Good Food Store promotes McDonalds

Our local, values-based natural food store is putting on a McDonalds Holiday Benefit. I knew times were tough for multinational corporations, what with the ever-escalating fight for who can pay the highest salary, but this seems a bit much.

Well, OK, that’s a bit deceptive. But, then so is the Ronald McDonald House that is the beneficiary of this event. Yes, it is a charity. And, yes, providing a hotel for families to stay in while other members of the family are undergoing medical treatment is noble, indeed. But, another big winner is McDonalds.

There is simply no way to separate the Ronald McDonald House Charity (RMHC) from the fast food chain. The trademarked symbol of every house features Ronald McDonald, a cartoon character invented to sell hamburgers. Every family that comes through the door is subjected to constant reminders of the connection to McDonalds, Ronald McDonald, and the Golden Arches. McDonalds is the single largest donor, and every house is funded and promoted by the local McDonalds. The sales of USA Today inside the store are all donated to RMHC. There is even a RMHC-themed McDonalds restaurant. And the website for the local RMHC is © 2005 – 2009 McDonald’s Corporation.

Don’t get me wrong. RMHC is a good charity, doing good service in many communities around the world. But, if McDonalds felt this was so important that it didn’t need to use it as a marketing tool, then they could have called them Missoula Hospital Family Stay. Oh, but wait, there is one: St. Patrick House, right near St. Patrick Hospital. (The Ronald McDonald House is on the campus of the Community Medical Center, and charges the same per night as the St. Patrick House.)

So, my question is why the Good Food Store wants to promote the charity arm of McDonalds? The Good Food Store is a “non-profit corporation dedicated to supporting a healthy community“. I’m not sure I understand how promoting McDonalds is supporting a healthy community. With a bit more forethought, they could have been doing a St. Patrick House Benefit or one for the St. Pat’s Women’s Care Center or the Rehabilitation Institute of Montana at Community Medical Center or the Watson Children’s Shelter.

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There’s trouble a foot ..

Interesting … the nation’s banks have just been given a stress test by the Investigative Reporting Workshop, a project of the School of Communication at American University. Using June 2009 figures, they calculated a troubled asset ratio for every bank and credit union in the country.

According to MSNBC:

“While it is not an official FDIC statistic, nor is it intended as a definitive predictor of the likelihood of bank failure, the troubled asset ratio apparently is a strong indicator of severe stress inside a bank because it shows the bank’s ability to withstand loan losses. Of the 92 banks that have failed so far this year, 84 had troubled asset ratios of 100 percent or greater in the final quarter they reported data before they closed.”

Here’s a look at here’s some of the local figures:

Troubled asset ratio, June 2009

56.7 Stirling Savings Bank (of Spokane)
54.5 Treasure State Bank of Missoula
38.5 Farmers State Bank (of Victor)
29.9 First Security Bank of Missoula

25.9 First Interstate Bank (of Billings)
24.1 US Bank (National)
19.7 Wells Fargo (National)
17.4 Community Bank – Missoula

16.8 Montana First Credit Union
15.6 Mountain West Bank (of Kalispell)
14.3 First Citizens (of Rhode Island)
10.1 Missoula Federal Credit Union

For banks, they calculated a “troubled asset ratio,” which compares the sum of troubled assets with the sum of Tier 1 Capital plus Loan Loss Reserves. Generally speaking, higher values in this ratio indicate that a bank is under more stress caused by loans that are not paying as scheduled.

For credit unions, they combined Capital and Loan Loss Reserves to calculate the amount of cushion the credit union has to protect against loan losses. We combined the delinquent loans and other real estate owned to calculate the “Total Troubled Assets.”

They then divided the amount of Total Troubled Assets by the amount of Capital and Loan Loss Reserves to derive the “Troubled Asset Ratio.” Generally speaking, higher values in this ratio indicate that a credit union is under more stress caused by loans that are not paying as scheduled.

What’s yours is mine, and what’s mine is mine too

I’m reminded every weekend that the Griz play at home – the University doesn’t provide nearly enough parking for all the Griz fans that drive to the game.

But, this last weekend something different happened to me as I parked on the streets in the University district. I found myself behind a vehicle that I recognized – from out on Kona Ranch Road. Yep, they’d driven in from their property (next to the river) where they post and enforce ‘No Parking’ signs. Somehow they feel that it is all right for them to park in front of someone else’s property when they clearly don’t think it is OK for someone else to park in front of theirs.

Of course, this is common. Other than on Griz gameday, you’re not allowed to park in the University District. Nor are you welcome to park in the Grant Creek area if you want to hike up one of the nearby peaks on Forest Service land. And you can completely forget parking along the Blackfoot River Recreation Corridor during the summer since the adjacent landowners have severely limited the number of legal spaces. Even the Costco parking lot seems to be full more times than not and there’s nowhere else to legally park!

If we’re not allowed to park on public streets or roads in so many situations, shouldn’t the attractions be responsible for providing parking? Not only would the University have to build enough parking for all 20,000+ people that drive to Griz games, but MT Fish, Wildlife & Parks would have to buy up land near the Fishing Access Sites and the Forest Service would build some parking near the trailheads.

Of course, if you’re going to do that then we would expect downtown business to equally provide parking for their customers, too. Right? None of this relying upon street parking – if my guests aren’t allowed to park outside of my property, then why should their guests be allowed to park outside their property? Perhaps the East Front Street Parking Structure is for that purpose?

But, wait, apparently asking Macy’s to pay a percentage of the operating &/or maintenance costs could be a deal breaker! Instead, Missoula County Commissioners have unanimously approved designating Missoula County an Economic Recovery Zone to enable private entities, the County, City, and other local governments to access federally subsidized financing. Apparently, the county is going to borrow $8 million dollars and give it to the City to build the structure. And, at the same time the Missoula Downtown Association wants to raise the downtown parking fines. Yep, we’ll be paying four times over for the privilege to park on our downtown streets.

Which begs the question – why do we pay for and build parking for some people in some locations, but not others? Oh, I know: economic development! Sadly, that word is rapidly becoming code – for subsidizing my business at your expense.

Vote early?

I got my election ballot today. I considered the candidates for Citywide office, marked my choices, sealed the envelope inside the envelope, signed it, and … then what?

I thought of putting it out for the US Post to collect, but I don’t want someone to see my ballot sitting outside my fence and think they might steal my vote.

So, maybe I’ll drop it off at the Election Center located in the Fine Arts Building at the fairgrounds. That’s where you go if you aren’t registered, or didn’t receive a ballot in the mail. Or, I could drop it off at the Courthouse. I’ll have to take a bus to either location, since they’re not within walking distance of my home.

On Election Day, there are drop locations in many schools (Cold Springs, Hellgate, Lowell, Paxson, Rattlesnake, Russell, and Seeley Lake). There is also same-day registration at the Election Center, Missoula Fairgrounds.

But, I have to ask – why did we go to all the expense of mailing out ballots, if people are just going to drive over and put their ballot into the boxes at the drop locations? Wouldn’t it have been cheaper to have had a regular election – maybe with fewer places to vote, but still within walking distance?

Sterling Savings Bank first to go?

In a little-noticed AP article in Friday’s Missoulian (10.15.09), a major controversy with one of the regional banks was brought to our attention. Sterling Savings Bank, headquartered in Spokane and the largest Washington-based bank, also has branches in Missoula, Billings, Bozeman, Hamilton, Livingston and Big Timber.

It may be the first bank operating in Montana to fail in the current economic cycle.

To a bank with $12.4 billion in assets, being asked to raise $300 million within 60 days might not seem like much. But, with the stock price (Nasdaq: STSA) having plummeted from $12 a year ago to $1.20 at last trade on Friday, it is unlikely investors will be rushing to open their wallets. One analyst said that investors can choose among several Northwest banks in need of capital and that Sterling may not be the most attractive proposition. Fitch Ratings has cut its credit rating down into junk bond territory.

Furthermore, the bank has been found to have “engaged in unsafe or unsound banking practices and violations of law and/or regulations“. That’s extremely stern stuff, by regulator standards. The FDIC (Federal Deposit Insurance Corporation) cites Sterling for “operating with inadequate board of directors oversight; operating with inadequate capital in relation to the kind and quality of assets held by the Bank; operating with a large volume of poor quality loans; and operating in such a manner as to produce operating losses.” That the FDIC has given Sterling 4 months to develop a new strategic plan to improve profitability also doesn’t bode well. The Chairman of Sterling Financial Corp, Harold Gilkey, as well as Heidi Stanley, chairwoman of the subsidiary Sterling Savings Bank, both submitted their resignations effective immediately. The new Chairman, William L. Eisenhart, has been a director on the board since 2004 and was chairman of the company’s audit committee.

Oh, and Sterling had borrowed $303 million through the Troubled Asset Relief Program, which it still has to pay back.   By missing its Aug. 17 TARP dividend payment, it is now on the TARP deadbeat list.

Nov. 19 update: The bank’s quarterly report (Oct. 22) shows that Sterling lost $463.7 million or $8.93 per common share in the first three quarters of 2009. Share prices plummeted on the announcement, to the 50 to 75 cent range.

Says Eckhart, President of Sterling Savings Bank, of the requirement to raise $300 million in new capital: “It may not happen by Dec. 15, but I’m not concerned that the government will come in and shut us down by that date. We’ve shown a great deal of focus and I think they will give us the flexibility to meet our goals.”

Dec. 17 update: No word on the FDIC deadline.

In other news, Hagens Berman Sobol Shapiro (a Seattle-based law firm devoted to protecting the rights of investors, consumers, workers and the environment) is investigating Sterling Financial Corp for potential violations of the Employee Retirement Income Security Act of 1974 (“ERISA”). And Californian shareholder rights firm Robbins Umeda LLP has begun an investigation into possible mismanagement at Sterling Financial Corporation. Lastly, Kendall Law Group, founded by a former federal judge, began an investigation on behalf of shareholders of Sterling Financial Corporation. Are the vultures circling?

Jan. 5 update: In an agreement announced the day before New Years, but signed a week earlier, the Federal Reserve bank toughens oversight and gave Stirling Financial 60 days to draw up plans to strengthen risk management, maintain sufficient capital and identify contingent sources of liquidity. Stirling Financial also cannot pay dividends or increase the bank’s debt without approval. Stock value barely moves around 0.62 range.

Feb. 5 update: Stirling limps along. Barely. Stirling Financial announced on Monday a fourth-quarter loss attributable to common shareholders of $333.1 million, or a loss of $6.41 per share. That translates into a net loss in 2009 of $855.5 million, or $16.48 per share. On Tuesday, shares fell 18 cents to close at 57 cents.

Sterling’s nonperforming assets ballooned more than 16 percent in its fourth quarter to finish 2009 at $952 million. That’s more than 8.5 percent of Sterling’s total assets.

This week, Sterling offered 20 cents on the dollar for 10 separate sets of trust preferred securities initially valued at $238 million. As that WSJ article explains, trust preferred securities are at the front of the line in bankruptcy proceedings. It is very hard to raise new capital when new investors would likely recover little if the bank collapsed. Thus, the efforts to buy back the trust preferred securities.

March 17 update. It would appear that Sterling needs another break from the Feds in order to stay in business. The Treasury would accept a steep markdown on the $303 million invested in Sterling only 15 months ago if the company can raise an additional $650 million in capital from new investors. The deal essentially wipes out all current shareholder equity.

It looks like the bank will be sold to private equity firms. Whether the Sterling franchise brand will survive is unclear, nor is it known what assets (including branches) will need to be sold.

April 2 update. Remember that update from February? The one where Sterling was offering a steep discount on the repurchase of $238 million in securities. Apparently, it is critical to Sterling’s efforts to raise $650 million in capital that would bring the bank back into compliance with regulatory capital requirements.

Well, they had to extend the deadline for two more weeks.

May 4 update. Thomas H. Lee Partners, a Boston private equity firm, will invest $134.7 million in struggling Sterling Financial Corp.

Sounds good, doesn’t it? Except that, as part of the ‘deal’, Sterling also announced it will execute a separate stock exchange deal with the U.S. Treasury to convert about $303 million in preferred shares to common stock worth about $76 million. Why did taxpayers have to lose $237 million of equity, when the private investment is only for $135 million?

Oh, and Sterling still has to raise an additional $585 million to meet the required capitalization to keep the company independent. Because they’ve lost a cumulative $1.28 billion since the fourth quarter of 2008 ($85 million in the first 3 months of 2010), you’ve really got to wonder.

On Monday, May 3rd, Sterling announced their plan for recapitalization – sell 221.9 million shares of common stock at 20 cents a share. Add in 5.5 million shares of convertible preferred stock being offered at $92 a share and the deal with Thomas H. Lee Partners mentioned above, and they get the $725 million they need.

Not bad, except that common stock was priced at 87 cents before the announcement. The question is whether shareholders will approve taking such a big hit and the further dilution of their holdings.

May 24 update. Warburg Pincus Private Equity X, L.P. has agreed to bail out part of Sterling. Upon the completion of the deal, Warburg Pincus would own approximately 20.5% of Sterling Financial. As part of the deal, Thomas H. Lee Partners, L.P. will adjust the size of its proposed investment to be equal to Warburg Pincus. Terms of the deal require Sterling to raise an additional $442 million from other investors.

The Warburg deal requires U.S. Treasury and other regulatory approvals. (Treasury granted approval May 26, which is not surprising given that it was at regulators behest that Warburg help the otherwise struggling deal with THL Partners.)

July 16 update. Sterling is described as one of today’s worst performing penny stocks. Describing a 30-day average volume of 1.7 million shares, Smartrend suggests that, high volume often signals a change in trends. Shares of Sterling Financial are currently trading below their 50-day moving average (MA) of $0.73 and below their 200-day MA of $0.79.

August 21 update. Fitch Ratings has downgraded the Individual Rating of Sterling Savings Bank to ‘F’ from ‘E’ indicating Fitch’s opinion that STSA would have defaulted if it had not received some form of external support.

Thursday, it was announced Thomas H. Lee Partners, L.P. (“THL”) and Warburg Pincus Private Equity X, L.P. (“WP”) have amended their agreements to increase their investments in Sterling. Upon closing, THL and WP would each own an aggregate of 22.6 percent of Sterling’s pro forma common stock.

Sterling also reached agreement with about 30 investors for a private placement of about 155.3 million shares of common stock and 3.9 million shares of preferred stock for gross proceeds of about $388 million.

Shares closed Friday at 64 cents. The stock has lost nearly three quarters of its value in the past year.

Hoteliers want higher taxes

Last night at the Missoula City Council meeting, while we were all waiting for the vote on the zoning update, we were treated to a dog & pony show put on by one of Montana’s biggest economic interest groups. The mainly-government-funded Convention & Visitors Bureau (CVB), along with a number of hoteliers in town, trotted out their presentation for a Tourism Business Improvement District (Tourism BID). Some would call this a fee, others would say it is corporate welfare, while yet others would it a subsidy. Me? I name it a tax increase.

In a nutshell, every person who stays in a hotel within the City limits would be charged 75c per room per night. That money is then assessed on the Property Tax bill, collected by the City Treasurer, and handed over to the CVB to spend. How the Tourism BID monies are spent is then decided by a Board of 5-7 hoteliers who are appointed by the Mayor (although board members can only be hoteliers).

Unfortunately, this is not a local idea. Not only are we supposedly playing catch up to other tourism markets (Billings, Spokane, etc.), but CVB’s all around the country are pushing this approach. (In fact, the presentation given to City Council last night was based on a state-wide template: How to Lobby for a TBID.) It is sort of like an arms race – because the other guys are doing it, so must we. And according to State law, the local CVB must be the Tourism BID manager. So, it is no surprise that Barbara Neilan, Sage Grendahl, and an assortment of CVB board members (past and present) all urged council to support the idea! Beneficiaries of other Missoula BID’s, such as the Missoula Downtown Association, the Missoula Redevelopment Agency, and the like, also came out in support of the model.

I’ve never quite understood why city council has to get involved. If it is such a good idea for development of the tourism industry, then I’m surprised that the tourism businesses don’t get together and form a Tourism Chamber of Commerce, levy a fee on themselves, and go right ahead and market away. Instead, the city has to get involved and force every hotel guest to cough up the dough.

So, what is the money going to be spent on? According to a Missoula CVB brochure, about a quarter of the money will be spent on adding new staff to the CVB with the majority of the rest going towards assorted marketing costs (branding, research, branding, web site optimization (!), and trade shows).

Listening in last night, however, it seems a major concern is the underwriting and sponsorship of events. Maybe they’re talking about events at the MEC (Missoula Events Center), but since that hasn’t yet been built, let alone approved and funded, I guess they can’t say that. Instead, it seemed to boil down to paying organizations to bring sporting events (mainly state high school championships) to Missoula. I wonder if they’ll also be giving money directly to the Women of Faith conference, the NRA regional gun-show, or a Moveon.org/FreedomWorks gathering, as well?

Nary a whisper last night of who is going to pay for the infrastructure necessitated by all these tourists in our town. If there’s a whole bunch more people driving around town, we’ll need to pave, repair, and plow our streets a bunch more. If all those tourists are downtown eating and drinking their hearts out, then I suppose we might need a few more police to keep an eye on them. And with all those wallets just bursting at the seams with money to spend in the oh-so-cute downtown boutiques, I suspect we’ll see more panhandlers that might then need accommodating for the night. Who is going to pay for all those city services, then? Us, of course.

And that’s the rub. Instead of this tax going into the general city coffers to be divided up as our elected officials see fit, you and I will have no say or influence in how the CVB spends the Tourism BID revenues. As one speaker mentioned last night, how do we know the CVB is the best qualified group to manage and disperse the funds? According to some hoteliers I’ve chatted with, there is no way they would support the Tourism BID if the city council, or even Missoula City, had any control over the Tourism BID funds. They point to what happened to the Statewide Tourism Bed Tax once the state legislature got a hold of it. (Err, instead of it all being spent on tourism advertising, it was also spent on the assets of the state – state parks, historic preservation, historical society, and the Lewis & Clark Bicentennary, etc.)

However, I can perfectly understand why some of the bigger hoteliers like the idea of a Tourism BID. It is a tax that someone else pays (the hotel guest), that someone else enforces (the city), and that they (the industry) gets to spend. Wouldn’t want to trust the voters or their elected officials to do what’s right, would we? I think we could call it taxation without representation.

Granny flats for all!

Ryan Morton, candidate for Ward 1, would have liked the recent Missoula zoning update to have included, “the option for ADUs in all districts“. If elected, Morton would, “probably bring [granny suites] back up and start addressing through performance standards the issues people are concerned about“.

Well, I am honored that Ryan reads and comments on this blog. And, since I am not all that enthused about ADUs, perhaps I can give Morton some pointers on these Accessory Dwelling Units, or ‘granny flats’.

While I suspect many people are worried about density, I don’t see it as the main issue. I think we can deal with density through the usual zoning tools – side setbacks, for instance, can ensure that separate houses don’t get packed too closely together. That makes sense, particularly if seen through the health and safety lens of allowing free flow of air, stopping fires from spreading too easily from house to house, and giving some semblance of quiet enjoyment of your property. If the City wants greater density (and hence affordable housing?), then perhaps we could encourage the granny suites to be built on top of existing, street-facing homes. In many of the new zones, I understand it will be possible to soon build three floors and a basement. Surely, that’s enough room for someone’s sweet grandma?

No, I think the issue with alley homes (a much fairer term than granny flats or mother-in-law suites, because in the vast majority of cases I suspect we will see renters living in these homes and not members of the soon-to-be-deceased family) is the alley. And alleys mean vehicles. Thus, alley homes means an intersection of homes and vehicles.

What are the problems with more vehicles coming and going along alleys? Firstly, and most obviously, alleys were not designed for that much traffic. In my neighborhood, there are any manner of compost bins, covered boats and trailers, cars in various states of repair, and building equipment that sits out in the alley. That’s where we can access our property and so it is the easiest place to unattach or dump our mobile possessions.

That creates a problem. If the best way for our trash collectors, our fire fighters, and the utility company technicians to access our properties is down the alleys, then we’re going to have to ensure the new alley homes don’t park their vehicles there as well. That means building parking on-site, accessible from the alley. With the design of many of the garages-to-be-converted-into-alley homes today, that could be a problem.

Then there’s all the extra traffic. A not uncommon feature of alley homes is that the only access is via the alley. I know that many of them are not supposed to do this and that there is supposed to be access from the street, but a sudden desire for privacy leads property owners to fence off the front house from the back. That means that not only must the fire brigade, police and ambulance access the alley house from the back, so too must the residents.

With all the extra cars zooming up and down the alley, will we need to make sure all the alleys are paved? Probably, if only to alleviate the dust and the noise from all the extra vehicles. In my neighborhood, the kids like to play in the alley – particularly since some of the backyard lawns go right up to the alley without a fence. We’ll need to do something about the speed with which the tenants drive up and down the alley, maybe traffic calming speed bumps. We’ll need to plow the alleys, which probably means narrower plows than the City currently owns. And we’ll probably need to put in a bevy of stop signs to encourage people to slow down as they reach the end of the alley and not run right into the pedestrians walking along the sidewalks.

Sound too expensive and not very effective? I think so. Alley homes just aren’t very safe.