Property Tax Exemptions Shift Burden to Neighbors

Some Arizona cities that recruit major shopping malls and high-rise buildings have used a special tax incentive that waives most of the development's property taxes, often for 50 years or longer. A Goldwater Institute investigative report found development projects valued at more than $2 billion pay only a small fraction of what they otherwise would in property taxes. As a result, local governments raise property tax rates for nearby businesses and homes that don't qualify for this special tax break.

To qualify for the property tax exemption, building developers transfer ownership of the property to the city and then lease it back to operate. State law requires that the developer pay a Government Property Lease Excise Tax, or GPLET, that is supposed to replace a significant portion of the waived property taxes. Mark Flatten, a Goldwater Institute investigative reporter, shows that GPLET projects throughout Arizona pay at least $31 million less in property taxes each year.

"Arizona's high property taxes deter businesses from moving here. It's no surprise that companies look for ways to lighten the tax burden using the GPLET system. However, any time you offer a tax break to one business, it should be available to all," said Darcy Olsen, president and CEO of the Goldwater Institute. "GPLET programs that single out select businesses for deals essentially leave neighboring businesses and homeowners with the tab."

Most GPLET projects are located in Tempe and Phoenix, where most downtown high-rises built since 1996 benefit from a property tax exemption. Other communities have started to approve GPLET projects as well. For example, Mesa has agreed to waive an estimated $776 million in property taxes over 50 years for a future convention center and luxury resort near Phoenix-Mesa Gateway Airport. Mr. Flatten reports cities generally don't worry about lower property tax revenue because property taxes are a relatively small portion of their budgets.

School districts and community colleges, on the other hand, depend more heavily on property taxes. But school districts haven't had to worry either, because the state government had filled the gap created by GPLET projects. That will change this year because lawmakers have changed the law that protected school district budgets. Now, GPLET projects likely will prompt school districts to raise property taxes or reduce spending. "It's a great concern. It shifts the tax onto our property owners, our homeowners, and it's a huge shift," Antonio Sanchez, superintendent of the Wilson Elementary School District in Phoenix, told Mr. Flatten.

Some lawmakers have tried in the past to change GPLET laws to limit the length of the new leases and to increase the amount that new projects have to pay in excise taxes so that it is more comparable to what businesses that do not have a special exemption are required to pay. These efforts have been thwarted by lobbyists for cities and developers who expect to benefit in the future, Mr. Flatten reports. State Representative Rick Murphy has introduced a bill this year that will try to curb the practice.

The Goldwater Institute recommends that governments pursue economic development efforts that would benefit a wide range of businesses, instead of giving a handful preferential treatment. The Arizona Supreme Court recently reinforced the Arizona Constitution's "Gift Clause," a prohibition that GPLET leases might violate. Examples of more appropriate business incentives would include reducing property tax rates for businesses to match the rates paid by homeowners and the expansion of enterprise zones in which reduced tax rates are offered to all businesses.

"These deals show that Arizona's tax burden is too high to attract business. That is easy to correct without giving special privileges to the few. Lower property taxes to competitive regional rates for all of our businesses and help Arizona grow its way out of the recession," said Ms. Olsen.

Read "Shifting the Burden: Cities Waive Property Taxes for Favored Businesses" online here.

The Goldwater Institute is an independent government watchdog supported by people who are committed to expanding free enterprise and liberty.
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Pew Study Finds States Face $1 Trillion Shortfall in Retiree Benefits

There was a $1 trillion gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees' retirement benefits and the $3.35 trillion price tag of those promises, according to a new report released by the Pew Center on the States. The shortfall, which will have to be paid over the next 30 years by state and local governments, amounts to more than $8,800 for every household in the United States.

The figures detailed in Pew's report, “The Trillion Dollar Gap,” include pension, health care and other non-pension benefits promised to both current and future retirees in states’ and participating localities’ public sector retirement systems.

Pew’s numbers likely underestimate the bill coming due because the most recent available data do not account for the second half of 2008, when states’ pension fund investments were particularly affected by the financial crisis. Additionally, most states’ accounting methods spread the investment declines over a period of time–meaning states will be dealing with their losses for several years.

“While the economic crisis and drop in investments helped create it, the trillion dollar gap is primarily the result of states’ inability to save for the future and manage the costs of their public sector retirement benefits,” said Susan Urahn, managing director, Pew Center on the States. “The growing bill coming due to states could have significant consequences for taxpayers—higher taxes, less money for public services and lower state bond ratings. States need to start exploring reforms.”

To help policy makers and the public understand these challenges, Pew assessed all 50 states on how well they are managing their public sector retirement benefit obligations.

In fiscal year 2008, states’ pension plans had $2.8 trillion in long-term liabilities, with more than $2.3 trillion reserved to cover those costs. Overall, states’ pension systems were 84 percent funded—above the 80 percent funding level recommended by experts. Still, the unfunded portion–$452 billion–is substantial, and states’ performance is down slightly from an 85 percent combined funding level in fiscal year 2006. Pension liabilities have grown by $323 billion since 2006, outpacing asset growth by almost $87 billion.

Retiree health care and other non-pension benefits, such as life insurance, create another huge bill coming due: a $587 billion total liability to pay for current and future benefits, with only $32 billion–or just over 5 percent of the cost–funded as of fiscal year 2008. Half of the states account for 95 percent of the liability. Because of a 2004 Governmental Accounting Standards Board rule, the full range of non-pension liabilities was officially reported in fiscal year 2008 for the first time across all 50 states.

In spite of the large and growing shortfall and the variation among states, momentum for policy reform is building nationwide. Fifteen states passed legislation to reform their state-run retirement systems in 2009 compared to 12 in 2008 and 11 in 2007. Reforms largely fell into five categories: (1) keeping up with funding requirements; (2) reducing benefits or increasing the retirement age; (3) sharing the risk with employees; (4) increasing employee contributions; and (5) improving governance and investment oversight.

With legal restrictions in most states on reducing pensions for current employees, the majority of changes in the past two years affect new employees. Ten states increased the contributions that current and future employees make to their own benefit systems, while ten states lowered benefits for new employees or set in place higher retirement ages or longer service requirements.

“A growing number of policy makers recognize that their states’ fiscal health depends on how well they manage the bill coming due for public sector retirement benefits,” said Urahn. “We are seeing more and more states explore policy reforms aimed at putting their systems on stronger fiscal footing.”

“The Trillion Dollar Gap” identified significant variations in how states are managing their employee retiree benefits:

Pension benefits

• Sixteen states were deemed solid performers, 15 were in need of improvement and 19 states
were flagged for serious concerns.
• States like Florida, Idaho, New York, North Carolina and Wisconsin all entered the current
recession with fully funded pensions, and were rated top performers by Pew.
• In 2000, just over half the states had fully funded pension systems. By 2006, that number
had shrunk to six states. By 2008, only four–Florida, New York, Washington
and Wisconsin– could make that claim.
• In eight states–Connecticut, Illinois, Kansas, Kentucky, Massachusetts, Oklahoma,
Rhode Island and West Virginia–more than one-third of the total pension liability was unfunded.
Two states–Illinois and Kansas–had less than 60 percent of the necessary assets on hand.


Health care and other non-pension benefits

• Nine states were deemed solid performers, having enough assets to cover at least
7.1 percent–the 50-state average–of their non-pension liabilities. Only two
states–Alaska and Arizona– had 50 percent or more of the assets needed.
• Forty states were classified as needing improvement, having set aside less than 7.1 percent
of the funds required. Twenty of these have no assets on hand to cover their obligations.
(Nebraska does not provide estimates of its retiree health care or other benefit obligations
and did not receive a grade.)
• Only four states contributed their entire actuarially required contribution for non-pension
benefits in 2008: Alaska, Arizona, Maine and North Dakota.

About the Methodology

Pew’s analysis is based on data from states’ own Comprehensive Annual Financial Reports, pension plan system annual reports and actuarial valuations. Pew researchers analyzed the funding performance of 231 state-administered pension plans and 159 state-administered retiree health care and other non-pension benefit plans, which include some localities’ and teacher plans. States have flexibility in how they compute their obligations and present their data, so three main challenges arise in comparing their numbers: whether and how they smooth investment gains or losses; when they conduct actuarial valuations; and what assumptions they use for investment returns, retirement ages and other factors.

The Pew Center on the States is a division of The Pew Charitable Trusts that identifies and advances effective solutions to critical issues facing states. Pew is a nonprofit organization that applies a rigorous, analytical approach to improve public policy, inform the public and stimulate civic life.
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Pew Study: California Faces Challenges in Managing Bills Coming Due for Retiree Benefits

State has set aside only $3 million toward its $62 billion long-term liability for public retiree health care and other benefits

California needs to improve how it manages its long-term liabilities for both pensions and retiree health care and other non-pension benefits for public workers, according to “The Trillion Dollar Gap,” a new report released today by the Pew Center on the States.

Overall, California’s pension plans—with total liabilities of about $454 billion, the largest amount among the 50 states—were 87 percent funded at the end of fiscal year 2008, above the 80 percent benchmark that the U.S. Government Accountability Office says is preferred by experts. But when it comes to individual plans, the results vary. The California Public Employees Retirement System (CalPERS) paid its entire actuarially required contribution of $7.2 billion in 2008, but the California State Teachers’ Retirement System contributed less than two thirds of its $4.3 billion obligation that year. Meanwhile, the state had reserved only $3 million to cover the total $62 billion, long-term liability for retiree health care and other non-pension benefits.

“California has a troubling pattern of not paying its annual required pension contributions in recent years,” said Susan Urahn, managing director, Pew Center on the States. “If the bill is ignored year after year, more taxpayer dollars will be consumed by these obligations at the price of either higher taxes or cuts in other critical services.”

Pew assessed all 50 states on how well they are managing their public sector retirement benefit obligations. Nationally, there was a $1 trillion gap at the end of fiscal year 2008 between states’ assets on hand and the cost of their obligations to current and future retirees. This figure likely is conservative because the most recent available data do not fully account for the second half of 2008, when states’ pension fund investments were particularly affected by the financial crisis. State and local governments will have to make up these shortfalls over the next 30 years.

The annual bill for retirement benefits will increase unless states make their required annual payments consistently or contain the size of their liabilities

The figures detailed in Pew’s report include pension, health care and other non-pension benefits promised to both current and future retirees in states’ and participating localities’ public sector retirement systems.

Momentum for policy reform is building nationwide. In 2008, California passed a law aimed at improving pension decision-making by requiring that trained actuaries be present during benefit increase discussions and also that all pension changes be subject to cost review. Across the country, 15 states passed legislation to reform their state-run retirement systems in 2009 compared to 12 in 2008 and 11 in 2007. Reforms largely fell into five categories: (1) keeping up with funding requirements; (2) reducing benefits or increasing the retirement age; (3) sharing the risk with employees; (4) increasing employee contributions; and (5) improving governance and investment oversight.

“A growing number of policy makers recognize that their states’ fiscal health depends on how well they manage the bill coming due for public sector retirement benefits,” said Urahn. “We are seeing more and more states explore policy reforms aimed at putting their systems on stronger fiscal footing.”

The Trillion Dollar Gap” identified significant variations in how states are managing their employee retiree benefits:

Pension benefits

• Sixteen states were deemed solid performers, 15—including California—were in need of improvement and 19 states were flagged for serious concerns.
• States like Florida, Idaho, New York, North Carolina and Wisconsin all entered the current recession with fully funded pensions, and were rated top performers by Pew.
• In 2000, just over half the states had fully funded pension systems. By 2006, that number had shrunk to six states. By 2008, only four–Florida, New York, Washington and Wisconsin– could make that claim.
• In eight states–Connecticut, Illinois, Kansas, Kentucky, Massachusetts, Oklahoma, Rhode Island and West Virginia–more than one-third of the total pension liability was unfunded. Two states–Illinois and Kansas–had less than 60 percent of the necessary assets on hand.

Health care and other non-pension benefits

• Nine states were deemed solid performers, having enough assets to cover at least 7.1 percent–the 50-state average–of their non-pension liabilities. Only two states–Alaska and Arizona– had 50 percent or more of the assets needed.
• Forty states—including California—were classified as needing improvement, having set aside less than 7.1 percent of the funds required. Twenty of these have no assets on hand to cover their obligations. (Nebraska does not provide estimates of its retiree health care or other benefit obligations and did not receive a grade.)
• Only four states contributed their entire actuarially required contribution for non-pension benefits in 2008: Alaska, Arizona, Maine and North Dakota.

About the Methodology

Pew’s analysis is based on data from states’ own Comprehensive Annual Financial Reports, pension plan system annual reports and actuarial valuations. Pew researchers analyzed the funding performance of 231 state-administered pension plans and 159 state-administered retiree health care and other non-pension benefit plans, which include some localities’ and teacher plans. States have flexibility in how they compute their obligations and present their data, so three main challenges arise in comparing their numbers: whether and how they smooth investment gains or losses; when they conduct actuarial valuations; and what assumptions they use for investment returns, retirement ages and other factors.

The Pew Center on the States is a division of The Pew Charitable Trusts that identifies and advances effective solutions to critical issues facing states. Pew is a nonprofit organization that applies a rigorous, analytical approach to improve public policy, inform the public and stimulate civic life.

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New Federal Credit Card Law - 5 Things Consumers Need to Know

/PRNewswire/ -- On February 22, most provisions of a new Federal Credit Card Law will go into effect. While many of the changes are designed to help protect card holders, it is still important that consumers practice sound credit management.

"Despite changing requirements for credit card companies, consumers should not use credit cards as emergency savings accounts or to purchase items they cannot afford," said Mechel Glass, director of education for Consumer Credit Counseling Service (CCCS) of Greater Atlanta. "Using credit wisely is the most sensible way to build, and maintain, a solid credit history."

CCCS shares 5 things consumers need to know about the new Federal Credit Card Law.

1. Rate Increases and Credit Limits. Under the new law, credit card
companies must extend promotional rates for at least 6 months and, in
general, rates cannot be raised on existing balances unless you are
more than 60 days late with your payment. Creditors may lower credit
limits or close accounts without prior notice to cardholders."Consumers
who are more than 60 days late and experience a rate increase are
eligible to have the original rate restored after six consecutive
months of on-time payments," said Glass. Creditors may still raise
rates on new balances with a 45 day notice to cardholders, compared to
the 15 days required under prior legislation, and there is no cap on
interest rates.Purchases may be declined if a credit limit has been
reduced and a pending purchase would result in going over the limit.
Institutions may offer consumers the option of exceeding their limit in
exchange for fees, but only one "over the limit" fee may be charged in
a billing cycle. "Make sure you clearly understand the fees involved,"
said Glass.


2. Payment Protection and an end to Double Billing. Payments received on
the due date, or the following day if the creditor was closed and did
not accept payment, are considered on time, as are payments made at a
local branch. This can help consumers avoid late fees, as payments must
be processed the same day they are received."Under the new law,
consumers cannot be charged interest twice on the same balance," added
Glass. The practice of basing finance charges on current and previous
balances is no longer permitted.


1. How to Keep Your Credit Card "Active"One by-product of the new law is
that some credit card companies may close a consumer's account if they
see a card is unused. To keep your credit cards "active," Glass
recommends that consumers may want to purchase gasoline once a month
with a credit card and pay it off quickly. She says this recommendation
will help consumers who have low balances on credit cards that
otherwise may be closed by their card company due to inactivity.



1. More Favorable Payment Allocation and TimingIn most cases, current
credit card agreements outline plans to apply payments to the lowest
rate balances first. Under the new law, any payment above the minimum
amount due must be applied to the highest rate balances first. In a
provision that went into effect last August, credit card companies must
send statements 21 days in advance of the payment due date, compared to
14 under the old requirements.

2. Gift card protectionOf the $87 billion dollars in gift cards estimated
to be purchased in 2009, approximately 6 percent, or $5 billion dollars
will go unused. Many will be eroded by fees and eventually expire
without ever providing a benefit to the recipient. Under the new law,
gift cards will not be able to expire for at least 5 years, and
inactivity fees will not be able to begin before 1 year after the card
is issued.


Changes in the credit card law are designed to help consumers be better fiscal managers. To help consumers navigate the new requirements, Glass recommends that consumers continue to use credit wisely. "Use credit cards only to make purchases that you are prepared to pay off when the bill comes in. Pay bills in advance of the due date and work toward creating an emergency savings account that will reduce dependence on credit in the event of unplanned events."

Need help getting your credit under control or understanding how the new laws might impact you? CCCS can help. Our certified counselors can help you review your current financial situation and work with you to create a budget and financial plan to get you back on track. Contact CCCS at 800-251-2227 or online at www.cccsinc.org or www.cccsenespanol.org.

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Tax Reminder: A Big Portion of Your Long Term Care Insurance Premiums May Be Deductible

/PRNewswire/ -- Want to keep more of your money in these challenging times? Then check with your tax advisor if you have long term care insurance. You may be able to deduct a big chunk of your 2009 premiums. What if you don't have long term care insurance? Then consider getting it NOW to lock in tax benefits next year. Uncle Sam may in effect pick up the tab for much of your premiums for 2010. This reminder comes from LTC Financial Partners LLC (LTCFP), one of the nation's most experienced long term care insurance agencies.

"For the 2009 tax year, an individual with a qualified policy may be able to deduct up to $3,980, depending on age," says Cameron Truesdell, CEO of LTCFP. "For a couple, the maximum amount doubles, to nearly $8,000." According to the Internal Revenue Service, for individuals the amounts of long term care insurance premiums that are deductible as medical expenses in 2009 can be as high as --

-- $3,980 if you're 70 or over
-- $3,180 if you're over 60 but not over 70
-- $1,190 if you're over 50 but not over 60
-- $600 if you're over 40 but not over 50
-- $320 if you're 40 or under



"Those who don't have policies, but want them, can set themselves up for substantial deductions next year," Truesdell says. For individuals, the amounts deductible as medical expenses in 2010 can be as high as --

-- $4,110 if you're 70 or over
-- $3,290 if you're over 60 but not over 70
-- $1,230 if you're over 50 but not over 60
-- $620 if you're over 40 but not over 50
-- $330 if you're 40 or under



"These deductions are not a one-time thing," Truesdell says. "They recur. You can take them each and every year that you pay premiums; and the deductible limits have been increasing annually."

Truesdell strongly urges individuals and companies to investigate ALL the tax advantages that may be available to them. Additional potential benefits, beyond the above federal deductions, include --

-- If your state offers tax deductions or rebates, and you qualify, these
are additive to your federal deduction, if you qualify.
-- When a policy is designed to pay on a per-diem basis, a limited
portion of the benefits may be excluded from taxable income.
-- When a policy is paid for out of a Health Savings Account (HSA), there
can be tax advantages.
-- For businesses, there are tax breaks that can be especially
attractive. For example, opportunities exist for some business owners
to deduct premiums without having to satisfy the 7.5% medical expense
threshold amount.



"With so much government support, we often wonder why more people don't get LTC policies," says Truesdell.

LTCFP does not offer tax advice but teams up with accountants and other tax experts to help their clients get all the deductions or other benefits available to them. "We've formed strategic alliances with banks, accountants, other financial advisors and tax preparers, and organizations such as the National Association of Estate Planning Attorneys," says Truesdell.

How can you make sure you don't miss out? "Ask your tax expert to check into every deduction that may apply in your case," Truesdell advises. "We're glad to help. We'll consult with anyone's accountant, tax attorney, or other advisor -- now or closer to the tax deadline." In Truesdell's national organization, hundreds of experts are available by phone or Internet. Requests for help, at no charge, may be made at http://www.ltcfp.us/ltcfp/taxbreaks.htm.

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Clayton State Accounting Students Gear Up for 20th Year of Free Tax Preparation Services

Free, Free, Free. Clayton State University’s accounting students will provide free volunteer tax preparation assistance again this year, beginning at 9 a.m. on Saturday Feb. 6, in the School of Business Building, located on the Clayton State University campus.

Accounting students from the University have recently been busy reviewing all the tax law changes brought about by the American Recovery and Reinvestment Act, partly because they are participating in the Volunteer Income Tax Assistance Program (VITA), hosted by the School of Business.

VITA is a national program that provides tax support to low-to-moderate income taxpayers. This program, which has been in existence for 37 years, provides volunteers with extensive IRS training to ensure that taxpayers receive the tax credits for which they qualify such as the Earned Income Tax Credit and the Child Tax Credit. Students also benefit from this program as preparers are trained in the recent changes to the credits available for tuition and other school-related expenses. The VITA program also prepares state income tax returns and provides free e-filing options to ensure clients receive their refunds as soon as possible.

Clayton State University is proud to be the only university in the state of Georgia that has successfully participated in the VITA program for 20 years running. On average, the student volunteers provide assistance to at least 100 people each year, and they are looking forward to helping many more.

“It gives our students hands-on experience, and provides a valuable service to the public. We have taxpayers who return every year,” says Dr. Judith Ogden, assistant professor of Business Law.

This service will be offered at the Clayton State University School of Business on all Saturdays in February, and on Mar. 20 and Mar. 27, from 9 a.m. to 1 p.m. Taxpayers will be assisted on a first come, first serve basis. If taxpayers have further questions, they may call the VITA hotline at (678) 466-4527.

Those who are eligible to receive this service are taxpayers who make under $49,000 a year and wish to receive help with their 2009 personal income taxes. The program does not provide assistance with out-of-state or small business returns, or for those who are self-employed.

Those interested in receiving this assistance must bring the following items:

 photo identification,
 social security cards for themselves, their spouse, and dependents,
 birthdates,
 wage and earnings statements from all employers,
 interest and dividend statements,
 other relevant information about income and expenses including day care expenses,
 a copy of last year’s federal and state income tax returns if possible,
 And bank routing and account numbers for direct deposit.

In keeping with the desire to serve the community, Clayton State University will also host a local Bank of America representative on preparation dates during February. The representative will be available to assist with opening an account and will answer questions about a variety of different services that Bank of America offers.

In response to the success of Bank of America partnering with other VITA locations in the past, Clayton State University looks forward to working with them this year and hopes that taxpayers will take advantage of this additional service, notes Ogden.

A unit of the University System of Georgia, Clayton State University is an outstanding comprehensive metropolitan university located 15 miles southeast of downtown Atlanta.
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Community & Southern Bank Acquires the Assets and Deposits of First National Bank of Georgia from the FDIC

/PRNewswire/ -- Community & Southern Bank, a newly formed Georgia state bank, has acquired certain assets and deposit liabilities of the First National Bank of Georgia, Carrollton, Georgia ("First National Bank") from the Federal Deposit Insurance Corporation ("FDIC"), as receiver for First National Bank. First National Bank was closed by the Office of the Comptroller of the Currency at the close of business on Friday, January 29, 2010 and the FDIC was appointed receiver. Community & Southern Bank will begin operating First National Bank's branch offices as Community & Southern Bank offices immediately.

"We're very pleased to announce the acquisition of the First National Bank of Georgia from the FDIC. This is an excellent example of a successful private-public partnership that will save jobs and provide much needed stability to First National Bank customers and the communities it has served for nearly 100 years," said Community & Southern Bank's President and Chief Executive Officer, Patrick M. Frawley. "Following our recently completed capital raise, we are poised to pursue additional opportunities to help with the recovery of the banking system as we strive to create one of the strongest, healthiest, and most well-managed banks in the State of Georgia," added Mr. Frawley.

John Spiegel, Chairman of the Board of Directors of Community & Southern Bank and former Chief Financial Officer of SunTrust Bank, added, "The customers and employees of First National Bank of Georgia can rest assured knowing that there will be no disruption to the operations and services provided by their bank. We look forward to providing our customers with exemplary customer service and meeting all of their banking needs."

First National Bank customers should be aware that their accounts have been automatically converted to Community & Southern Bank accounts at the same rates and terms. All deposit accounts will continue to be fully insured to the maximum limits allowed by the FDIC. First National Bank customers should continue to visit existing branches and use their existing checks and ATM/Debit cards to access their funds. All direct deposit and electronic bill pay transactions will continue to be processed normally. First National Bank customers will be receiving new checks and ATM/Debit cards in the coming weeks.

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