Cutting your nose to spite your face?

Calls,and kudos, for cutting the budget annoy the heck out of me. Rarely do government expenditures fall. Instead, a politically-well-calculated shift occurs – from salaries, wages, and benefits to grandiose plans and projects. The winners: the consultants, developers, and politicians who get to parse the wealth around. The losers: the government employess, the services they provide, and the taxpayers dependent on them.

Now, Missoula Mayor John Engen is getting in on the game. His State of the City address (Feb.2nd) has every department cutting, saving and reorganizing in order to match the declining revenues of city government. This is as a result of him asking for 6.5% reductions in budgets. But, 75% of the city budget is in salaries. So, that means you either fire staff or delay cost-of-living adjustments and watch some good people leave the area for better paying jobs. Either way, its bad.

How about the Mayor stop the hemorrhaging of money that is going into various civic projects? I know the out-of-town consultants and various planners will scream, but these are tough times and somethings got to give.

Let’s put some things on the chopping block:

A new Missoula County Fairgrounds.

We’ve spent over $60,000 on consultants (Crandall Arambula) to be told it will probably cost around $19 million.

The Front Street Parking Structure.

Kimley-Horn & Associates were the consultants here, and it looks like it will cost $8.2 million. I can’t seem to get a straight answer from the Missoula Parking Commission, the Missoula Downtown Association, or the city on who is going to pay the costs, but I’ll bet the taxpayers won’t be completely off the hook. After all, Crandall Arumbula got paid nearly half a million via a “public-private partnership” for the Downtown Master Plan that prescribes provision of more parking. I’m guessing that means the city is going to borrow millions to subsidize the downtown merchants.

The Missoula Events Center.

Don’t get me started on the problems with this one. jhwygirl does a nice job over here. Suffice to say that Hunden Strategic Partners got paid $50,000 for the first phase of their feasibility assessment. They’re asking for a similar amount for the second phase, when they’ll tell us how much it is going to cost and who should pay for it.

Oh and by the way, have you ever looked at who is behind the MEC? Yep, many of the same people behind the ball park, which took at least $2 million in city funding and still isn’t finished. How’s that working out for ya?

So, instead of cutting firefighters, parks & recreation, and police officers, Mr. Mayor, you should take a closer look at some the grandiose projects that all these consultants say is necessary for you to spend money researching and building. Heck, you could also borrow back the nearly $4 million that the Missoula Parking Commission has in the bank.

Hush, money

Scot Meader, manager of Missoula County’s fair and fairgrounds resigned today. Hopefully, this will stem the tide of complaints being leveled against him: alleged drunken groping, unethical and deceptive behavior, and a lack of being honest, ethical and forthright.

But, while Meader is going to cease representing the fair he will continue to receive his salary for the next year. $71,776 seems like a lot of money in Missoula, moreso when you’re being paid not to continue doing bad things.

Seems like in bad economic times that the County Commissioners should stand up to the weasel. Commissioner Bill Carey said he doesn’t “know for sure how we got to this point”. Well here’s a clue – you didn’t nip this thing in the bud when the original sexual harassment claim was filed. Now, you’re making us all pay for your efforts at trying to sweep this under the rug.

Sorry, but I think Meader should pay the County if he wants us to keep quiet about his unprofessional behavior. If he wants a job anywhere near Missoula then wouldn’t it be in his best interests to not be dragged through the arena of public scrutiny?

Something wrong?

There was an extraordinary hearing today at the bipartisan commission established to examine the causes of the current financial crisis. Jamie Dimon, CEO of JPMorgan Chase and commonly acknowledged as one of America’s most powerful and outspoken bankers, said this:

“Regulators simply didn’t have the visibility, tools or authority to protect the stability of the financial system as a whole.” ”

Why not?

And the second to follow?

Back in October I wondered if Sterling Savings Bank would be the first bank in Missoula to go under. Well, that story seems to drag on and on (see updates at the end of that post).

Now, it seems as if a Montana chartered community bank, Treasure State Bank, is on the same path. On December 29th they announced they would agree to a regulator contract to maintain a Tier 1 leverage capital ratio of 12%. The average for all FDIC insured commercial banks in Montana as of September 30, 2009 was 10.43%.

As the Missoula Independent reports, the “consent order,” aims to address losses to the bank resulting from loans gone bad. Basically, the have to set aside a chunk more cash to cover the dodgy loans that they made in the past. And since Treasure State Bank is relatively young bank, founded in January 2007, they don’t have those reserves.

So, they went out to raise some more capital. Perhaps the problem is that investors don’t think Treasure State is such a good deal. The bank had to extend the stock offering another month.

Back in July, you’ll remember Treasure State Bank had the second worst Troubled Asset Ratio of the banks in Missoula (after Stirling Savings Bank). Now admittedly that Troubled Asset Ratio was a little bit better by September (down to 49%, from 54%), but of the 38 banks the FDIC has closed since Sept. 30, 32 had a troubled asset ratio of greater than 100.

Oh, and you’ve got to wonder why they needed a new President and CEO back in October? Maybe because a few days earlier the bank had announced they had lost $74,000 in the previous quarter. In the year to Sept 30, they’d managed to lose over a $1 million.   Not bad for a bank with less than 20 employees!

How is, exactly, that a bank loses money when they borrow from you and I at exceedingly low rates (our savings accounts) and lend that money to folks to buy cars and stuff at a much higher rate? Yep, management probably made some bad decisions, so management had to go.

Now, who is supervising the management? On the Board of Directors of Treasure State Bank, you’ll find:

Howard C. Chandler, a neurosurgeon
Mark S. Hawkins, president of InterWest Health
Stanley Earl Jenne, formerly Chair of Accounting at UM
Raymond Joseph Round, director of Davidson Investment Advisors
Mark C. Staples, an attorney based in Helena
William R. Weaver, a real estate developer
James A. Salisbury, the new CEO

If Treasure State is your bank, or if your business is relying on a loan from Treasure State, now might be a good time to get to know these folks.

If you’re an investor, then this graph tells your story:

Treasure State Bank currently trades on the Over the Counter Bulletin Board (OTCBB) under the ticker symbol “TRSU”.

Merry Something to You

A small holiday wish from Devo to you.

Punish the workers

It is a sad day in Missoula when a local employer lays off 417 jobs. It is even sadder that it was management who caused, through bad decisions, the operation to close down. But, nearly everyone in the pulp and paper industry knew that it was only a matter of time before Smurfit-Stone shuttered the Frenchtown mill.

Why is that? Nearly a year ago Smurfit-Stone Container filed for Chapter 11 Bankruptcy. At the time, chairman and CEO Patrick J. Moore said, “Our financial performance has not reflected the full potential of our earnings power due to higher cost operations and burdensome debt levels dating back to the original formation of the company.”

Did you notice that bit about burdensome debt levels? At one stage, Smurfit-Stone Container was leveraged to the extent of 70 percent of capital. Hardly wise management, but instead this was celebrated back in 1989 (the go-go 80’s) as an ambitious company batting above its average on the way towards becoming a global behemoth.

In March 1989 Stone paid $2.2 billion in cash and securities for Consolidated-Bathurst Inc. (CB), Canada’s fifth largest pulp-and-paper company. The purchase made Stone Container the world’s second largest producer of pulp, paper, and paperboard; a major player in newsprint; and gave Stone Container a foothold in the European market through CB’s Europa Carton subsidiary and U.K. plants. Investors even back then worried about the $3 billion debt, but management thought it was easy enought to sell-off some of the non-core assets. The deal, though, was financed by banks and eventually they called in their obligations. The debt nearly caused Stone Container to collapse in 1993 when the debt had risen to nearly $5 billion.

Still the company continued on its spending binge, all with the aim of becoming what they are now – North America’s largest manufacturer of paperboard packaging. In 2000, it purchased St. Laurent Paperboard Inc. of Montreal for about $1 billion in cash and stock. In 2002, it paid $375 million for the MeadWestvaco Corporation’s Stevenson, Ala., mill and the seven plants and 82,000 timberland acres that supply it. It was still splurging as of 2008.

Ever since then, through mergers, reorganizations, fire sales of assets, broad redefinitions of strategy and assorted restructuring programs the debt load has constantly dragged the company down. As of of Sept. 30, 2008, the company was still $5.6 billion in debt with only $7.5 billion in assets.

What about the Missoula mill? Well in a gentle farewell to workers, Smurfit president Steve Klinger said on Monday that the Frenchtown mill was a high-cost facility that did not provide adequate returns over the long term for the company.

Really? Because in 2008 a strategic review that the company conducted with outside experts determined that its mill system was very cost-competitive, with about two-thirds of its plants in the top half of the cost profile. This was after they’d already closed a 180,000-ton linerboard machine in Montana. So, either they already knew that Frenchtown was one of the dogs, or they just couldn’t be bothered to fix it.

I dunno. Maybe the workers could see what was coming and were just hoping things would work out fine. But, I can’t help but think that the company hasn’t been completely honest with the crew. I guess it is hard for management to admit they’ve been screwing up for over 20 years. Patrick Moore and the bosses in St. Louis, however, will all keep their jobs. And, to put the icing on the cake, Smurfit-Stone may pay out up to $47 million in bonuses to executives and other employees in 2009. I don’t think any of the folks in Frenchtown will be getting them.