Analysis Roundup – March 22, 2013

Let’s kick off with a significant issue.

Budgeting for Unemployment Insurance Reserve Payments

Karl Knapp agreed to a phone call this morning to discuss the steps local governments need to take in order to properly budget for establishing their unemployment insurance reserve with the State in the upcoming fiscal year. You can check out the following 21-minute video tutorial, which includes some simulations of how the payments of “taxable wages” will be applied on a per employee basis. If the video is not visible below, click here to view it.

This NCLGBA video is a followup to a presentation Karl participated in, along with NCACC’s Rebecca Troutman and DES Unemployment Administration Director Antwon Keith on the same topic during this month’s NCGFOA Spring Conference. You can view the slideshow from that presentation below, or click here.

Expect a separate NCLGBA website post featuring these presentations and some additional analysis early next week (March 25th-27th).

Legislature’s Tax Reform Plan would create challenges for Municipal Revenues

Click here to consult today’s NCLM Legislative Bulletin for information and analysis on how legislation introduced this week in the General Assembly would impact local revenue sources, including local option sales tax, utility franchise fees, and business privilege licenses.

How would eliminating the Tax Deduction on Municipal Bond Interest impact Local Governments?

Click here to review a report from GFOA and the National League of Cities.

GFOA Approves New “Best Practices”

Many of these new best practices deal directly with budgeting, including the pricing of internal services and developing “structurally balanced budgets.”

Click Here to Review their latest Best Practice Recommendations

Economy Looks to Be Improving?

Wells Fargo’s Mark Vitner sees some improvement in the first quarter of the national economy, fueled by home construction and durable good sales. Depending on activity in your local area, this may help foster some revenue growth.

With respect to sequestration, Vitner believes that Federal budget cuts implemented due to the sequestration will be limited in amount and impact outside the Washington, DC, MSA, with the actual national impact more than likely recorded back in the final quarter of 2012.

If the video does not appear below, click here.

Click Here for their latest Weekly Economic Commentary Report

Walden Sees Jobs for 2013 in North Carolina

NC State University Economist Michael Walden spoke this week in Chapel Hill and stated that he sees job growth of 90,000 statewide in 2013, ahead of 55,000 jobs the state gained in 2012.

Click Here for the Story from NEWS14Carolina

Click Here for His Latest Economic Update Audio Recording

Inflation Picks Up Across Board, Moderate Outlook Remains

From Wells Fargo Economics Group:

CPI inflation rose 0.7 percent in February, which was slightly more than markets were expecting. The increase marks a notable acceleration in prices from the past two months when the broad level of consumer prices was unchanged. As expected, the pickup in headline inflation was largely due to a rise in energy prices. All components of the energy index, which includes fuel oil, natural gas and electricity rose in February, but the largest increase was in gasoline. Gasoline prices jumped 9.1 percent, accounting for about 75 percent of the headline’s gain. While alarming for consumers in our view, some reprieve is already in sight. Since the end of February, the average price of a gallon of gas has fallen from $3.77 to $3.70. 

Food price inflation was significantly tamer. The CPI for food ticked up 0.1 percent after a flat reading in January. A 1.4 percent rise in fruits and vegetables and a 0.5 percent rise in meats, poultry, fish and eggs were mostly offset by a decline in bakery and dairy products. The 12-month trend in food price inflation remains manageable for consumers at 1.6 percent.

Excluding food and energy products, prices rose 0.2 percent in February. Shelter costs, which comprise the bulk of core goods, rose 0.2 percent and are now up 2.3 percent over the past year. The recovery in home prices has steadily pushed the owners’ equivalent rent index higher, while costs for rented residences have risen amid a tight rental market. Also contributing to the increase in core prices was the 0.8 percent increase in prices for used cars and trucks. The gain was the largest since May for this category, but prices remain down from a year earlier. Core CPI is now up 2.0 percent over the past year.

Other Items of Interest

Summer Conference Information – More Updates Next Week!

Job Postings:

Senior Fiscal Analyst – Mecklenburg County Department of Human Services (Closes April 3rd)

Budget & Management Analyst – City of Greensboro (Closes April 15th)

Other Articles:

Governor McCrory Announces 2013-15 Budget

Learn More About “Tax & Tag Together”

LGC Provides Guidance on GASB 63 & 65 Implementation






Analysis Roundup – February 22, 2013

It’s been a while since the last one. So, without further ado…

2013 Summer Conference Update

Visit our conference page (click here) for more information on our upcoming Summer Conference (July 10th-12th, Shell Island Resort, Wrightsville Beach). Hotel rates and reservation information are now available.

What the @!#& is going on with gas prices?

You may have noticed that retail gasoline prices have spiked up SIGNIFICANTLY since the first of 2013. We’re finishing out the week with prices for regular unleaded in the $3.65 to $3.80/gallon range in most of North Carolina, with Diesel ranging from $4.00 to $4.20/gallon.


The 30-day increase is about 13% across the board, or approximately $0.45 to $0.50/gallon. For someone filling up a 15-gallon tank for their sedan, that’s $7.50 per tank (extrapolate that to get an idea of how it could effect your jurisdiction’s budget, or that of your household, or fellow residents).

Why is this going on? Is it the price of crude? Hmmm…


The year-to-year chart does not appear to indicate the crude prices are pushing fuel upward. So, what about projections on demand and supply? We can take a look at the Energy Information Administration’s short term outlook and see that…

EIA expects that falling crude prices will contribute to a decline in the national annual average regular gasoline retail price from $3.63 per gallon in 2012 to $3.55 per gallon in 2013 and $3.39 per gallon in 2014, about 11 cents per gallon and 4 cents per gallon higher than forecast in last month’s STEO, respectively. Diesel fuel retail prices averaged $3.97 per gallon during 2012 and are forecast to fall to $3.92 per gallon in 2013 and to $3.82 per gallon in 2014.

Well, that doesn’t explain it. What’s going on here? The EIA is suggesting that refinery margins are increasing, and the basic numbers would agree.

However, don’t forget what else is going on. Right now, the Fed is buying up more than $80 billion a month in Federal Treasuries, and is growing its share of ownership of the National Debt. Also, over the past two weeks, Venezuela (oil producing company) announced the formal devaluation of its currency, creating global concerns for broader currency devaluation across the country, and the likelihood of significant increases in commodity prices.

This week, the Bureau of Labor Statistics reported that consumer inflation in January was “unchanged” for the month, and only up 1.3% compared to last January. It’s doubtful they’ll be able to sell that “logic” for February when they report an update next month.

Unemployment Insurance Reform is Here

We held off discussing how local governments should calculate what they will need to budget to address the Unemployment Insurance reform plan passed by the General Assembly and signed into law by Governor McCrory this week. Now, Karl Knapp and his cohorts at NCLM has thankfully assembled the nuts and bolts.

Click here for NCLM’s report 


Wells Fargo Economics Group
How’s Washington impacting the overall economy?

Fourth Quarter 2012 GDP retraction gave us an idea of just how significant Federal expenditures are to the overall economy, and the threat of sequestration could significantly impact individuals and economies in several North Carolina areas. Overall, North Carolina’s economy is significantly-influenced by Federal Spending, as it pertains to GDP (see map below).


Wells Fargo Economics Group/TBJ
Housing Continues Some Growth


HousingFeb13Housing starts for January came in well below consensus expectations, but, after adjusting for an upward revision to December data, starts were just a shade weaker than the consensus had expected. The decline was entirely attributable to a drop in the volatile multifamily component. Building permits increased in January–not just for single-family homes, which climbed 1.9 percent on the month, but for multifamily as well,where permits increased 1.5 percent…Momentum in housing-related economic activity is not limited to residential construction. Existing home sales data for January also came in better than expected.

In the Triangle…

The Triangle housing market finished way ahead in 2012, with nearly 21 percent more home sales than in 2011. The comeback was so strong that sales almost regained the pace of four years ago.

The market continued double-digit gains in December, with sales increasing by 26.6 percent over the same period a year ago, according to the monthly report fromTriangle Multiple Listing Services. Nearly 1,960 home sales were recorded in December in the Triangle, which was up from 1,546 homes sales in December 2011.

For the year total, 23,829 homes were sold in the Triangle in 2012 compared to 19,733 in 2011, which was when the market hit bottom.

Articles/Videos of Interest

NC Pension Fund balance returns to pre-2008 recession level (TBJ)

NCLM LeagueLINC Bulletin for February 22nd

NCACC Legislative Bulletin

UNCTV’s Legislative This Week features highlights of Governor McCrory’s State of the State address from earlier this week:

Duke & Progress looking to hike electric rates (TBJ)

Wilmington & New Hanover County looking to merge services (TBJ)

Wells Fargo Weekly Update – US Economy Trudges On

North Carolina could see Revenue Losses (TBJ)

NFIB Survey shows continued lack of small business confidence (TBJ)





Analysis Roundup – January 25, 2013

A little early, in case you go home early today.

Job Announcements

Two new vacancies were announced earlier today, and we have included them to the Jobs Site:

Finance Director – Cumberland County (Open Until Filled)

Purchasing Manager – City of Raleigh (Closing 1/31/13)

LGERS Employer Contributions Increasing 4% in FY14

(From NCLM) On Thursday (Jan. 17), the Local Government Retirement System Board of Trustees approved local employer rate increases, effective July 1, 2013.  The employer contribution rate would increase from 6.74% to 7.07% (+4%) for general employees, and up to 7.28% for law enforcement officers.  The total additional cost for local employers is $18.3 million, filling actuarial losses within the system resulting from reduced market returns during 2007-2011.  Retiree groups were pushing for 2% cost of living increases for local retirees that would cost local units an additional $24 million in 2013-14, but the Board denied those requests at the urging of the League and instead mandated the actuarial required contribution.

North Carolina Indicators Continued Late-2012 Improvement


Dr. Michael Walden’s Leading Economic Indicators for North Carolina improved 0.3% in November, boosted by lower jobless claims, gains in manufacturing employment hours, and manufacturing earnings.


Government Budget/Spending Improved, According to Vendor-Supported Newsletter

Government Product News is a magazine for purchasing offices featuring, for the most part, products and services offered by national manufacturers and providers (vendors). They also have some substantive articles, like their recent update to their own Keating Report on Government Budgets and Spending. It does have value from the standpoint the article includes references from several sources. However, much of the information may be out of date (published by agencies last fall) and will be updated soon (like CBO estimates and projections coming in 2 weeks).

Did Retailers Have a “Merry Christmas”?

(RBC) Retail sales in December 2012 rose by 0.5%, which represented a steady improving trend during the Christmas shopping period relative to a gain in November of 0.4%, which was revised upwardly from 0.3% previously, and a 0.2% decline in October (-0.3% previously). Expectations had been for a modest 0.2% increase in December.”

“The overall increase received support from the motor vehicle component, which rose by 1.6% in the month. This occurred despite the earlier-reported, slight drop in December unit sales although likely reflected a lagged effect from the November surge in unit sales. Excluding the motor vehicle component, sales rose by 0.3%, which more than retraced the 0.1% drop in November. Expectations had been for ex-auto sales in December to rise by 0.2%. This increase was restrained by a sizeable 1.6% drop in sales receipts from gasoline stations. Some weakness had been expected given indications of falling gasoline prices in the month although not to the extent reported this morning.”

“The so called ‘control’ measure, which excludes sales at motor vehicle dealerships, gasoline stations, and building material stores (unchanged in the month), rose a by a better than expected 0.6% and thus further built on the 0.5% increase recorded in November. The increase was led by gains in sales at clothing stores of 1.0% and sporting goods stores of 0.6%.”

“The continued growth in retail sales during the end of the Christmas shopping period was encouraging although the pace remained modest. The data are consistent with fourth-quarter 2012 consumer spending on a volumes basis rising only by 2.1% at an annualized rate and compares to the 1.6% increase recorded in the third quarter of 2012. Although the Fed will take some encouragement from the improvement, there is likely to be disappointment that this pace of growth does not provide enough of a contribution to overall GDP growth to put sustained downward pressure on the unemployment rate. Until greater progress is evident toward improving labour markets, the central bank is expected to keep monetary conditions highly stimulative. Our forecast assumes that the current range for fed funds of 0% to 0.25% will be maintained until 2015.”

Energy Costs Shift “Inflation” Down as Quickly as they Shift It Up


(Wells Fargo) “The Consumer Price Index for December was unchanged, as lower energy prices offset modest gains in core goods and services. The inflation outlook remains conducive for the Fed to continue its easy monetary policy… Energy prices fell for the third consecutive month…Energy services, on the other hand, rose 0.4 percent, led by a 1.3 percent rise in utility gas services, but are down 1.1 percent over the past year… Food prices continued to climb higher, increasing 0.2 percent in December. Most food categories posted modest gains over the month, although fruit and vegetable prices rose a strong 0.6 percent… Rising medical costs remain a challenge to the consumer. While the cost of medical care goods decreased for the second month in a row, medical care services continue to exceed broad inflation and are up 3.7 percent over the past year. Shelter costs continued their steady ascent, increasing 0.1 percent. Price pressures in the housing market continue to be greatest in the rental market. Demand for apartments and other rental units has been strong in this recovery, with vacancy rates falling to an 11-year low in the third quarter.”

National Leading Economic Indicators Up, Mostly Because Unemployment Claims Dropped


Fullscreen capture 1252013 111245 AM(Wells Fargo) “For LEI, this bouncing around in the jobless claims figure means the November reading was dragged lower and today’s “strong” report for December may be somewhat overstated… While the trend in LEI is still slightly positive, a number of components remain weak. A general lack of confidence among consumers has been a drag on the index for the better part of the past four years. Consumer goods orders as well as manufacturers’ orders have also been weak…The coincident-to-lagging ratio has weakened on trend in the past six months raising doubts about the pace of future growth.”

Small Bounce Upward in Small Business Confidence

(Wells Fargo) “The Wells Fargo/Gallup Small Business Index rose 20 points in early January, as businesses expressed less concern about current business conditions and slightly more optimism about expectations for the coming year. The 20-point rise follows a 28-point drop during the fourth quarter, which marked the largest quarterly decline since the fourth quarter of 2008. The partial recovery from that fourth quarter plunge suggests that worries over the fiscal cliff were likely a little overdone late last year. We noted then that most of the fourth quarter’s drop was in the expectations components and that current conditions were still improving. The most recent report shows improvement in both series, with the present situation series rising 8 points to -2 and the future expectations component climbing 12 points to +11.”

“Even with the 20 point rise, the overall index remains exceptionally low, suggesting that many businesses remain concerned about changes to the tax code and the ongoing debate about fiscal policy. In such an environment, businesses are likely to continue to tread lightly when it comes to investing in new plants and equipment or hiring additional workers.”

How About Housing?

(Wells Fargo) “Existing home sales unexpectedly fell 1.0% in December to a 4.94 million-unit pace. The drop in activity was concentrated in single-family, which fell 1.4%. Median prices rose, but inventories remain tight.”

Fullscreen capture 1252013 111723 AM

Housing starts surged 12.1 percent in December to a 954,000-unit pace, likely reflecting seasonal noise and some year-end tax jitters. Multifamily starts rose 20.3% and single-family starts were up 8.1%.”

Articles of Interest

Walden: What State policies can boost economic growth?

Possible “wind to our back” on housing (ABFM)

Southeastern Conference for Public Administration (SECoPA) will be held in Charlotte, September 25-28, 2013

February 28th Free Webinar Addresses Public Sector Defined Contribution Plans (ABFM)

What does Gen Y value? (Fast Track)

2012 Update of Best Performing US Cities for Tech Jobs (Milken Institute)

Governors (including NC) Push Bigger Reliance on Sales Taxes (New York Times)

Berger Outlines NC Senate’s 2013 Agenda (WRAL)

Analysis Roundup for January 4, 2013

Happy New Year!

Unemployment Rate Rises Across Most of NC in November

81 of North Carolina’s 100 counties saw their unemployment rates increase in November, according to analysis released Thursday by the NC Department of Commerce’s Division of Employment Security.

43 North Carolina counties still have unemployment rates of 10% or greater going into the end of the year. Overall, the state lost a little more than 22,000 jobs in November.

Click Here for the full analysis.

Click Here for WRAL’s interactive unemployment rate map

National December Employment Holds Trend

Wells Fargo Economics Group offered this short and sweet summary in their assessment of December’s national employment numbers, which saw the seasonally-adjusted rate go to 7.8%, consistent with the revised rate for November.

Job gains have averaged 151,000 over the past three months and 153,000 in both 2011 and 2012. Over the past three months, unemployment and participation have averaged 7.8 percent and 63.7 percent, respectively. So, is this it?

Be Prepared for Tax Reform

Based on remarks made by Governor-Elect Pat McCrory during his appearance Wednesday at the 2013 NC Economic Forecast Forum, it appears that significant tax reform is on the agenda for North Carolina’s Governor and General Assembly in the coming months.

The appointment of Art Pope as Deputy Budget Director likely means the Governor-Elect and General Assembly will work within a framework where the State Personal and Corporate Income Tax would be reduced or eliminated in favor of broad, consumption-based taxation. These and other ideas, including eliminating the Franchise Tax, were discussed during the preliminary session of the Forum by a group of financial panelists, including Wells Fargo Economist and Winter 2012 Conference presenter Michael Brown.

The Governor-Elect’s remarks also included discussion of other pertinent issues, including health care exchanges and the State’s unemployment insurance debt.

The Governor-Elect formally takes office this weekend.

Here is a video of McCrory’s complete remarks at the Forum.

Forecasters Little Less Optimistic About 2013 Economy

Wednesday’s 2013 NC Economic Forecast Forum, sponsored by the NC Chamber of Commerce and NC Banker’s Association, included presentations by noted financial analysts and economists on the current and upcoming state of the state, national and global economies. Overall, their assessments were not as “rosy” as those offered this week by NC State University economists Michael Walden.

You can check out video of these presentations below, starting with UNC-Charlotte Economists John Connaughton.

Click on the links below for copies of the presentations made during the Forum.

Connaughton – 2013 Babson Capital/UNC Charlotte Economic Forecast

Carroll – Our Economy in 2013: Investors… Forge Ahead or Duck and Run?

Brown – North Carolina: Tax Reform In A New Growth Environment

Lindholm – Effective State Tax Reform: Encouraging Jobs and Investment

Richmond Fed’s Lacker offers 2013 Outlook

Jeffrey Lacker, President of the Richmond District of the Federal Reserve and lone opposing vote on recent votes to continue the Fed’s policy of quantitative easing, delivered his outlook for 2013 during the Maryland Bankers Association’s Sixth Annual First Friday Economic Outlook Forum in Baltimore.

Click here for highlights from the outlook speech

Governor-Elect McCrory Announces Cabinet

Prior to the start of the New Year, Governor-Elect Pat McCrory made a few announcements regarding his initial appoints to his Cabinet. Yesterday, he rounded out his leadership team with several additions.

The McCrory leadership team taking over the State next week looks like this (information courtesy NC Metro Mayors Coalition):

NCDOT- Tony Tata (former Wake County school superintendent, retired military)

Commerce- Sharon Decker (former VP, Duke Energy)

Administration- Bill Daughtridge (former State Rep. from Rocky Mount)

Cultural Resources- Susan Kluttz (former Salisbury Mayor)

Public Safety- Kieran Shanahan (Attorney, former Federal Prosecutor)

DHHS- Aldona Wos (Doctor, former Ambassador)

DENR- John Skvarla (Attorney)

Revenue- Lyons Gray (Former Legislator)

Budget director- Art Pope (Former Legislator)

Office of State Personnel-  Neil Alexander

Chief of Staff- Thomas Stith (Former Durham Councilmember)

Chief Legal Counsel- Bob Stephens

Communications Director- Chris Walker

The most surprising is perhaps that of Tata to head NCDOT. A military veteran and former DC Schools executive, Tata was hired as Superintendent of Schools for Wake County in 2010, but was fired last year following local elections that saw the political makeup of the School Board change party majorities from Republican to Democrat.

Congress & President Avert Fiscal Cliff Policies, for Now

Tuesday, Congress and the President run in the New Year with a deal that averted implementation of several tax and spending policies known together as the “fiscal cliff.” While the potential for significant tax increases and federal spending cuts would have likely had a profound immediate negative impact on the national economy, the compromise plan that delayed almost all spending cuts in exchange for increases in top marginal tax rates on income and capital gains for households earning more than $450,000 per year did very little to address systemic issues facing the Federal fiscal condition.

Click Here for a Comprehensive Overview (via ABFM)

Applications being accepted for GFOA Scholarships

Applications are now being accepted for various academic scholarships offered through the Government Finance Officers Association for undergraduate and graduate study in public administration and government finance.

The application deadline for each of the four scholarships being offered is February 22, 2013. Recipients will be announced on April 30, 2013, and invited to be recognized for their awards during the GFOA Annual Conference in San Francisco, June 2nd-5th.

Click Here for GFOA Scholarship Information (via ABFM)

Links of Interest

The Productivity-Crushing Power of “Reply to All” (WSJ-At Work)

Want that Promotion? Practice Your Job (WSJ-At Work)

Ten Resolutions the Most Successful People Make and Keep (Forbes)

Duke Energy, Progress fire up New Power Plants (CBJ)

Unclear whether live marsupial used at Possum Drop (WRAL/AP)

UNC-Chapel Hill is top value in Kiplinger’s ranking (WRAL)

Nortel Networks closes up, settles with retirees (TBJ)

NC Real Estate & Demographic Information (Neighborhood Scout)

January 4th League LINC (NCLM)

NC Furniture Maker Hailed as US Job Creator Closed (WRAL)

Analysis Roundup – December 14, 2012

This will likely be the last analysis roundup of 2012. The first edition next year will be posted on or before January 4th.

NCLGBA 2012 Winter Conference Presentations Now Available for Download – Click Here


No Hope for Good Yields from Treasuries

Bloomberg posted this chart this morning, showing how yields on 10-year US Treasuries have remained bottomed out at below 0 for two consecutive yields, remaining far below even the most modest measures of inflation. For municipal governments dependent on Treasury-based investment funds to generate at least a little off their savings, as well as the elderly managing their retirement cash, this trend, facilitated in large part by the continuation of quantitative easing, is not a positive harbinger for the future.

Economic Updates Galore!

Need economic info? Check out these sources (Click on Links)

Wells Fargo’s “Cautious” 2013 Outlook (Replay of December 13th Call Also Available)

Our 2013 forecast remains cautious to say the least. Real GDP growth appears to have slowed to around a 1 percent annualized rate during the final quarter of 2012, as businesses have put expansion and hiring plans on hold ahead of the fiscal cliff negotiations. We expect growth to get off to a slow start in 2013, as higher taxes hit households at all income levels. Federal government spending will also contract modestly. We expect growth to rebound modestly by the middle of the year, as the economy moves further away from the fiscal cliff and homebuilding gains momentum.

Mike Walden’s “Optimistic” Winter 2012-13 Outlook

Propelled by an improving housing market, continued employment gains, and a better household financial balance sheet, the economy will expand again in 2013. The national economy will grow between 2.25% and 2.5% (Gross Domestic Product), add 2 million jobs, and reach a 7% unemployment rate by the end of 2013. Buoyed by reductions in their debt/income ratio and gains in their net worth, consumer spending will lead the way with the best growth rate in four years.

Better numbers are also predicted for the North Carolina economy. Both output (Gross State Product) and employment growth are expected to exceed national rates in 2013, resulting in a payroll employment gain of 68,000 jobs and an unemployment rate falling by 1.1 percentage points (compared to a 0.8 percentage point decline for the nation). The state’s economic growth will be driven by its high labor productivity, competitive business costs, and location in the expanding Southeast. Anticipated economic growth resulting from the opening of the larger Panama Canal will also be a positive element for the state economy. Raleigh-Cary, Durham-Chapel Hill, and Asheville will have the lowest unemployment rates in the state at the end of 2013, with Raleigh-Cary’s rate falling to under 6%. The strongest job growth by sector will be in professional and business services.

Federal Reserve FOMC Economic Forecast Update (December 2013)

Upper-end projections for GDP growth in 2013 remain at 3%, with national unemployment expected to remain in the upper-7% range.


The Fed Establishes Benchmarks for QE

From Forbes:

On Wednesday, the FOMC announced more quantitative easing at a rate of $85 billion a month for an extended period of time.  The Bernanke Fed has also modified its guidance, noting its ultra-accommodative stance will remain in place until the unemployment rate falls below 6.5% and inflation projections remain no more than half a percentage point above 2% two years out.

QE4 is here.  Only a few months after announcing what had been dubbed QE3, an open-ended $40 billion a month program to buy up mortgage backed securities (MBS), the FOMC decided to extend its asset purchases in 2013 as Operation Twist expires.

The Fed will therefore accelerate its rate of balance sheet expansion, easing monetary conditions further.  While Operation Twist had been sterilized, which means the Fed sold assets at the same rate as it was gobbling them up, the new program will consist purely of Treasury purchases.  Combined with QE3, the Fed will be taking $85 billion in bonds, both Treasuries and MBS, out of the market.  The FOMC also decided to begin rolling over its maturing Treasuries as of January.

Bernanke’s biggest surprise came in terms of the Fed’s forward guidance.  The FOMC moved from a calendar-based guidance to one tied to economic factors, specifically, inflation and unemployment (which constitute the Federal Reserve’s dual mandate)…

Once again, the Richmond District President, Jeffrey Lacker, was the sole member of the FOMC to vote against the policy continuation and changes.

“I disagreed with the Committee’s decision to continue purchasing additional assets to stimulate the economy. With economic activity growing at a modest pace and inflation fluctuating close to 2 percent — the Committee’s inflation goal — further monetary stimulus runs the risk of raising inflation and destabilizing inflation expectations.

“I also objected to the continuing purchase of agency mortgage-backed securities. If asset purchases are appropriate, the FOMC should confine its purchases to U.S. Treasury securities. Purchasing agency mortgage-backed securities can be expected to reduce borrowing rates for conforming home mortgages by more than it reduces borrowing rates for nonconforming mortgages or for other borrowing sectors, such as small business, autos or unsecured consumer loans. Deliberately tilting the flow of credit to one particular economic sector is an inappropriate role for the Federal Reserve…

“I agree that it’s useful for the Committee to describe how its future actions are likely to depend on the evolving state of the economy. However, monetary policy has only a limited ability to reduce unemployment, and such effects are transitory and generally short-lived. Moreover, a single indicator cannot provide a complete picture of labor market conditions. Therefore, I do not believe that tying the federal funds rate to a specific numerical threshold for unemployment is an appropriate and balanced approach to the FOMC’s price stability and maximum employment mandates. I would prefer to describe in qualitative terms the economic conditions under which our monetary policy stance is likely to change.

For more background information, check out The Richmond Fed’s “A Citizen’s Guide to Unconventional Monetary Policy”


Small Business Sentiment Continues Decline

The National Federation of Independent Business’ (NFIB) Small Business Optimism Index declined 5.6 points to 87.5. According to the NFIB, November’s drop was one of the largest on record and is the largest singlemonth drop dating back to 1987. The fall in small business optimism is consistent with our own quarterly small business survey, which posted its largest drop in four years during the fourth quarter. Small businesses are concerned about the future course of public policy, particularly as it relates to taxes and regulation. Business owners also seem to be more concerned about future economic conditions. Small businesses are more susceptible to changes in the tax code and part of the most recent decline likely reflects uneasiness about the fiscal cliff negotiations.

Also check out commentary on the findings in Gallup’s small business survey from November.

Big Business Sentiment Mixed, Manufacturing Lagging

From Last Week’s Manufacturing Index Results

Manufacturing activity cooled slightly during November, with the composite index sliding 2.2 points to 49.5. With the drop, the ISM manufacturing index has been below the key 50 breakeven level during four of the past six months. A reading below 50 signals that more manufacturers see conditions worsening in their business than see them improving…

…While it is always difficult to draw too many conclusions from one month’s survey results, November’s data suggest that manufacturers have turned more cautious following the presidential election and increased focus on the fiscal cliff. Fewer manufacturers report increased orders and more manufacturers report that their customers are reducing their inventories.

What do the Non-Manufacturing Index Results Say?

Business activity shot up 5.8 points to a stellar 61.2, marking its highest level since February. Thirty-one percent of businesses surveyed said that business activity improved in November, while just 14 percent reported that it decreased… The supplier delivery index fell 2.5 points, which indicates that more firms noted that delivery times shortened during the month…The employment component fell 4.6 points to 50.3 in November, with the most significant declines occurring in arts and entertainment, mining, management of companies and support services, professional and technical services, and hotels and restaurants. By contrast, hiring rose in agriculture, forestry, construction, retail trade and other services…While the overall index rose in November, the service sector appears to have slowed, particularly in the largest employment categories, such as business and professional services. Much of this past month’s gain appears to be tied to the budding recovery in housing and late harvest in the farm sector.

What Does the Fiscal Cliff mean for the Tar Heel State?

Generally speaking, not too many people are excited about the prospect of Congress and the President failing to reach a solution in order to avoid tax increases and budget sequestrations scheduled to take effect at the first of 2013. We have outlined the impact of the “fiscal cliff” situation before, so here are what some are now saying as it begins to approach us.

From this morning’s News & Observer:

In 2011, North Carolinians collected roughly $69.1 billion in government assistance. Payments stem from a list of programs, including Medicaid, Medicare, unemployment, disability, veterans assistance and food stamps.

Nationwide, government programs awarded $2.2 trillion to residents last year, according to estimates from the U.S. Bureau of Economic Analysis. The monies make up a large chunk of some people’s income.

“It’s really quite simple: People who get the spending like to keep getting it,” veteran Washington budget analyst Stan Collender said. “Almost any spending that’s still in the budget has substantial political support.”

Numerous polls show widespread enthusiasm for cutting spending in general, but there’s resistance to specific trims, Collender said.

“With the possible exception of foreign aid, and every once in a while NASA, almost nothing has a majority of support for cutting,” Collender said. “If you read the public opinion polls, Americans don’t want their government to do less; they just want it to cost less.”

Our State Treasurer offers a more specific critique of the situation and its potential impact:
NC Treasurer Janet Cowell wrote a column this week discussing the impact of the “Fiscal Cliff” on North Carolina

We have heard that the fiscal cliff is really a slope, that tax increases and spending cuts could be administratively delayed or retroactively reversed, that kicking the can into 2013 makes sense to intensify the pressure for a deal. That thought process is reckless and naïve.

As North Carolina State Treasurer, I am concerned about potential impacts on our pension fund, our bond rating and the state budget.

With time running out before year-end, investors get nervous, causing market volatility and accompanying unpredictable pension returns. If returns are low, North Carolina’s taxpayers will need to make up the difference.

Punting on the fiscal cliff would send rating agencies the wrong message – that our federal government is truly dysfunctional. As Alan Krueger, Chairman of the Council of Economic Advisors, put it, the message would be that government cannot solve the problems it is there to solve. If the federal rating is downgraded another notch, North Carolina’s AAA bond rating will be automatically knocked down a rung on the ladder making it harder to fund roads, schools and other capital improvements.

In a worst case situation where Congress does nothing, experts suggest America’s GDP would be cut by 4 percent, sending our economy back into a recession and putting 2 million individuals out of work. Here in North Carolina, if no deal is reached, an estimated 100,000 people could lose unemployment benefits and the typical middle-class family earning an income of $63,700 could see their income taxes rise by $2,200, according to a White House report. Going over the cliff also means a 6.3 percent cut in state revenue from the loss of federal money. North Carolina’s military bases and research universities will feel the impact in particular.

As the steward of our public pension system, I am responsible for the retirement security of 875,000 police, firefighters, teachers, health care workers and other state and local employees.

Their pension investment returns depend on the economic growth of the United States if we cannot solve our long term structural deficit.

Over time, the rising level of America’s debt squeezes out priorities that keep us competitive. We lose the opportunity to invest in things that really matter to North Carolinians − education, technology, job training, research, and infrastructure.

 NC Treasurer Janet Cowell 


Business Owners Selling in Anticipation of 2013 Tax Increases

A November 1st Wall Street Journal article profiled several business owners across the country who were selling their businesses this year in order to avoid paying higher taxes on investment income, as well as to liquidate built up equity for retirement purposes.

“It just made more sense for me to take my chips off the table and go do something else,” said Bert Wolf, 60, who has an agreement to sell his compress-gas business, Acetylene Oxygen Co., of Harlingen, TX, before year’s end.

Mr. Wolf added that if he waited until after the tax increase to sell, he would have to expand the business at its current rate “for 3 or 4 more years to achieve the same after-tax dollar.”

“There’s a kind of a panic on to get things done,” said Beatrice Mitchell, co-founder of Sperry, Mitchell & Co., Inc., a New York investment bank advising Mr. Wolf on the sale.

The trend is also happening in North Carolina. Earlier this year, Rocky Mount-based Meadowbrook Meat Company, a family-owned business and one of the nation’s largest food distribution operations, sold out to McLane, a global trucking company that is part of Berkshire Hathaway.

Per John Hood today at Carolina Journal:

Smart investors, CEOs, and entrepreneurs are already bracing for impact. As Triangle Business Journal recently reported, “large numbers of business owners are scrambling to sell their companies before January” because “for many, the currently lower tax rate translates into tens or even hundreds of thousands of dollars.”

This is what happens in the real world when politicians indulge the prejudices they harbor in their fantasy world. Taxes affect the prices of labor, resources, and capital. They push people into making decisions they wouldn’t otherwise have made, with largely deleterious consequences for the economy as a whole.

Other Links

(Richmond Fed) December 2012 Regional Economic Snapshot

Economic conditions in the Fifth Federal Reserve District generally improved in recent months with moderate improvement in labor markets, housing markets, and among area businesses…Reports on the North Carolina economy suggested moderate improvement in employment conditions and mixed conditions in the housing market.

(Wells Fargo) Weekly Economic Commentary for December 14th

While data this week showed that the economy is nowhere near falling off a cliff, it is lacking much to be cheerful about. With negotiations surrounding the fiscal cliff still up in the air, small businesses are beginning to show concern about the near-term path of the economy… Consumers are proceeding with caution as we head into the final weeks of the year. Retail sales disappointed in November by rising 0.3 percent, which was just enough to offset October’s decline. Core sales, which excludes autos, gasoline and building materials, looked a little stronger with an increase of 0.5 percent, and suggest that consumers have not gone completely into hiding for the holiday season (see top chart on page 1). Sales picked up across a broad range of stores, led by non-store retailers where sales rose 3.0 percent and are up 12.4 percent over the past year

(Glasshammer) Do you want to be Perfect… or Powerful?
(Marketplace) NYC & DC allow Uber to compete with Taxis
(ASPA) The Public Administrator Challenge: The Agency and the Power
(PA Times) Focus on Assets, Not Needs, When it Comes to Development
(PA Times) Basics of Disaster Contracting
(CBO) Latest update on ARRA shows little change in prior economic impact projections

(Forbes) Best Buy: Is This the Last Public Gasp?

(Bloomberg) Job Recruiters Eschew Monster to find Hidden Talent on LinkedIn

Analysis Roundup for November 21, 2012

Watch the skies… “gobble, gobble”

Wells Fargo Economics
Leading Indicators Continue Slow Growth Trend

The national index of Leading Economic Indicators (LEI), updated earlier today, only increased 0.2% for October, indicating continued slow growth.

The six-month annualized rate of change in the LEI has
weakened since the start of the year, but remains well above the
negative 3.5 percent rate which often signals recession…

After the interest rate spread, the next largest contribution was
the Leading Credit Index, followed by first-time claims for
unemployment insurance. As fewer people file for jobless
benefits, this component pushes LEI higher.


BLS/NC Employment Security
October Sees Continued, Slow Employment Growth

Total Employment in North Carolina increased by nearly 44,000 in October, according to last week’s release of seasonally adjusted employment and unemployment data. The adjusted unemployment rate declined from 9.6% to 9.3%. Since last October, the state has gained a little more than 95,000 jobs.

With respect to nonfarm payrolls (more accurate depiction of permanent workforce), North Carolina only saw an increase of 8,000 jobs in October, all the result of private sector employment growth (+8,900). Since last October, total nonfarm payrolls have grown by 35,700, with private sector growth of 40,000. This means that there have been some employment losses in the public sector, reflecting the need for state agencies and local governments to reduce their workforces in response to permanent fiscal challenges.


Overall and private payrolls still remain more than 6% below pre-recession high levels.

Wells Fargo Economics
November Outlook focuses Globally

This month’s video outlook from Wells Fargo Economics Group provides further analysis on current global economic conditions and how they are influencing conditions here in the US. This month’s outlook host, Wells Fargo Economist Michael Brown, will present an Economic Update during the Winter 2012 NCLGBA Conference in Concord on December 7th.

NCSU/Dr. Michael Walden
NC Leading Indicators Improve a Little

Dr. Walden’s Index of Leading Economic Indicators in North Carolina did show a slight increase for September (+0.2%), ending four consecutive months of decline. All of the measures incorporated into the index showed improvement except building permits, which fell by 25%.

Compared to a year ago, the overall index is up 2.4%, with all categories except personal earnings showing improvement.

Wells Fargo/Modeled Behavior
October Home Sales Continue Market Improvement Trend

2012 has been a good year for the housing market, compared to where its position since the start of the last recession. Existing sales continued to improve in October, volume increasing 2.1% to an annual rate of 4.79 million units.

In a blog post, UNC School of Government Economist Karl Smith provides some analysis on the appearance of growth in housing starts, a prediction he discussed during his presentation at the Winter 2011 NCLGBA Conference. If trends pick up in a manner consistent with his original prediction (which he admits anticipated housing growth sooner in 2012 than what actually took place), overall economic activity might look better in 2013.

Finviz/Gas Buddy
Oil Prices Rise with Middle East Tension, Gas Prices Slide Little More

Some parts of NC are seeing retail prices for Regular Unleaded below $3.20/Gallon this week. Crude prices did go above $90/bbl this week as a result of hostilities initiated by terrorists in Gaza against Israel, creating concern for a prolonged conflict and potential supply disruptions. Weak demand, however, does limit the impact of this developing situation, especially here in the US.

Articles of Interest

Philadelphia Fed – November 2012 Business Outlook Survey

Firms responding to the November Business Outlook Survey reported declines in business activity this month following the disruptive effects of Hurricane Sandy on the region. The survey’s indicators for general activity, which had shown improvement in October, fell back into negative territory this month. Firms reported slight declines in shipments, employment, and hours worked. Indicators for the firms’ expectations over the next six months were near their levels in the previous month, but expectations for future employment and capital spending have weakened in the last two months.

WSJ – Investment Falls Off a Cliff

Forbes – The Entrepreneurs of Plymouth Rock

WITN – Computer Frozen, Message Says You’re Under FBI Investigation

GovLoop – Either Way a Fiscal Cliff

TBJ – Top 7 Emerging Trends in Real Estate

Bloomberg – Hospital Medicare Cash Lures Doctors as Costs Increase

St. Louis Fed – Price Level Targeting… The Fed Has It About Right(?)

Census – Facts for Features: Thanksgiving Day!

Have a Happy, Safe and Enjoyable Thanksgiving Holiday!


Analysis Roundup – November 9, 2012

Here is the latest information of interests to budget, financial and management analyst  for NC local government:

NC League of Municipalities
2012 Annual Budget & Tax Rate Survey Results Released

Wednesday, NCLM Research Director Karl Knapp released the League’s latest update to their annual survey on budget and tax rate performance. More than 450 municipalities responded to their late-summer survey.


  • 67% of respondents reported that revenues were better able to support increased spending levels, up from 53% last year and relatively-close to pre-recession confidence levels.
  • In order to balance budgets, more municipalities than last year chose to raise tax rates and increase or add fees, while much fewer than last year chose to cut specific program expenditures of eliminate employee pay increases.
  • General government services like finance, human resources and administration remain the hardest hit by budget limitations and necessary spending cuts.
  • Nearly 55% of those responding to a question about service reduction reported that sanitation services had been scaled back.
  • Approximately 45% of those reporting on job eliminations indicated they eliminated positions in Police (highest), general government was second (39%).
  • Fewer municipalities eliminated positions, reduced employee benefits or cut capital spending compared to last year.
Wells Fargo Economics
Wells Fargo released their Monthly Economic Outlook report for November this morning. They predict 3rd Quarter GDP will be around 1.4% annualized rate in the US, with global growth for the year coming in a little over 3%. Domestically, they do not expect the slight improvement in trends seen during the 3rd quarter to remain through the end of the year. This week’s announcements of considerable corporate layoffs following Tuesday’s election point to some weaknesses, and uncertainty of the pending “fiscal cliff” events will create additional uncertainty and negatively-impact investment. More than likely, any domestic GDP growth through the end of the year will be achieved from consumer spending, including an expected increase in spending during the holiday season.
Check out what Kenneth Hunter (Rocky Mount) presented early this week.

Links of Interest

Wells Fargo – The Fiscal Cliff Debate in a Post-Election World

Wells Fargo – Global Chartbook (October 2012)

Richmond Fed – Fifth District Economic Indicators

Richmond Fed – Are Depression Era Employment Swings Overrated?

RTP Master Plan/Road Show

Grand Rapids, MI – Effort to Change Comptroller from Elected to Appointed Fails

Analysis Roundup: November 2, 2012

Wells Fargo Economics Group
NC Outlook shows “downshift”

Thursday evening, Wells Fargo Economics Group released their latest North Carolina Outlook. Their analysis points to how global downturn and uncertainty over the pending Federal “fiscal cliff” put negative pressure on economic activity within the state this year, as well as create potential decline going into 2013.

Metro-specific analysis is also included in the Outlook for Asheville, Charlotte, Raleigh, Greensboro and Winston-Salem.

Click Here for the NCLGBA Post & Access to the Outlook

National Retail Federation/Wells Fargo/NCLGBA
2012 Holiday Spending Growth Predicted

The National Retail Federation is predicting 4.1% annual growth in retail sales during the 2012 holiday season (November-December), while Wells Fargo also forecasts growth at 3.8%. While below last year’s 5.6% growth rate, it is still above the 3.1% rate reflecting the 10-year average.

Click Here for the NCLGBA Post on 2012 Holiday Sales

Bureau of Labor Statistics
National Workforce Gains 171,000 Jobs

Today, the BLS reported a 7.9% seasonally-adjusted national unemployment rate for October 2012, slightly above last month’s 7.8% rate. Nonfarm payroll increased 171,000 in October, with private sector workforce growth of 184,000. Growth in the services sector continued to outpace goods-production (click here for quick overview of sector performance).

Labor force participation remains below 64%. At the October 2011 participate level of 64.1%, unemployment would be 8.3%, with the rate remaining near or above 10% at pre-recession participation levels. Total nonfarm payroll is still more than 4 million jobs less than early 2008, prior to the start of the recession.

Click Here for the BLS Press Release

NC Employment Security/BLS
NC Counties, Metro See September Payroll Gains

95 of 100 North Carolina Counties and all of the State’s Metropolitan Areas saw increases in nonfarm payroll in September. County payroll growth for the month (1.67%) was close to the year-to-year growth rate for September (1.77%), reflecting the ongoing issues North Carolina is having with sustaining increasing in employment.

Metropolitan areas saw average 1-Month job growth of 1.6%, with 12-Month growth clocking in at an average of 2.7%. Rocky Mount, struggling with among the highest unemployment rates for NC Metropolitan Areas, had the strongest 12-Month job growth at 4.4%.


Gas Buddy/AAA/WTVD
“Demand Destruction” Helps Bring Gas Prices Down

Among the effects of Superstorm Sandy, North Carolina residents are noticing another significant drop in gas prices. This is due to the fact that while the storm did not disrupt national gasoline refinery or pipeline activity, the devastation and loss of end delivery infrastructure in the Northeast has created temporary “demand destruction” forcing prices to come down in other areas.

For a better explanation, check out this interview with NC State Economist, Dr. Michael Walden, aired Thursday night:

In the past week, the state average for unleaded as dropped 2.5%, and pump prices in many locations today are less than $3.30/gallon.

Since climbing to over $3.80/gallon shortly after Labor Day, the NC state average has dropped nearly 14%. In most metro areas, according to AAA, prices today are at or slightly above one year ago, though the state average is 21% higher than 2 years ago, reflecting considerable increases in gas prices and the impact felt on local budgets.

Training Opportunities

Next Wednesday, November 7th, 1PM ET – Unbalanced Mayhem: Trends, Challenges & Failures in Local Government Budgeting (Webinar Hosted by American Society for Public Administration & Association for Budgeting & Financial Management)

Presented by Kenneth Hunter, City of Rocky Mount, North Carolina

Across the country, local governments are struggling with fiscal pressures created by ongoing economic turmoil and its impact on revenues, expenditures and citizen quality of life. This presentation will examine specific challenges municipalities and counties encounter when developing annual budgets and how they impact local policy decisions with respect to personnel, capital, taxes and other facets of public administration. Click Here for Registration Info.

November 13th-15th – Intermediate Purchasing Seminar (UNC School of Government)

Click Here for More Info & To Register

Friday, November 16th – Positive Problem Solving (UNC School of Government)

Facilitating positive change is the focus of this one-day leadership development workshop for public staff and elected officials who are interested in involving others, building on current assets, and engaging in joint problem-solving.

The course provides an opportunity for significant interaction with instructors and the chance to apply the course content to real-time work scenarios in class.

Click Here for More Info & To Register

Wednesday, November 28th, 1PM ET – Michigan’s Emergency Manager Law:  Fiscal Fix or Loss of Local Democracy? (Webinar Hosted by American Society for Public Administration & Association for Budgeting & Financial Management)

This webinar discusses the Michigan Emergency Law (EM law), passed in 2011. It is considered the most aggressive attempt by a state to modify and reign in local democracy in an attempt to solve a serious fiscal crisis.  Most states take an approach where local officials are required to undertake certain actions in order to benefit from state support.  Other states insert a financial control board which has the power to oversee city operations and potentially veto certain local decisions.  Few states have implemented an approach that completely removes local decision making and local democracy.  The question arises as the justification for such extreme action. Click Here for Registration Info.

Thursday, November 29th – Accounting & Auditing Update (UNC School of Government)

Presented by Greg Allison

This one-day course will focus on new and emerging governmental accounting and financial reporting requirements. Recent pronouncements and exposure drafts of the Governmental Accounting Standards Board (GASB) will be highlighted, as will the GASB’s technical agenda. (8 Hours CPE)

Program Topics:

  • Overview of current GASB projects related to pension accounting
  • Changes to the reporting of certain assets and liabilities
  • Accounting and financial reporting requirements of GASB Statement No. 54 and other recent statements
  • Highlights of the GASB’s new Comprehensive Implementation Guide
  • Common accounting and financial reporting problems

Click Here for More Info & To Register

Links of Interest

Economic Snapshot – Federal Reserve Bank of Richmond (Includes North Carolina, Released Today)

ASPA National Blog – New Skills for Complex Times

Mercatus – Pensions in Peril

Census Bureau – New Findings on Metropolitan and Micropolitan America and Change Between 2000 and 2010

Wells Fargo Economics Group – An Early Look at the Impact of Hurricane Sandy

CREC – Regional Cluster Analysis – North Carolina’s Eastern Region (Industrial Economic Development)

Charlotte Business Journal – Piedmont Natural Gas Rates Bump Up November 1st

Charlotte Business Journal – Simon says only one outlet center will get built (in Charlotte)

Wells Fargo Economics Group – Fed Maintains Weak Growth, Low Inflation Outlook (Upholds justification for continued quantitative easing)

PNC Economic Outlook Survey, Fall 2012

WRAL – Consumer Confidence Continues Improvement

Durham Herald-Sun – Chapel Hill weighs trash options

WTVD – Feds provide funding to repair Outer Banks roads damaged by Sandy

Analysis Roundup: October 22, 2012

Here’s a collection of data and information from the past couple weeks of interest to local budget and financial analysts:

NC Department of Transportation
FY 2013 Powell Bill Allocations Released

The first half of Powell Bill allocations for qualifying municipalities were distributed on September 30th. The remaining 50% will be distributed on or before December 31st.

According to the NCDOT report detailing the September 30th distribution, payouts to municipalities were 3.2% higher than last December. Total payouts were $71.4 million, reflecting a total FY 2013 allocation to cities and towns of $142.8 million, distributed in shares of $20.43 per capita and $1,610.94 per mile.

Bureau of Labor Statistics/NC Employment Security
North Carolina Added 29k Jobs in September, or Did We?

Last Friday saw the release of the latest employment and unemployment numbers for states. North Carolina’s seasonally-adjusted unemployment rate dropped slightly from 9.7% to 9.6%. The state “gained” 29,232 jobs (+0.7%) while the labor force grew by 25,656 (+0.6%).

According to BLS, North Carolina was one of 35 states that saw an increase in jobs, and among 41 with a decrease in the unemployment rate.

The Employment Security Commission provides an overview of distribution of nonfarm employment through their Current Employment Statistics. Comparing September to August, growth looks a lot more murky:

  • Seasonally-adjusted total growth is only 100 nonfarm jobs for September
  • Unadjusted numbers indicate total growth of 11,900 nonfarm jobs, though the private sector contracted by 18,700.
  • Goods producing jobs did increase by 1,900, signalling some help for manufacturing and contraction by more than 20,000 in the private service sector
  • Government jobs grew by 30,600, almost entirely facilitated by education services and the start of the school year

According to BLS, North Carolina has gained 50,839 total jobs since January 2009 (+1.2%), not keeping pace with labor growth of 88,387 (+2.7%).

With respect to nonfarm employment, North Carolina has lost 52,700 jobs since January 2009.

County-level data should be available on or by November 2nd.

NC Department of Transportation
Joint Legislative Committee Reviewing NCDOT Progress

The Metro Mayors Coalition shared several presentations last week from September and October meetings of the Joint Legislative Transportation Oversight Committee. These presentations give us an idea of what NCDOT is work on with respect to several major initiatives:

2040 Plan

Consolidation of Division of Highways

Secondary Roads Program

NC Turnpike Authority Projects

The General Assembly’s Program Evaluation Division also just completed an analysis of the North Carolina Railroad Company, recommending that the company’s “unique relationship” with the State as sole shareholder should facilitate payment of an annual dividend to the State, along with improving reporting requirements.

NC Department of Revenue
August 2012 Retail Taxable Sales Slightly Above Last Year

NCLGBA will start creating monthly reports of retail sales activity, analyzing monthly report distributed by the North Carolina Deparment of Revenue. For August, taxable sales were 0.7% higher than last August. Compared to July 2012, sales were 6.9% less, reflecting seasonal differences.

From the perspective of a 3-month rolling average, August 2012 sales were 3.1% higher than last year. Tax collections were down, reflecting the last month where the difference includes the presence of the 1% temporary sales tax increase that was in place through June 2011.

Click Here to Review Our Analysis

Wells Fargo/ABFM
Economist Vitner sees Continued Economic Slowdown

Wells Fargo Senior Economist Mark Vitner did not express much optimism for improved economic growth through the end of 2012 and into next year, as he shared several concerns during his October 2012 Economic Outlook discussion.

Click Here to Access Video & Review Summary of Topics

Click Here for Wells Fargo’s Latest Economic & Financial Commentary

Lincoln Institute of Land Policy
What’s going on with voluntary nonprofit PILOT’s

This study takes a look at recent activity with voluntary payments in lieu of taxes (PILOTs) by nonprofits to local governments. Here are the highlights with respect to their findings:

  • PILOTs have been received by at least 218 localities in at least 28 states since 2000; these payments are collectively worth more than $92 million per year. This is a much greater number of PILOTs than identified in previous studies, with the increase due to a more expansive methodology.
  • Although more than 90 percent of all PILOT revenue comes from “eds and meds”—college payments are far more important than hospital payments with colleges contributing about two-thirds of PILOT payments and hospitals another quarter.
  • Many other types of nonprofits also make PILOTs even if their contributions are generally small. This report identifies nonprofits that make PILOTs of these types: housing (47), religious organizations including churches (36), social services (15), and arts/culture (11).
  • The Northeast accounts for roughly 75 to 80 percent of PILOT activity, with the  largest share in Massachusetts and Pennsylvania.
  • Most nonprofits make fairly small PILOTs while most revenue generated comes from a small number of multi-million dollar PILOTs. As a result, the average PILOT for all nonprofits ($292,952) is nearly 10 times larger than the median ($30,000).
  • While at least 420 nonprofits make PILOTs, the majority of revenue comes from just 10 organizations: Harvard University, Yale University, Stanford University, Brown University, Boston University, Massachusetts General Hospital, Dartmouth College, Brigham & Women’s Center, Massachusetts Institute of Technology, and Princeton University (in order of payments, beginning with the highest).
  • PILOTs generate little revenue in most localities—accounting for less than 1 percent of total general revenue in 165 out of 181 localities that have information available.
  • Localities use a variety of methods to receive PILOTs; the most common are long-term contracts (used by 58 percent of localities) and routine annual payments (34 percent).
  • Most PILOTs go to cities and towns, but at least seven school districts and four counties also receive PILOTs.
Thanks to Tony McDowell (City of Asheville) for sharing this report.

Click Here to Access the Report

Cobalt Community Research/ABFM
Local Government Employee/Retiree Healthcare Coverage Struggling

“…The report shows 7% fewer local units of government provide health coverage to their active employees than in 2011.  Governments who do provide health coverage are paying a slightly smaller share of the premium.  Fewer local governments are self‐insuring…”

Click Here to Access Report & Summary Press Release

Articles of Interest

San Francisco Chronicle: Prudential Said to be Near Systemic-Risk Tag in US Review of Firm

Prudential, manager of North Carolina’s 401(k) program, is being reviewed by the Financial Stability Oversight Council, an arm of the Treasury Department established by Dodd-Frank. Due to its size in the overall financial market, the insurance and financial services company could be subject to greater federal oversight and restrictions on dividends and buybacks if deemed necessary by regulators following a final round of review and testing. Prudential did not receive any Federal bailout funds.

Charlotte Business Journal: Regulators: Duke Energy improperly sealed Progress merger records

Charlotte Business Journal: Charlotte wins $580 million from Feds for Light Rail Extension

WRAL: 2012 State Fair ends on a high note

WRAL: Amtrak through NC hits highest percentage of growth in the nation

Triangle Business Journal: NCDOT getting plenty of feedback on proposed rate increase




Analysis Roundup for October 5, 2012

Here’s the latest collection of topics discussed in economic reports of note from financial institutions and government agencies.

BLS/NC Employment Security
Employment Picture Differentiate Across NC Counties

Last Friday, NC Employment Security and the US Bureau of Labor Statistics provided county-level updates for total employment and unemployment rates. 80 counties within the state experienced a decrease in total employment, while 73 saw a decrease in their unemployment rate. Reduced labor force participation within the working age population, caused in part by terminations of summer employment, attributed to this contrast in results.

National Employment Improves a Little in September

Total nonfarm employment growth for September (Seasonally Adjusted) was 114,000 nationwide. Because of this and adjusted improvements to job growth reported in July and August, the national unemployment rate was reduced to 7.8%, its first sub-8% reporting since January 2009.

National employment participation continues to lag, though up slightly in September to 63.6% of the working age population. Since last September, the total labor force (those working or looking for work) has only increased 827,000, while the working age population has increased 3.7 million. If labor force participation was consistent with September 2011 (a distressing 64.1%, compared to a pre-recession average of 66% to 67%), the unemployment rate would be 8.5%.

On the bright side, since January 2011, private sector nonfarm employment has grown nationally by nearly 3.3 million.

North Carolina unemployment, as of August 2012, still remains among the highest rates in the country, and more than a full percent above the nationwide level.

National Job Growth Remains Subdued

The National Employment Report provided by payroll processor ADP (released today) shows US nonfarm private employment growing by 162,000 last month (seasonally-adjusted). Job growth for July and August were also revised downward by about 9%-10% per month.

About 89% of these new jobs (148,000) are in the service sector, while the remainder are in goods production. 50% of total reported job creation was with small businesses with less than 50 employees.

Dr. Walden
September NC Leading Indicator Index Dropped 0.8%

For the third month in a row, the North Carolina Leading Economic Indicator Index declined, this time falling 0.8% due to declining manufacturing and building activity.

NC Treasurer
New Website, e-Newsletter Launched

North Carolina State Treasurer Janet Cowell recently-released a newly-designed website, along with a monthly e-newsletter.

The October issue of the newsletter, published today, features information on the Treasurer Office’s investigation of LIBOR Rate manipulation and State Pension Fund performance.

For the 2011-12 Fiscal Year, the Pension Fund achieved 2.21% growth, declining 1.23 during the second quarter of calendar year 2012. Recent losses were concentrated in global equity investments, while securities, real estate and private equity holdings performed well.

Click here to sign-up for Treasurer Cowell’s e-newsletter.

Wells Fargo Economics Group
October 5th Weekly Commentary Highlights

  • September job growth met expectations, but adjusted improvement for summer was unexpected;
  • Economic activity in Europe and China remains sluggish;
  • Interest Rates should remain low as a result of QE3;
  • Low interest rates should have positive influence on car and truck sales

Oil below $90, Unleaded below $3.70

Despite tension in the Middle East, crude oil futures continued to slide, though they remain prone to intermittent volatility due to mixed economic signals. Whether or not employment growth is a sure thing in the US, continued economic slowdown in Europe and China is putting strong downward pressure on crude in comparison to its near-$100/bbl position in late-summer.



As for gasoline, we’re starting to see some relief, with the State average dropping below $3.70/gallon this week.


At the same time, North Carolina prices remain closer to the national average, indicating a peak price situation within the state itself.

QE3 may also play a role in keeping gasoline prices high, especially if greater inflation kicks in. Overall, gasoline prices not only significantly impact local government budgets, but they also have a large influence on disposable personal income. Higher fuel prices in August contributed to an increase in the level of total US retail sales, a situation where greater spending does not necessarily reflect improved economic activity.

Worth Checking Out

Here are some articles worth taking a look at involving NC local governments, or possible strategies for local budgeting and finance:

Wilmington Star News: Industry seeks 30% increase in homeowners insurance premiums for beaches, inland

Triad Business Journal: Bank of North Carolina awarded SBA “preferred lender” status

Triangle Business Journal: Wake OKs changes to make RTP more urban

ASPA Blog: Management Lessons from the Haul Road

NCDOT: Economic Assessment for I-95 Improvements Begins