Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

Illinois Energy… Still Going Nowhere

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Since the energy industry has been deregulated the investment level in new electricity generation has dwindled to almost nothing. Firms do spend money retrofitting existing generating plants and keeping nuclear plants online a greater percentage of the time, but these measures generally only keep our existing capacity running and don’t put new plants on line to meet ever expanding demand.

The barriers against new generation are immense. They include:

1) fanatical resistance from environmentalists
2) a regulatory structure that not only doesn’t encourage new generation to be built but allows current owners to profit immensely from the current shortage
3) half baked government intervention that only further confuses the situation by seeming to help the problem while delivering nothing

I don’t think that there is any way to “bet” on the likelihood that new generating plants will be built but if there was such an opportunity it would be easy money to bet that any given proposal will ultimately be abandoned for one reason or another. I am not saying that nothing will be built anywhere, ever, but the odds of a given project surviving to fruition are close to slim and none.

Some recent ways a project can die…

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Passchendaele, WW1 & the Definition of “Attrition”

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Dan sent me a box of books around Christmas time. One of the books was Passchendaele: The Untold Story, covering that sad and bloody WW1 battle. Even though I have read extensively about WW1 history I mainly focused on the naval campaigns (Jutland, submarines, Gallipoli) and not so much the horrendous trench warfare battles, since they seemed devoid of strategic intent.

At about the same time in the news I saw articles about the passing of the last living German WW1 war veteran. Even though it is not necessarily rational, it seems odd to me as events pass into history with no living representatives; to some extent WW1 is as far back as the Civil War.

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Inventory

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I was walking through a mall recently when I saw a sign that used to be quite common but is now rather rare. They were closing the store to take “inventory” overnight, and the store was scheduled to re-open in the morning.

As an accountant, the word “inventory” immediately perks me up. Way back when I started in accounting, computers were in use for a variety of purposes, such as plant accounting and financial reporting, but they hadn’t really penetrated inventory at retail. Why? Because computing power was expensive, and they didn’t have a solid methodology for tracking individual items (i.e. the bar code sticker and reader).

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Those that can’t… consult

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Periodically I can’t resist poking fun at “traditional” journalism, where they take a simple thesis, “humanize” it with an interview of example, and then roll to a simple conclusion. The conclusion is often driven by the all-too linear narrator, who tells a story that is supplanted by corroborating facts.

In the usually-vapid managing your career section in the WSJ (these sections are much less illuminating than their hard-news elements) a recent article was titled “How one executive used a sabbatical to fix his career“.

While the article ostensibly showed the linear story of a person who was 1) having a hard time with their career 2) took a sabbatical 3) then performed better, the real story “behind the scenes” was much more interesting. Let’s review…

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Taxes In Chicago and Illinois

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The tax situation in Chicago, Cook County, and Illinois is unsettled.

On a semi-humorous note, the City of Chicago proposed a 5 cent / bottle tax on bottled water. Apparently the goal is to reduce consumption of bottled water since it is bad for the environment (compared to tap water, I guess). The real goal of course is to raise money, and as this article from the Chicago Tribune points out, a 5 cent increase in a vending machine isn’t a big deal but on a case of bottled water a 24 pack case would go up from $3.99 to $5.19, which is effectively a 20% increase (19.4% for sticklers out there). The City of Chicago claims that this tax would raise $10.5M, which is I guess 210M bottles of water annually or about 70 for each citizen on average (I guess you need to include tourists and commuters in the calculation, so that is maybe 50 per permanent citizen. The article claims that this might create a black market in bottled water, which is plausible, and in any case it would be interesting to see if the revenue target is achieved or if people find ways to avoid it.

And another funny note is that a tax on str*p clubs (don’t want the traffic) also was thrown out by an appellate court; apparently small clubs were exempt from a tax but the city tried to apply it to these types of enterprises.

It appears for now that the proposed 2% sales tax increase (to 11%, effectively the highest in the country) is dead. This article describes the recent measures that county government are starting to consider in order to deal with these cuts, including reducing their fleet of vehicles, thinking about new fees to pay directly for services (like court fees), and some more e-government opportunities.

The city council of Chicago passed the mayor’s budget featuring $83.4M in additional property taxes over the 2007 budget. The budget also features numerous “fee” increases such as the bottled water tax listed above totalling $276.5M.

For the State of Illinois, we are still hearing about “doomsday” predictions of reduced service for the CTA due to a lack of funding. There were two previous dates listed but emergency funds postponed the day of reckoning; the latest day scheduled (fliers are up all over the city and the message drones over and over on the buses and trains) is January 20th. The CTA claims it would have to eliminate 81 of its 154 bus routes and raise fares, among other cuts. No one knows what is true or not and how much of it is posturing, but it is already growing tedious.

It is unclear what is going on with the state of Illinois. Apparently the Governor’s gross receipts tax is dead; when I google it the links return right back to this blog where I wrote about it in the first place and I can’t see any recent references to it. Here is the most recent budget article I can find… I don’t know how this solves the situation yet.

I will update the posts when I figure out what is going on with the State of Illinois and the CTA. Of course we are doing NOTHING to fix our pension situation (check the link, it is a great article, definitely a post in of itself)… since we rank last in the nation by most measures. The key is to leave the state before it all melts down, I guess.

Cross posted at LITGM