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Restriction Could Have Suppressed Bidding

In today’s Coast Star story, Mayor Doherty dismisses claims by Councilman Bean and former mayor Pringle that the provision in our bidding laws that requires bidders to participate in a state approved union apprenticeship program or pay journeyman’s wages was a factor in the 70% drop in the number of bidders on the second set of pavilion plans:

The responsible bidder language had no effect on the pavilion bidding process, according to Mayor Doherty.

The only thing that restricted what contractors would offer to bid, the mayor said, was the project labor agreement [PLA].

He noted that the final passage of the responsible bidder ordinance was passed on Feb. 18, he said, and the bids were received on Feb. 4. Furthermore, according to Mayor Doherty, the ordinance did not go into effect until March 10 — 20 days later.

“Basically, FEMA and state law requires that you pay a prevailing wage on projects using their money,” Mayor Doherty said. “What applied was the project labor agreement.”

“On both the boardwalk and the pavilions, in the bid specs, we put in something called a project labor agreement,” the mayor said.

The PLA requires contractors to guarantee they will pay a prevailing wage, the mayor said, which effectively “weeds out unscrupulous contractors.” It does so, according to the mayor, by guaranteeing contractors cannot bid low on a project, and then use cheap labor to cut costs.

First of all, Doherty says that the bids were received February 4th but that the offending ordinance wasn’t passed until February 18th.  But the ordinance’s introduction and first reading was on January 28th.  At that meeting I raised a big stink about it which the Coast Star reported on the following Thursday.  And actually that meeting was originally scheduled for January 21st.  (I don’t think a single meeting this year was held on the date it was originally supposed to be.)  I first was made aware of this ordinance when the agenda for that original meeting was made public on January 19th.  And some contractors may have heard rumors even earlier.

Also note that the clause allowing bidders to pay journeyman’s wages in lieu of supporting an apprenticeship program wasn’t added on until the evening the ordinance was passed.  So it’s possible that contractors may have had bids ready but decided not to send them because they weren’t part of an apprenticeship program and were not aware there would be another option.

Doherty attempts to shift the blame for the dearth of bidders on the latest plans to the Project Labor Agreement he enacted immediately after the storm.  That was a bunch of BS too, but it doesn’t explain why we got only three bids this time around when we got more than three times as many the first time we put this project out to bid.  The PLA was already in effect then.

Personally I think a lot of bidders are starting to think the Belmar pavilion project has become radioactive and they would just as soon not be involved with it.

What Does That have To Do With It?

The mayor’s defense, published in today’s Coast Star, of the requirement that contractors participate in a union apprenticeship program or pay “journeyman’s” wages, which are higher than the required “prevailing” wages:

The language modification came about, according to Mayor Doherty, after a contractor turned in payroll records that did not match those kept by the borough.

Without the language, contractors would effectively be able to bid at lower rates, promise to pay the prevailing wage and then not follow through, in order to maximize profits.

Who is he fooling?  One thing has nothing to do with the other.  Doing that, if it really happened, is fraud and is already illegal. The clause everyone is objecting to has nothing to do with it.

We need to get rid of this rule and just get the job done at the lowest expense possible under state law.  If anyone in Belmar thinks the LIUNA should get more support for their apprenticeship and training program they can make a private donation to it.  And if they think the workers aren’t being paid enough, nobody is going to stop them from going down to the construction site and giving the guys some cash out of their own pocket.

Cheap Money Causes Bad Investments

Adherents of the Austrian school of economic thought, such as myself, have been saying for some time that we’re in a stock market bubble and that when it pops there will be a lot of pain.  Now some in the mainstream are starting to say the same thing, even on CNBC:

I don’t know if it will be 60%.  I think the Fed will not allow that to happen and instead will print enough money and funnel it into the market to keep it from falling off a cliff.

The Keynesians who are running the show right now think that they can smooth out the business cycle by juicing the markets with printed money and low interest rates when there’s downturns, which seem to happen every five to seven years.  The problem we face today is that they never stopped juicing from the last downturn so when the next one happens it’s going to have to open up the fire hoses to make any difference at all.  Look for sharply rising consumer prices next year or maybe in 2016.  And if they try to tame the inflation by raising interest rates then the market will tank.  They’re stuck.

There’s a lot of bad investments and a lot of bad debt out there that need to be liquidated.  It’s going to happen one way or another.

The culprit is low interest rates.

When you’re investing money that you paid 6% or 7% to borrow, you have to be very careful.  You have to do your homework.  What ever it is needs to produce that kind of return just to break even.  But when you’re investing free money, or almost free money, just about any return at all is profit.  So investment flows into some pretty marginal enterprises.

It’s not that low interest rates turn investors into fools.  It’s, as economist and (my) stockbroker Peter Schiff says, low interest rates turn fools into investors.  Market-based interest rates would keep the amateurs out and prevent a lot of malinvestment and a lot of pain.

Bean/Seebeck Media Release

I guess they consider me to be part of the media:

 

BELMAR RESIDENTS VOTED AND NOW WANT ACTION

 
Last week the voters of Belmar soundly defeated a plan to borrow 7 million dollars to fund construction of a public safety pavilion at 10th Ave and a new Taylor pavilion at 5th Ave. It’s important to remember that the referendum was not about whether to build or what to build. It was about the 7 million dollars and the voters made absolutely clear in that special election that they don’t want to spend that much money on pavilion construction. Honestly, most constituents I’ve spoken with who voted “no” were not opposed so much to the plans as they were to the cost.

I’ve maintained all along that we can build those pavilions, or similar pavilions, at a much lower cost. We need to look at why the cost seems so much higher than it should be.

Of course the $1 million fee that Maser Consultants is charging us needs to be examined. There is no way that engineering costs should contribute that much to the cost of a project this size.

But the bigger problem, as I see it, is the anti-competitive language added to our municipal code earlier this year by ordinance 2014-01. The requirements made of any company bidding for a public construction project in Belmar now include this paragraph:

The provision of satisfactory evidence by the bidding entity, is that it provides or participates in an apprenticeship and training program approved and registered with the U.S. Department of Labor’s Bureau of Apprenticeship & Training, as well as a benefit configuration being no less than required under the New Jersey Prevailing Wage Act, or the bidder certifies that they will not pay any less than the journeymans rate as defined by the New Jersey Prevailing Wage Act, are minimally required to demonstrate that a bidding entity is “responsible.”

Companies that bid for work in Belmar, now, by statute, must either be a participant in an approved union apprenticeship and training program or pay a wage higher than the going rate.

We can see how this law has affected the competitive environment for public projects in Belmar. When the previous pavilion design – the one that included a two-story Taylor Pavilion – was put out to bid last year, this clause was not part of our code and ten companies bid for that work. But when the current plan was put out to bid this year, with that language now part of our code, only three companies sent in bids. This is not the way to get the best price.

I don’t understand why the mayor and majority of council members would pass laws that drive up the costs of public projects in their jurisdiction, costs that will be passed on to their constituents. We should not enact laws that mandate additional benefits or higher pay for workers when they work in Belmar than they get for the same work in other towns. Bear in mind that this law is not only about the pavilions. It will drive up the cost of all projects in Belmar including the major improvements to the Lake Como outflow system currently being planned.

This is grossly unfair to Belmar’s taxpayers and I respectfully, but strongly, call on Mayor Doherty and members of the Council to immediately remove this language from Belmar’s bidding requirements.

In order to resolve all the controversies surrounding the pavilion plans and start building as quickly as possible, I would like to see a first reading to amend this language from Ordinance 2014-01 at the next Borough Council meeting scheduled to be held September 9th and a second reading, public hearing and vote on the matter at the following meeting, which is currently scheduled for October 7th.

This is an absolutely necessary first step in moving forward on pavilion construction that the taxpayers of Belmar can afford.

If the mayor does not respond to this request, I consider it another affront to taxpayers and will take other actions to force the mayor to hear their voices.

Contact Information

Councilman Jim Bean
jbean@betterbelmar.com
732-620-0526

“Where’s That Confounded Bridge?”

The view from 5th Ave,

Before:

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Notice that you can see if the drawbridge is open from pretty far back, plenty of time to safely move to the left lane and take Main St. to 8th Ave and Rt 35 instead of waiting for the bridge to close.

Now:

5th Ave

By the time you can see if the bridge is open it is too late to change lanes.  Now you must go down River Ave and through the train station parking lot to get to 8th Ave and Rt 35.

“Inversion” Lies And Truth

The lies:

“I think most people would say: If you’re doing business here, if you’re basically still an American country, but you’re simply changing your mailing address to avoid paying taxes, then you’re really not doing right by the country and by the American people,”

Barack Obama.

“Burger King’s decision to abandon the United States means consumers should turn to Wendy’s Old Fashioned Hamburgers or White Castle sliders. Burger King has always said ‘Have it Your Way’; well my way is to support two Ohio companies that haven’t abandoned their country or customers  To help business grow in America, taxpayers have funded public infrastructure, workforce training, and incentives to encourage R&D and capital investment. Runaway corporations benefited from those policies but want U.S. companies to pay their share of the tab.”

“We need an immediate fix to forestall a flood of these dangerous inversions and a long term solution that lowers corporate tax rates while instituting a country-by-country global minimum tax,”

Senator Sherrod Brown

The truth (from Forbes Magazine’s Yevgeniy Feyman):

But why is inversion even necessary? This has to do with two elements of the American tax system.

For one, the U.S. has the highest statutory corporate tax rate in the OECD, a combined rate of about 39 percent when taking into account federal and state taxes. Effective tax rates are harder to come by, but a report from the Tax Foundation found that the U.S. had the highest marginal effective corporate tax rate among developed country groups. It can be profitable then for U.S. firms to move offshore to reduce tax liabilities.

But there is another factor at play here as well. Most developed economies use what’s known as a “territorial” tax system. Under such an approach, income is only taxed when it’s earned domestically. So a U.K.-headquartered company will only pay U.K. taxes on its British income. The United States, however, employs a hybrid between a territorial and worldwide system. U.S. citizens and corporations are required to pay U.S. taxes on all income – even if that income is earned outside of the country. (The tax system provides credits for foreign taxes paid, which reduce or eliminate double taxation of income.) But foreign income is only taxed upon repatriation – when it is brought back to American shores. At this point the incentives should be fairly clear – companies have every reason to avoid bringing their earnings back to the U.S. if they were earned in a lower corporate tax rate country. So it’s not hard to see why firms hold somewhere around $2 trillion abroad in unremitted earnings, according to the Center for Budget and Policy Priorities.

Simply put, a worldwide tax system puts American firms at a significant competitive disadvantage. In a paper I co-authored with my Manhattan Institute colleague, Diana Furchtgott-Roth, we explained how this plays out:

“If an American company operates in the United States and Switzerland, its domestic affiliate pays U.S. taxes at 35 percent. But its foreign affiliate pays U.S. taxes at 35 percent and Swiss taxes at 8.5 percent, putting it at a disadvantage vis-à-vis its foreign competitors. America allows companies to deduct the taxes paid to foreign governments from U.S. taxes owed to the Internal Revenue Service, but corporations always pay the full U.S. rate and are unable to take advantage of low-tax jurisdictions.”

To be fair, there is one other country in the world that taxes the foreign earnings of its citizens and corporations: Eritrea

Good Point

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The Week

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A $7 Million Bond That Would Have Passed

As a matter of fact, there never would have even been a petition drive against it.

$4 million for the two pavilions, $3 million for a permanent, effective solution to the flooding of Lake Como.

(Hey, south end people.  I’m the one looking out for you.)

Rebel Wins A Cause

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