Sunday, February 22, 2009

Stimulate me!

The ARRA passed last week and promises to shower me in a stimulating rain of cash. How exciting! I’ve got my Irish Spring in one hand and a bucket in the other. I can hardly wait for the flood of twenty-dollar bills (or direct deposits, if that works better for the U.S. Treasury) to envelop and protect me from the big bad wolf recession.

Because I have a reputation for thoroughly researching my topics before foisting them on my readers, I googled ARRA to get all of the facts. It’s embarrassing to find out a week after I post a column that it was riddled with inaccuracies. I’m used to it, but it’s still embarrassing.

ARRA – Americans for Responsible Recreational Access. This lobbying group, headed by Larry Smith, is the leading supporter of allowing snot-nosed Billy to ride his souped-up ATV (all-terrain vehicle, aka four-wheeled, off-road destruct-a-mobile) on Federal lands, tearing up every trace of natural flora and fauna in his track. How this helps people refinance their 12% subprime loans is a mystery to me.

ARRA – Asphalt Recycling & Reclaiming Association. Mike Krissoff (dangerously close to having a belligerent last name), executive director, manages this eco-friendly organization that just conducted its annual meeting in Palm Springs this weekend. Billed as “Preservation & Rehabilitation 2009 – The Eco-Friendly Bailout for Our Infrastructure,” I definitely thought I had found the right ARRA information. The seminar has “Bailout” in the title, after all!

Reading further, I quickly realized that this organization must be tied to Americans for Responsible Recreational Access, because the entertainment for the week was:

Desert Adventures Jeep Tours
Located directly on the famous “San Andreas Fault,” this tour visits an authentic replica of a Cahuilla Indian Village. Explore the strange and eerie canyons of the Painted Hills, nature’s own sculptures.

ARRA – Arizona Radiation Regulatory Agency. We lived in El Paso, Texas, when the Palo Verde nuclear plant was built in Wintersburg, Arizona. (I love how they name their towns to attract snowbirds, like Sun City, Arizona.) The construction of this power plant ran hugely over budget and left us with the second highest electricity rates in the country—second only to Cape Cod, where we live now. Did we bring the high electricity prices to Cape Cod like visitors who are often accused of bringing the bad weather? I don’t know. But I do know that Bechtel was the general contractor for the plant. Can you say “Big Dig?”

ARRA – Chicagoland’s Number One Classic Rock Cover Band. Now we’re getting somewhere. President Obama is from Chicago. I played in a cover band (see A Musical Family). This must be the stimulus I’m looking for. Time to dust off my electric bass and get ready to receive that call from Turbo Tax Tim Geithner (U.S. Treasury Secretary), assigning me to one of the Stimulus Bill’s nationwide classic rock cover bands. I hope it’s somewhere close to home—I’d hate to drive too far to the gigs, given that I’ll be paying 50 stimulating cents a gallon in Massachusetts gasoline tax.

ARRA – American Recovery and Reinvestment Act. This is it! I finally found it! How do I know? There’s a picture of Obama next to the headline “Your Money at Work.”

My money at work??!!! Wait a second. I was the one preparing to be showered with other people’s money. My money?

Just great. I’ve got to cut this column short and go to the office to earn some more money to fund the ARRA. Damn!

Copyright 2009 Randy Hunt

Saturday, February 14, 2009

Town Neck Beach, Sands of Change

Paul Schrader came to me over a year ago with the idea of creating a video about the erosion of Town Neck Beach. He and Clare are regular visitors to the beach and boardwalk that crosses over Old Harbor Marsh and, over the years, they have witnessed stark changes to the barrier dunes and salt marsh system.

Mary and I live in the Town Neck area of Sandwich, Massachusetts, and often take the five-minute walk down to the beach. From our own observations, as well as those of other Sandwich residents we heard from during the production of this video, there is no doubt that we are experiencing accelerating erosion of the barrier beach.

Paul and I wrote an article for the Sandwich Enterprise, a local weekly newspaper, which provides some interesting background on the topic. Read it here. We edited the video, “Town Neck Beach, Sands of Change,” into a 30-minute version and a 10-minute version. To see the long version, request a DVD from me by emailing a request to randy@randyhuntcpa.com. If you can stop by our office to pick it up, there is no charge for the DVD. Otherwise, we will mail a copy to you for a handling and postage fee of $5. Directions to the office are at http://www.randyhuntcpa.com/contactus.html.

The 10-minute version follows. If you have a broadband Internet connection, make sure to click "watch in high quality" for the best viewing experience. Also, this YouTube version of the program includes closed captioning. Hover your mouse over the triangle at the bottom, right-hand corner of the video window. The closed captioning box (CC) will appear. Click it to turn it on or off.



Paul Schrader and I also recently appeared on Spectrum, a WXTK radio show hosted by Judith Goetz. We talked about the Town Neck Beach erosion problem and our documentary, Sands of Change.

To hear the podcast of the Spectrum program, click here. Be patient. It's a pretty big file.

You can help us preserve this beautiful spot on Cape Cod by learning about the erosion problem and sharing your awareness with your friends and neighbors. If you would like to join our email distribution list, please send a message to randy@randyhuntcpa.com to indicate your interest. We will need your participation to assist the town in its efforts to protect this fragile ecosystem.

The following photos were taken by Paul Schrader.

Copyright 2009 Randy Hunt

Sunday, February 8, 2009

Here comes the scam (sung to the tune of “Here Comes The Bride”)

UPDATE
All of the wrangling is over and after the pendulum swung widely on the issue of a credit for home buyers, we ended up with virtually the same first-time home buyer credit we already had with the following modifications: 1) the credit is increased to $8,000; 2) the payback provision is eliminated for houses purchased in 2009; and 3) the purchasing window is extended to November 30, 2009.

Here is the summary of the conference committee first-time home buyer credit:

Refundable First-time Home Buyer Credit.
Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. This proposal is estimated to cost $6.638 billion over 10 years.

* * * * *
(Original Post)
This week’s post is not a humor column. This is my prediction of the unintended consequences of an amendment to the Economic Stimulus Bill to be voted by the Senate on Tuesday. The House and Senate bills will be reconciled immediately after the Senate vote with the objective of getting the compromise bill approved and moved to Obama’s desk before the President’s Day hiatus.

The amendment was proposed by Georgia Senator Johnny Isakson, a former realtor, to stimulate the housing market. In a nutshell, it provides for a nonrefundable tax credit (the word nonrefundable means that the credit offsets one's tax liability, but to the extent that the credit is larger than the tax liability, it goes unused) of up to ten percent of the purchase price of a principal residence, capped at $15,000. It would apply to real estate closings occurring for one year from the date that Obama signs the bill into law.

The credit would be paid over two tax years at $7,500 per year, generally the year of the purchase and the year after, though it’s looking like purchases made in 2009 may qualify for a credit on your 2008 tax return. Presumably this would apply to closings that occur prior to the personal tax return extension deadline of October 15th or possibly any closing occurring in 2009 and reported on the 2008 Form 1040 via an amended return.

This proposal is different from the current $7,500 first-time homebuyers (defined as people who have not owned a principal residence for more than three years) “credit” (which requires repayment of the $7,500 “credit” over 15 years) as well as the modified House version (which makes the credit refundable and eliminates the payback provision). The amount is increased, obviously, but the major change is that Isakson’s proposal applies to anyone’s purchase of a principal residence, not just first-time homebuyers.

That’s where the unintended consequences come in. Let’s say that there are next door neighbors who both bought their houses during the loose credit heyday, qualifying for their interest-only mortgages without even having to substantiate their incomes (often called “no-doc” or “Alt-A” loans). The interest rates have moved up substantially from the teaser rates that expired a year or two after the loan documents were signed.

Normally, people in this situation would be looking to refinance their mortgages into conventional fixed-rate loans, a no-brainer given the low interest rates available in today’s marketplace. So, let’s assume that our next door neighbors both have the means to qualify for a refinancing, but there’s a much better option out there thanks to Senator Isakson.

Since the first-time homebuyer requirement has been dropped, our next door neighbors are eligible for the $15,000 credit. Rather than refinancing their current loans, why not buy each other’s houses? They’ll still incur closing costs, but they eliminate the realtor’s commission, which is usually six percent of the sales price. They’d have to pay closing costs on a refinancing transaction anyway. Nothing lost there.

What’s to be gained, however, is that each family can then get a $15,000 credit on their tax returns. That would cover all of the closing costs and most likely leave $12,000 or so for pocket change. Multiply that by two and we have $24,000 transferred from the rest of us to our next door neighbors.

Has this transaction bolstered the housing industry? Hardly. Do realtors benefit? I don't see how. The $24,000 might have a stimulative effect, assuming they spend the money on something besides debt reduction, but the primary purpose of Isakson’s proposal would have been circumvented. The neighbors wouldn’t even have to move into each other’s houses as long as they change their addresses for legal purposes or just use post office boxes to hide what’s happened.

I’m certainly not advocating that anybody should pull a stunt like this, but I am painting a scenario that needs to be dealt with in the enacting legislation or by the IRS. The shift from first-time homebuyers to any homebuyers opens this loophole.

There is no doubt that the stimulus package will involve huge amounts of wasteful spending, unimpeded by any diligent oversight; just as we saw with Katrina aid and the financial sector bailout. So, if I can help plug at least one hole in our ship that is quickly sinking into the ocean of socialism, I feel better.

(My concerns have been communicated to Senator Isakson’s office in an email I sent last week.)

Copyright 2009 Randy Hunt

Sunday, February 1, 2009

Ice Ice Baby

Click here to listen to the audio version. (On a high speed connection, these podcasts may take up to a minute to load. Be patient. If you're on dial-up, you can simulate a podcast by reading the following article out loud.)

I woke up yesterday morning to the sounds of ice picks and hammers. Probably the neighbor gone overboard—tired of ice skating out to her car for the past two weeks—trying to break up the three-inch glacier covering everybody’s lawn out here on good Olde Cape Cod.

Then it occurred to me that the noises were just too loud to be the lady next door, so I put on some clothes and went outside to see what was going on. Rounding the corner of the house, I discovered a team of Swiss ice climbers scaling our chimney, which has sported a variety of challenging world class icefalls since last week’s storm. Querying them in my broken German, I learned that our chimney is rated WI4 on the World Icefall Difficulty Scale.

There is no recession going on in Cape Cod emergency rooms. The Guinness Book of World’s Records was at the hospital in Hyannis certifying the record for most broken bones set in a 24-hour period. The ER doctors almost broke the cracked skull record, coming in second to the Saugus Marble Company disaster. We all remember when their delivery truck, loaded with six million marbles, crashed into a home heating oil tanker in the path of the Boston Marathon back in the 70’s.

On day one of this modern ice age, Mary and I were leaving for work and I stepped out the front door onto the stoop, only then realizing that it was covered with a clear glaze of ice. Briefcase in one hand and cup of coffee in the other, I was in trouble. I couldn’t retreat back into the house without my foot slipping out from under me, nor could I negotiate the rest of the steps without the risk of a life changing injury.

I considered having Mary call 911. I could just stand there until firemen came to pluck me from my predicament, hopefully with such skill that I wouldn’t spill a drop of my coffee. Running this scenario through my head, I imagined the fire log in the weekly local newspaper: “Man stranded on frozen steps rescued by hook and ladder company at cost to taxpayers of $1,500.”

Plan B came to mind fairly swiftly. If I could just squat down, it would take at least four feet out of my fall, reducing the chance for a severe injury. So I called back to Mary: “I’m goin’ down!” With that, I slowly (and I mean really slowly, which Mary found to be intensely entertaining and comical) started squatting down. About half way into Plan B, I became aware of the physics involved. It has something to do with the ratio of the size of your derrière to the mass of your frontal lobe and, apparently, my ratio is too large.

My feet went out from under me in an instant and I landed hard on my ratio. Fortunately, I hadn’t injured anything, although I did lose control of my coffee; all the more entertaining for Mary, who by now was experiencing uncontrollable laughter—the kind that’s interrupted every few seconds with a snort.

From this point, all I had to do was scoot down the steps until I could reach a patch of snow and regain my footing. The rest of the trip to the car was quite treacherous and has remained so for over a week.

I wanted to share this tale with all of our friends who are enjoying the season down in their Floridian lairs. I imagine you’re all feeling very happy and smug about your decision to leave the character-building New England winters behind. If I was the envious type, I would cast a cold spell on you that would have you considering pulling a sweater out of the closet or closing a window or two, but I’m not. See you in the spring.

Copyright 2009 Randy Hunt