thereafter — property rights became not a poor but a destitute relation, and are not being enforced either by SCOTUS or by the lower federal courts. In fact, after the notorious San Remo Hotel case, property rights became the only species of constitutional “rights” whose conceded violation does not entitle their ostensible beneficiaries to judicial consideration on the merits as of right or at all — not in state courts and certainly not in federal courts. See San Remo Hotel v. San Francisco, 545 U.S. 323, at 342 (2005), Rehnqist C.J., O’Connor, J., Kennedy, J. and Thomas, J. concurring, but noting the resulting anomaly in constitutional law. There is a lesson in that, but we are willing to bet you a fine nickel cigar that the aforemetioned intellectual grandees will not deign to consider it as having any merit. We would sure like to be wrong on that one, but reality and harsh experience are not to be denied.

 

A New Trend in New York?

There is an interesting front-page story in today’s New York Times. Nelson D. Schwartz, Financial Giants Are Moving Jobs Off Wall Street, N.Y. Times, July 2, 2012 — click here. Motivated by the economic pressure of the recession, Big Apple’s financial biggies are realizing that salaries are so much higher in New York that they can save a bundle by moving jobs elsewhere. “[S]ervices like accounting, trading and legal support, and human resources and compliance are being shifted to places like Salt Lake City, North Carolina and Jacksonville, Fla.” And why not? The Times reports the case of one such employee whose $100,000 per year job was moved to Salt Lake City where the going rate for such work is $60,000 per year. So why not move it, particularly where these days most of this sort of work is done by a computer online. This work can also be streamlined by using the Best Employee Benefits Software to help manage every detail once inputted to the software itself, so the trend makes sense. It sounds like a no-brainer. This could be an opportunity for those looking for a new job, especially if they’re not needing a “New York Salary”. If you’re wanting to try for these job vacancies could even look into help with your resume to hopefully strengthen your chance at securing the position.

But this only raises the question of why are salaries so much higher in New York? Our take is that it’s closely related to the cost of housing. Rents and condo prices in Manhattan and other desirable places in New York have been outlandishly high for decades, so it’s hardly surprising that experienced employees whose work adds value to their employers’ enterprises. Their opinions may be rated higher too, given these workplaces often employ the use of employee morale surveys to keep tabs on their best talent, and who are therefore in a position to demand pay that is commensurate with their cost of living, are demanding and getting higher salaries than their counterparts in Salt Lake City or Charlotte, where you can buy a nice, 3500 sq.ft. house in a pretty good suburb for $300,000.