Economic Recession Hits the North Pole

December 21, 2008
Dateline: Boston, Mass.

BPI: In a packed press conference held in Faneuil Hall, Boston, Massachusetts, Santa Claus today asked for help from the US $700 billion bailout package. Santa said that without some assistance this year, he would have to cut back on Christmas and may have to shutter the operations center at the North Pole. Santa has estimated that he will need in the vicinity of $39 billion in order to complete his deliveries “on time and on budget” this year.

Santa was in Boston over the weekend to meet with Massachusetts’s officials about his application for life science funding when accountants from the Canadian firm of D’Argent , Tout and LeMonde (DT&L) gave him the bad news. “Bad investments in the off season coupled with high energy costs have really hit us hard,” Santa explained. “Cold weather costs us greatly each year, but since global warming hit, the sump pumps to keep things dry with all the icebergs thawing is costing an arm and a leg.”

He added, “ Transportation is a killer and has been worse since the reindeer unionized. You’d think that one night a year isn’t bad working conditions, but we now have to pay for degree days and well, they are working on a holiday.” Santa went on to say that negotiations have been difficult this year as the coursers are looking for danger pay. “It was the darndest thing last year. We were flying over little villages in Alaska when some woman in a helicopter started shooting at us! Now they are nervous and we can’t have Dasher up there with a nervous stomach. We have to keep stopping and scooping.”

Santa said the economy has hit him in several ways. “No one keeps anything in inventory anymore, and we pay a premium just to keep to schedule. That has cost us more. We try to buy year round in anticipation, but storage costs increases our carrying costs and banks don’t like to see inventory sitting there.”

Santa’s spokesman, Herbie T. Elf pointed to a couple of investments gone badly this year. “Santa’s house has been in the family forever, and Mrs. Claus really likes it, but has been getting a little tired with all the wind and bluster up here. You think the Cape is tough on a paint job, come on up to the Pole. But this was a lousy year to get a new mortgage on the old house. Last year was good, but there is little demand this year and the banker said we could flip it for a nicer place in the magnetic north pole before our subprime rates kicked into a conventional mortgage, but we didn’t know that they demanded insurance because we are in a flood plain. That was a real killer.”

At this point, Santa interjected, “How was I supposed to know the pole sits on the Artic Ocean? I’m just a toy maker for God’s sake!”

Mr. Elf continued, “ The mortgage company was nice but very firm on our paying back the loan and we need relief. We counter offered, but the Tickle Me Elmos are not worth what they used to be.”

As for other investment problems, because of pending lawsuits, all Herbie Elf would say was, “ I can’t say anything but this, I believe that Mr. Madoff has been relocated to the “naughty” list, if you know what I mean.”

Mr. Claus was asked about his meetings in Boston with Gov. Patrick and the life science people. He said that meetings were cordial and the governor encouraged him to think about relocating to Boston. When asked why he was looking for life science money, all Santa would say was, “Where do you think we get all these identical elves?”

Mr. Claus said that the amount was firm, but how payments are made are open for negotiations. Payments could be divided between dba’s such as Father Christmas, Sinter Klaus, Kris Kringle, or Santa Claus. Santa did however point out that he would prefer to receive payments in the name of St. Nick as that preserved his religious tax-free status. “It just adds to the mounting cost if I have to pay taxes.” he shrugged.
An accountant from Mr. Claus’ firm, Joshua Heifitz pointed out that the cost could be worse. “Fortunately, we are in a down year “nice” list-wise. People like Gov. Rod Blagojevich, Mr. Madoff, investment accountants, and even a few from this state have driven down demand and we feel that we are comfortable with the aforementioned amount.”
Mr. Heifitz concluded the press conference by asking what people would do if Santa had to close shop. “If Santa closes, what’s left? Burger King meat scented perfume? So who’s happy with that shmutz? Someone’s got to help the good people. Besides, Santa Claus is too big for us to let fail!”
When asked, the White House refused comment. Senator Redd Stanton of Mississippi suggested that the timing of the request was suspicious. “Here we are a few days before Christmas and Mister Claus comes around with his hand out. I just think the timing is suspicious. What we really ought to be talking about is whether he needs some documentation before flying all over the country illegally. There’s something wrong with that." Senator Chris Dodd of Connecticut was far more open to looking at this request. “While I am concerned and disappointed that Mr. Claus flew down here in his personal sleigh rather than take a domestic animal, I have always said we need to keep the Ho Ho Ho in Christmas”, Dodd was quoted as saying.
Big Press International

Ice Storm Repair Efforts

I have spent some time looking at the damage done by an ice storm about a week ago. There are huge swathes of trees that came down on power lines and some people haven't had power for over a week. It is easy to blame the utilities when one doesn't have power, but this was unexpected and the damage was wide spread. I am looking at how we could better respond and will work with the utilities in order to make sure they respond quicker also. One of the issues is making sure that areas with smaller populations receive the same response as areas with larger populations. While companies have to prioritize resources, it doesn't matter to a customer whether they are the only customer in town to lose power or the whole town loses power. At the least we need to ensure people get timely, accurate info after a storm of this nature.

I have stayed on top of this situation by talking with each utility to measure their progress and by staying in touch with the Governor's efforts. My office has called each town and we have offered our help in getting paperwork to Mema/Fema offices in order to make sure we qualify for disaster relief aid.

I am worried about the long term effects of this storm and about subsequent storms. There are many trees down and many will die. I am worried about the long term effects on soil erosion and water tables. I also worry that emergency work to get lines up and power and telephone service restored have taken a long time and there are still trees that are down but not touching the power lines presently. these could come down and take wires in subsequent storms. We need to watch this closely.

The following is a press release that I issued on December 19. It contains a lot of information on what has been done; what needs to be done; who to call if power is not restored; and who farms should call over physical losses.

Bosley Comments on Power Outage and Restoration Efforts

Last Friday, parts of the Commonwealth – particularly in the Worcester area and along Route 2 throughout Berkshire and Franklin counties – were devastated with an ice storm that left hundreds of thousands without power and destroyed hundreds of trees.

Representative Daniel E. Bosley (D-North Adams) surveyed the damage around the First Berkshire District earlier this week. “Despite the progress that has been made since last week, I am gravely concerned about a recurrence of downed wires due to fallen trees that have not been cleared given the forecast of two or three storms in succession. It is imperative that everyone work together to restore power to homes and businesses and clear the roads for safe travel and emergency vehicles.”

The storm had far-reaching effects for all utility companies. For example, approximately 20,000 Western Massachusetts Electricity Company (WMECO) customers were without power as a result of the storm – 1,354 in Berkshire County. As of today, more than 17,500 of those have had their power restored with 48 customers remaining – down from 199 yesterday – in Savoy and 13 in Franklin County – down from 88 yesterday.

With over 1,000 line and tree crews as well as an additional 1,300 support personnel working throughout the Commonwealth, National Grid has restored power to all but 13 houses in Florida and 200 in North Adams. They have fielded over 51,000 phone calls and identified 4,000 individual items that require the company’s attention, such as downed lines, open circuit breakers, trees leaning on electrical equipment and broken poles. National Grid customers that lose power can call the customer service center at 800-322-3223 so that a restoration crew can be deployed in a timely fashion.

Verizon had 4,000 lines down but as of Wednesday, they have replaced 900 poles. “Although electricity has not yet been restored to everyone, I applaud the rapid responses of the local utility companies and the state’s emergency management services,” said Bosley. “Given the enormity of the damage, crews have worked hard to restore service.” Most of the utilities have said they hope to have all power restored by Saturday.

For those who remain without power or lose power this winter, Rep. Bosley reminds them to adhere to a few practices to prevent the pipes from freezing and to keep a fuse from blowing when power is restored. According to the Massachusetts Emergency Management Agency (MEMA) website, “to keep pipes from freezing, wrap them in insulation or layers of newspapers, covering the newspapers with plastic to keep out moisture; let faucets drip a trickle of water from the faucet farthest from your water meter to help keep pipes from freezing; if pipes freeze, remove insulation, completely open all faucets and pour hot water over the pipes, starting where they are most exposed to the cold. A hand-held hair dryer, used with caution, also works well; in order to protect against possible voltage irregularities that can occur when power is restored, you should unplug all sensitive electronic equipment, including your TVs, stereo, VCR, microwave oven, computer, cordless telephone, answering machine and garage door opener.”

For the towns that submitted a preliminary damage assessment to MEMA, the state will sort through to estimate what the state is capable of funding. Following that they will work with the Federal Emergency Management Agency to financially assist those communities who dispersed otherwise budgeted funds to provide for the clean-up and any damages sustained to residences and businesses. Rep. Bosley said, “I have been working with MEMA and the Patrick Administration to ensure all cities and towns in the district are accounted for and I am particularly worried about the long-term effects of all of the damaged trees, which could lead to soil erosion and affect the water tables in the future.” As of yesterday, preliminary damages were estimated at around $2.6 million. With more winter weather on the way, those costs will likely increase.

In addition to that, Rep. Bosley recognizes that a lot of damages have been sustained at local farms. For farmers who have suffered physical losses due to the storm, they are urged to call and report losses to the local Farm Service Agency (FSA). For Berkshire County, the contact information for the Pittsfield office is 413-443-1776 Ext 100 and the Franklin County FSA in Greenfield can be contacted at 413-772-0384 Ext 2.

Following the storm, Governor Deval Patrick declared a State of Emergency. The declaration of a State of Emergency will enable the Governor to take the appropriate steps to mobilize many of the Commonwealth's assets, such as the National Guard, and conduct other emergency business to assist local communities is their response to and recovery from the many impacts of this winter storm. If you have questions or need assistance during this emergency, contact Mass 2-1-1 by dialing “2-1-1” or visit www.mass211.org.

National Grid customers that experience a loss of power can call the customer service center at 800-322-3223 so that a restoration crew can be deployed in a timely fashion.

Paying for our Roads

Over the past few years, Massachusetts has struggled as to how we pay for our roads system. We incurred a huge debt during the construction of the “Big Dig” project in Boston. This project aided in the transportation of cars through Boston on the North South highway. The rest of the state complained about paying for this. But the issue is complicated. On one hand, we needed to get traffic through Boston faster. The expressway was built for less than 50,000 cars per day and was handling over 250,000 cars per day just before the Dig was opened. It was clear that, given the amount of activity in this area, we needed to do something like this. Given the amount of revenue generated by business activity in this area, it is in the interests of everyone in the state to ensure that a better roadway was constructed. It also brought in a tremendous amount of federal dollars and this fueled our economy with goods, services, and salaries.
On the other hand, this project sucked highway money out of the rest of the state and many projects were left undone. These projects were, and are, just as important as the Big Dig to those areas around the state stifled by lousy transportation.
There are many other considerations. How do we rebuild a reliance on rail for both passenger and goods? How do we rebuild our regional transportation? Are there ways we can lessen our reliance on cars and use more enviro-friendly mass transportation? Is this fiscally possible given the problems of the MBTA in Boston?
However, for today, let’s just look at our roadways. It seems to me that we need to find a way to look at a statewide plan if we are to reorganize and modernize our highway departments or systems. The Big Dig grew far larger than anyone imagined. In doing so, it ate up a generation of highway funding resulting in a crisis today. We can lay blame and I am sure in hindsight that a better job could have been done in managing the financial aspects of this project. But the fact is that the Dig was the largest construction project ever done in America and there were not enough state and federal auditors to watch over something of this size. And the Big Dig was first proposed as part of the Eisenhower Defense Highway bill passed in the 50’s. Naturally the price grew with inflation, but also with the cost of such things as steel that far outgrew inflation. It was expensive but necessary.
Whatever the reasons, the state is charged with paying their fair share and until we come to grips with this, we can’t spend money on the rest of the system. That has been the problem. The state didn’t come to grips with this project, as it was ongoing, the federal government was complaining about the size and demanding we put together a funding scheme. Consequently, a lot of this debt (over $2 billion) was given to the Massachusetts Turnpike Agency. That has lead to fiscal problems at the pike and lead to toll increases that place the burden on the people who travel from the western suburbs of Boston. Since they don’t use the north south route through the Big Dig, they are complaining about paying for the roadway. The same can be said for the people in some neighborhoods in Boston who are looking at $7.00/day tolls to get to work. The people in western Massachusetts don’t want to pay for this as they think that their roads haven’t been done because of this project. So what do we do?
The Governor wants to merge the transportation systems of the Massachusetts port authority (MassPort), the turnpike (MTA) and our highway department together. There are problems with this. First, MassPort cannot commingle federal moneys from the airport together with other funds. This is a bad fit and since 9/11 they have struggled fiscally themselves. As for the MTA, they have their own outstanding bonds that will have to be reconciled if they merge. This is very complex. And I have said this could be good or bad depending on whether the rest of the state will look like the turnpike or the turnpike will look like the rest of our roads. But the largest problem is that this generates little towards resolving the biggest issue; that of the big dig debt. The agencies are like three people who go out to lunch and get a $75 bill and only have $60. They can pass the bill around, but ultimately, they still only have $60! The issue here is about raising the revenues to pay for the kind of roads and bridges we want.
There are currently four ways that have been suggested to do this.
1. The Senate has suggested that we take a look at privatizing the turnpike. This has had mixed results around the US. Moreover, that gives us money up front for long term leasing or purchase of roads. Will future legislatures run through this money resulting in more problems in the future or will they salt that money away and use it over the course of the years of the lease?
2. Can we offer ways to cut back expenditures in order to make the transportation agencies run leaner, putting more money into retiring debt and fixing roads? There are always ways to squeeze money out of the budgets, but we need to be cautious about what that means. One of the ways that we “squeezed” money out of the budget while paying for the Dig was by cutting back on the design work in the 90’s. That led to jobs around the state being postponed multiple times for years.
3. We can raise tolls. This is unacceptable to many as they pay tolls but don’t feel that others are paying their fair share. That is true. A part of the state is paying greatly increased tolls while others pay nothing, including people who use the big Dig on a daily basis. And the tolls in western Massachusetts were taken down years ago despite the studies that find that most of those tolls were paid for by out of state users of the pike.
4. We can raise the gas tax. This hasn’t been done since 1992 and we are below the national average in gas tax. A law was passed in the 90’s that ensured all the gas tax was actually used on our roadways. This seems more equitable since everyone pays it and it is a consumption tax. The more you drive, the more you pay. However, it is tough to raise a tax during a fiscal downturn. And, people in rural areas such as mine know that cars are a necessity and rural areas mean that services are farther away. While an urban area trip to the grocery store means around the block, in some towns it means traveling 15 miles both ways. Is this equitable?

I am sorry that this is such a long post, but this is a complicated issue and a thorough discussion could take up volumes. It is also a Hobson’s choice that may not have a right answer.

I think we need to do a little of everything in order to be equitable and to solve this problem. It is a drag on our economy and people are paying more for their cars through accelerated tire wear and realignments and the like because our roads are bad. We are losing commerce because our roads are bad. We need to fix this.

I believe we need to look for all the savings we can wring out of the systems. This means that the turnpike can no longer fund tourism grants or plowing adjacent roads. We need to increase our electronic passes and decrease our toll takers. We need to reinstate the western tolls to pay for the western maintenance. We need to take look at tolls at the borders of the state. And I am leaning towards an increase in the gas tax... a modest increase the gas tax. Gas has gone from $4.03/gal to $1.73. (That is the range I have paid in the last year.) If we had passed a gas tax at $4.03 to take effect of increasing our tax $.01 for every $.25 drop in price over the last few months we would have raised the gas tax by $.08 and no one would have noticed. We need to raise taxes between $.06-$.09. I think that as gas prices continue to drop, this is not an unfair burden given that it has not been increased in over 16 years. We could even provide a sliding scale to decrease this if gas prices rise precipitously in the future. This actually makes sense given that higher gas prices lead to decreased use of roads. Again, this is complicated as we need to ensure highway bondholders that we would continue to raise money to pay for bonds. So the state would have to make commitments on this, or find ways to increase mass transportation.
However, and it is a big however, we need to ensure that this increase creates a meaningful state plan to repair our roads ALL across the state. This includes funding the redheaded stepchildren of our system, the regional transportation authorities. In order to gain acceptance, people need to know that their roads will be taken care of.