Must-Know News - Jan. 20

• 1) China May Buy Less U.S. Debt on Dollar Drop, Researcher Says

“Jan. 20 (Bloomberg) — China, which cut Treasury holdings by the most in five months in November, may reduce purchases further on concern the dollar will decline, said Liu Yuhui, an economist at the Chinese Academy of Social Sciences.

The Asian nation’s investors, the biggest foreign holders of U.S. government debt, trimmed holdings by $9.3 billion in November to $789.6 billion, a Treasury Department report showed yesterday. The decline came even as Chinese foreign-exchange reserves swelled $61 billion in the month.”

• 2) Unfunded Benefits Dig States’ $3 Trillion Hole: Orin S. Kramer (Commentary)

“Jan. 20 (Bloomberg) — Everyone seems to know the current path of federal fiscal policy is a deathtrap over the long term. What’s peculiar is the relative inattention to the balance sheets of state and local governments.

Hidden behind accounting fictions, the politically unspeakable reality is that public employee pension systems are under-funded by more than $2 trillion. Add more than $1 trillion in unfunded health-care benefits for retired public employees, and state governments face protracted structural deficits ranging from challenging to insurmountable. ”

• 3) Florida’s expected budget shortfall grows to $3 billion in 2010-2011

“In September, state economists estimated the state would be about $2.7 billion short in paying for all its expenses in 2010-2011. That would include a $900 million shortfall for its most pressing needs, such as schools and courts.

Last week, the economists revised their estimate and it is even more dire, with the new total budget gat expected to be $3 billion and the new critical-needs shortfall anticipated at $1.5 billion.

The shortfall is the result of a nearly $800 million decrease in property tax collections since the previous year, rising Medicaid costs and the need to bulk up the state’s pension fund for the first time ever. The deficit would be worse except that state economists are including revenue for education from the federal stimulus act passed in 2009. ”

• 4) Outlook remains grim for commercial real estate

“Expect another year of rising vacancies, declining property values and distressed sales in the local commercial real estate market.

That’s the message from Colliers Turley Martin Tucker in its annual State of Real Estate report. The firm will discuss its predictions for 2010 at an event Wednesday afternoon at The Murat.

CTMT forecasts more upheaval and pain for property owners in 2010 as tenants continue to look for savings on their real estate and consumers continue to pull back. ”

• 5) Commercial real estate woes ‘looming’

“The effects of the recession are passing for some industries, but not for the commercial real estate business, a panel of experts said Tuesday.

Beach Co. president John Darby called the problems for the industry “looming” as millions of commercial loans nationwide become due for property owners who owe more than what their buildings or land are worth.

He cited a Deutsche Bank report from April that predicted two-thirds of the commercial real estate loans expected to mature before 2018 won’t qualify for refinancing without a major infusion of cash. ”

• 6) Payroll taxes increase for many employers across USA

(A chart on the left side of the page shows the increase for each state)

“In 2009, the average business owner paid $95 per employee. This year, the tax will be $171, according to estimates by the state workforce agency. “It’s another added expense to hiring somebody,” Miller says. “Everything’s going up, and business is going down.”

Similar tax increases are hitting employers nationwide this year as states struggle to pay the 5.5 million Americans currently collecting state jobless benefits. So far, high unemployment and, in many cases, poor planning have prompted 25 states to borrow more than $25 billion from the federal government to keep benefit checks in the mail.”

• 7) CalPERS’ investments underperform in 2009

“Heavy losses in real estate holdings battered 2009 investment returns at California’s giant public pension fund, although the portfolio overall rose in value for the year.

The California Public Employees’ Retirement System earned an 11.8% return on its portfolio as global stock markets recovered from the collapse of 2008, the fund said Tuesday. The portfolio had dived 27.1% in 2008.

But the gain for 2009 was far below CalPERS’ internal benchmark of 21.2%, which is based on the performance of broad indexes of investments similar to what the fund owns.

“That’s massive underperformance,” said Edward Siedle, an analyst with Benchmark Financial Services Inc., a boutique investment consulting firm in Ocean Ridge, Fla. “There’s no justification for that.”

CalPERS said its real estate holdings plunged 47.5% for the year, compared with a 15.4% drop for its benchmark index of property investment returns.”

• 8) MediaNews to file for bankruptcy protection

“The company that owns the Daily News in Palo Alto, San Mateo County Times, San Jose Mercury News, Contra Costa Times, Oakland Tribune and some 50 other daily newspapers, as well as 100 non-daily papers in 12 states will soon declare bankruptcy, initiating a proceeding in federal court.

The bankruptcy of holding company Affiliated Media Inc., in the form of a Chapter 11 filing, is the result of inability to pay huge debts accumulated in recent years when MediaNews Corp. acquired many of the papers it now owns.”

• 9) Horrible county budget outlook worsens, tough decisions loom (Clark County)

“A new financial forecast for Clark County will likely make it all but impossible for its employee unions to avoid this unwelcome choice in the coming weeks — salary cuts or job cuts.

As they prepare to begin renegotiating labor contracts in a few weeks, Clark County commissioners learned Tuesday that next year’s budget deficit could reach $200 million — much higher than the $126 million predicted earlier.

George Stevens, the county’s chief financial officer, told commissioners that consolidated tax revenue fell $28 million, or 20 percent, in the first three months of the fiscal year compared with the same period in the previous year, and that commercial property tax revenue is expected to decline. The fiscal year began July 1.

Based on an average cost of $90,000 in salary and benefits per county employee, the looming deficit would equal roughly 2,200 jobs.”

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