PHOENIX (By Jon Garrido, The Jon Garrido News Network) November 17, 2008 — At a time when there is already a $250 million shortfall caused by mismanagement by the Phoenix mayor and city council that will result in 1,500 Phoenix employees terminated and the drastic reduction of city services, Vice Mayor Peggy Neely and Mayor Phil Gordon gave away $100 million of Phoenix tax payer funds to a real estate developer.

 

If any city forgives any amount of money owed the city from taxes, by definition, it is a tax break.

 

Of course, except in Phoenix by Neely and Gordon. Neely calls it an "infrastructure reimbursement." No wonder the City of Phoenix is in dire straights for obligating the City of Phoenix by using taxpayer revenue to finance projects.

 

When a real estate developer wants an incentive to build a development in a city rather than develop in an adjacent city, developers ask for tax breaks. When Neely and Gordon convinced the Phoenix City Council to allow the developer to keep half the city sales taxes that should have been collected at CityNorth for 11 years which has a value of $97.4 million, it is $100 million in tax revenue lost that would have gone to the City of Phoenix lessening the number of City of Phoenix employees that will be fired and restoring some Phoenix services. Anyone other than Neely and Gordon would call this a tax break.

 

Phoenix Vice Mayor Peggy Neely claims, "This is not a tax break. It is an infrastructure reimbursement."

 

If lipstick is applied to a pig, it still is a pig no matter if it is called "infrastructure reimbursement."

 

All of this would be impossible to make up but the video documents how Neely and Gordon justify their actions thinking Phoenix residents are too stupid to understand but it is clear, Neely and Gordon go to great lengths to try to deceive Phoenix residents. Listen carefully to Neely and Gordon.

 

Gordon adds, "If the thing wasn't done then you wouldn't have the revenue so there should be no apology. This is a spin game by a few individuals."

 

The truth is the real estate developer was given $100 million and the developer was so grateful for receiving a $100 million windfall from Neely and Gordon, the developer gave or rather being "politically correct," contributed $17,000 to Neely's political campaign.

 

$17,000 for $100,000,000.00 is a sweet deal.  An unbelievable deal. The developer is probably still beaming for finding two really stupid people named Neely and Gordon that bought the sales pitch ― hook, line and sinker.

 

Stupid but the worse part of this will be mortal to the firing of 1,500 City of Phoenix employees because Neely and Gordon sold them down the river.

 

And to be outright bold, even more stupid than Neely and Gordon are the Phoenix voters who support Neely and Gordon at each re-election.

 

Lastly, how can any Phoenix employee respect Neely and Gordon for being deceitful and not putting the best interest of the City first?

City of Phoenix Budget Cuts

The City of Phoenix is facing a budget shortfall as high as $250 million depending on decreased tax collections from now to the end of the fiscal year. This is a time to do everything possible to increase tax revenue — not give it away.

Over the past six years, Phoenix already cut $125 million from its general fund. Earlier this year the city slashed $90 million from its budget, a record at the time.

Arizona law requires all Arizona cities to balance its budget and because of this, Phoenix will have to reduce its $1.2 billion budget by 22 percent.

The only way to for the City of Phoenix to balance its budget is too reduce city services and terminate Phoenix employees that provide these services.

Every department will face services and employee cuts. These will all have an adverse impact on every Phoenix resident directly and indirectly.

The termination of 1,500 city employees will have a ripple effect reducing food and retail purchasing and services provided by the Phoenix business community. All of this will have a multiplier effect as Phoenix businesses terminate employees and all remaining employees and former employees cut back on consumer purchases.

"The services that are left are critical services," said City Manager Frank Fairbanks. "Services will be reduced at all Phoenix community centers. There are senior, graffiti, after-school, and keep the neighborhoods from declining programs. Kids will have swimming pools closed next summer, city libraries will cut hours, bus routes will be terminated, streets will not be repaired and the long list of other city services will be drastically cut."

Sixty-eight percent of the budget is devoted to public safety departments: police, fire and courts. The city will not fill vacancies in the Police Department.

The council now must decide how much it can trim from those departments without significantly diminishing crime-fighting efforts.

If it chooses not to cut the public-safety budget at all, the council would have to reduce support for libraries, transit and all other programs by 60 percent.

"Forty-five percent may decimate a department," said Councilwoman Thelda Williams, who wondered if it might be better to eliminate some departments altogether rather than ask them to operate at half of their already reduced capacity.

The proposed budget will be released Jan. 6, followed by two weeks of community hearings. The cuts would go into effect March 2.

Now a Global Recession on the Verge of becoming a World Wide Depression

All of this coming at the worst economic period in recent history as unemployment rises and foreclosures continue to rise.

Today's national headlines debate a plan to bail out Detroit automakers, some calling the U.S. industry a "dinosaur" whose "day of reckoning" is coming. Their opposition raises serious doubts about whether the plan will pass in this week's postelection session of Congress.

Democratic leaders want to use $25 billion of the $700 billion financial industry bailout to help General Motors Corp., Ford Motor Co. and Chrysler LLC.

Richard Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee said, "They're not building the right products. They've got good workers but I don't believe they've got good management. They don't innovate. They're a dinosaur in a sense."

Sen. Carl Levin, a Michigan Democrat, said automakers are working to adapt to a changing consumer market, but they need immediate help to survive the nation's current economic crisis.

"This is not a Big Three problem alone," Levin said. "This current crisis is a crisis in the economy where there is no credit available to purchase, and where people are not buying cars because they are afraid."

"It's not the General Motors we grew up with. It's a General Motors that is headed down this road to oblivion," said Shelby. "Should we intervene to slow it down, knowing it's going to happen? I say no, not for the American taxpayer."

Obama said he believes that aid is needed but that it should be provided as part of a long-term plan for a "sustainable U.S. auto industry" — not simply as a blank check.

Automakers say bankruptcy protection is not an option because people would be reluctant to make long-term car and truck purchases from companies that might not last the life of their vehicles. But lawmakers opposed to the bailout say Chapter 11 bankruptcy protection might be a better option than government loans and they cite the experience of airlines that have gone through the process of reorganization.

The Center for Automotive Research, which receives funding from the auto industry, has warned the collapse of the Big Three could set off a catastrophic chain reaction in the economy, eliminating up to 3 million jobs and more than $150 billion in tax revenue over the next three years.

Cowed by the financial crisis, American consumers are pulling back on their spending, all but guaranteeing that the economic situation will get worse before it gets better.

In response to the falling value of their homes and high gasoline prices, Americans have become more frugal all year. But in recent weeks, as the financial crisis reverberated from Wall Street to Washington, consumers appear to have cut back sharply. Even with the government beginning a giant bailout of the financial system, their confidence may have been too shaken to resume their free-spending ways any time soon.

Recent figures from companies, and interviews across the country, show automobile sales are plummeting, airline traffic is dropping, restaurant chains are struggling to fill tables, customers are sparse in stores.

When the final tally is in, consumer spending for the quarter just ended will shrink, the first quarterly decline in nearly two decades. Many economists, who began the third quarter expecting modest growth, now believe the cutbacks are so severe the overall economy did not expand either, and they warn that a consumer-led recession could be more severe than the relatively mild one earlier this decade.

For some Americans, the pain is already acute: jobs disappeared at a faster clip in September. For many others, day-to-day finances are fine for now, but the financial outlook is uncertain: 401(k) accounts are dwindling, loans are hard to get and house prices continue to fall.

Consumer spending, which accounts for nearly two-thirds of the economy, grew modestly earlier in the year but fell in July and August on an annualized rate. When the government releases quarterly numbers this month, they are expected to show that consumer spending shrank 3 percent or more. That would be the first quarterly decline since 1990, ahead of the 1991 recession, and the steepest since 1981.

According to interviews with shoppers, analysts and company executives, the impact of the financial news of the last two weeks has been palpable in many corners of the country, from car dealerships, which endured the worst month for sales in 15 years, to the flashy casinos of Salt River and Gila River, where spending at gambling tables has gone from bad to worse.

The picture is just as grim at Phoenix area malls and city boutiques, where traffic is disappearing as retailers brace for what many predict will be a dismal holiday shopping season. Some have responded by reducing the number of sales people or their hours.

“In the last few days, there has been a huge drop-off in foot traffic and almost zero sales. People have lost their confidence. They have no buying power. They are losing their retirements, their vacation funds, and they are scared to commit to buying anything,” said a leading Phoenix banker refusing to give his name.

Taking a break outside an Office Max store in Phoenix, Dave Cargerman, a 25-year-old sales clerk, said his hours had been cut back. “We got killed during the back-to-school sales,” Mr. Cargerman said. “And that time of year is usually our bread and butter.”

The credit crisis and record high gas prices have teamed up to drive the world's largest Chevrolet dealer out of business. Bill Heard Enterprises has closed all 13 of its stores.

The Bill Heard dealerships relied heavily on the sale of pickups, which have slumped drastically since gas prices hit historic highs over the last several months. A pullback in dealer financing by GMAC also influenced the decision, reports said.

The company began in Columbus, Ga., in 1919, founded by W.T. Heard Sr. It developed into the country’s biggest Chevrolet dealer and ran dealerships in Arizona, Georgia, Alabama, Florida, Tennessee, Texas and Nevada. At its height, the company said it sold “around $2.5 billion” a year and employed more than 3,500 workers.

Casual dining restaurants, which have struggled in recent years because of a glut of restaurants and higher-quality fare at fast-food chains, have taken a beating already this year, forcing the Bennigan’s chain to close and leaving several others struggling. “I think September could be the worst month of the year, and we’ve had a lot of bad months,” said Lynne Collier, an analyst at KeyBanc Capital Markets who covers the restaurant industry.

At a Chili’s Grill & Bar at 2057 E Camelback Rd. in Phoenix, Luisa Sanchez, a 23-year-old salon manager, said she used to eat at places like Chili’s at least once a week but no longer does.

“Now it’s more like twice a month, and it’s somewhere cheap, like Subway,” she said. “I have a lot of bills to pay.”

And as fewer people eat at restaurants, food is flying off the shelves at grocery stores. David Driscoll, a stock analyst for Citigroup, said the shares of big food companies have risen about 17 percent this year. By contrast, he said, the restaurant sector is down 4 percent.

“The alternative of restaurants is buying groceries and eating at home,” he said, “and right now, that’s an attractive alternative.”

Daniel Kimble, 31, was putting Mr. Driscoll’s theory into practice on Friday. An independent trucker from Oklahoma, he stopped his rig on I -10 in Phoenix, AZ on his way to a Los Angeles.

Mr. Kimble ticked off a long list of his money-saving steps, from driving his pickup truck less to using less laundry detergent to buying fewer clothes. And he has stopped eating at restaurants on the road, which is why he was parked at Wal-Mart.

“I’m going in to buy some lunch meat and some bread, whatever’s cheap,” he said. “I’ve got to save money, you know?”

Consumers are also cutting back on air travel, whether for business or pleasure. Passenger volume is dwindling even faster than airlines can sideline planes and cut poorly performing routes. At American Airlines, domestic passengers flew 11.7 percent fewer miles in September, while the airline cut 9.4 percent of domestic seats.

The consumer slowdown in recent weeks comes after spending drops in July and August, when tax rebates came to an end. The financial shocks on Wall Street accelerated the decline, along with limits on consumer credit imposed by some banks.

“Consumers have become quite concerned that the recession, which they think is already under way, will last longer than they anticipated and will be deeper,” said Richard Curtin, director of the Reuters-University of Michigan Surveys of Consumers, describing the most recent poll. “They see their worst fears coming true.”

In addition, household net worth, which greases spending, fell $6 trillion over the last year, with $1 trillion of that in just the last four weeks, said Mark Zandi, chief economist at Moody’s Economy.com.

First came the mortgage crisis, now comes the credit card crisis

After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers.

The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of heavy losses after an era in which it reaped near record gains from the business of easy credit that it helped create.

“If unemployment continues to increase, credit card net charge-offs could exceed historical norms,” Gary L. Crittenden, Citigroup’s chief financial officer, said.

Lenders are shunning consumers already in debt and cutting credit limits for existing cardholders, especially those who live in areas ravaged by the housing crisis or who work in troubled industries. In some cases, lenders are even reining in credit lines after monitoring cardholders who shop at the same stores as other risky borrowers or who have mortgages from certain companies.

The depth of the financial crisis has shocked a credit-hooked nation into rethinking its habits. Many families once content to buy now and pay later are eager to trim their reliance on credit cards. The Treasury Department, which is spending billions of dollars in taxpayer money to clean up an economic mess brought on in part by all sorts of easy credit, recently started an advertising campaign inviting consumers to check into the “Bad Credit Hotel,” an online game that teaches the basics of maintaining good credit.

At the same time, the fear factor among lenders has deepened just as the crisis makes it harder for some financially stretched consumers to wean themselves from credit cards for even basic needs, like gas and food.

“We used to get a couple of offers a week, but I haven’t seen a credit card offer in over a year,” said Brett Barry, who owns a real estate agency outside Phoenix and described his credit record as strong. “What blows me away is these companies are in the business of extending credit, but they don’t want to do it for me.”

Mr. Barry said that, without any notice, American Express had reduced the credit limit on his business and personal credit card at least four times in the last year, which he said had lowered his credit score. The moves have also made it difficult for him to manage his payroll and budget, he said.

“Credit card issuers have realized their market is shrinking and that there is no room for extra credit cards, so they have to scale back,” said Lisa Hronek, a research analyst at Mintel. “People are completely maxed out with mortgages, home equity lines and credit card debt.”

Fear and foreboding took hold on Wall Street yesterday, as the stock market again plunged and investors became convinced that the nation is on the verge of a deep and prolonged recession.

The broad Standard & Poor's 500 fell 7.6 percent, the seventh consecutive day of misery on Wall Street. The index has now fallen 42 percent from its all-time high one year ago yesterday and 22 percent this month alone. Stocks are on track for their worst calendar year since 1937.

Fear from Wall Street flooded into Asia on Friday, where markets were dramatically lower in early trading. Japan's benchmark Nikkei average plunged more than 10 percent, Australia markets slid more than 7 percent and South Korea stocks were down about 8 percent.

"It's a domino effect. Stocks are falling out of bed. There is distrust in the market and distrust in the government that is trying to heal this," said Peter Cardillo, chief market economist with New York-based Avalon Partners.

Investors pulled a record $72 billion out of stock and bond mutual funds in September, the research firm Trim Tabs said yesterday, and in the past week alone took out $52 billion.

Meanwhile, darker clouds have moved to new parts of the economy. Trouble in sectors like steel production and heavy machinery, which until recently were growing strongly, has contributed to the mounting view that the U.S. economy has tumbled into a significant recession.

Economists now widely predict the economy will contract until the middle of 2010. If that holds true, it would mark the nation's longest period of economic decline since the downturn that ended in 1975.

The nation is still absorbing steep declines in home construction, an industry that shed 35,000 jobs in August alone. Sales of clothing and shoes are down, as is spending on recreational outlets -- including casino trips, nightclubs and sporting events -- according to Commerce Department data.

Factory orders were down in August by 3.5 percent, a decline that included products such as computers, pharmaceuticals and iron and steel. Demand for steel is dropping as the global economy cools and the domestic market for cars and appliances shrinks.

There is a bright spot for American consumers: Oil prices also continued a steep two-month decline yesterday, falling $2.36 to $86.59 a barrel as traders bet that the slowing global economy will reduce demand for energy worldwide. That should eventually flow through to American consumers' gasoline bills and could boost consumer spending.