Friday, June 10, 2011

Hernando official would slash dozens of jobs, then rehire at lower pay

It is interesting watching companies and governments struggle with what to do when the answer is readily available by looking at what happened in Australia in the 90's. Many of you are aware that I have commented a number of times previously in my BLOG how Cities and counties merged in order to balance budgets and ensure there where no increases in Tax's.

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Hernando official would slash dozens of jobs, then rehire at lower pay

By Barbara Behrendt, Times Staff Writer
In Print: Friday, June 10, 2011

BROOKSVILLE — Still more than $4 million away from balancing next year's Hernando County budget and with yet another bleak year expected after that, County Administrator David Hamilton is floating a drastic plan to save money.

First, Hamilton would terminate some of the positions of county directors, managers and supervisors. Then, he would readjust the job descriptions and cut salaries to reflect the current job market and pay scales.

Finally, he would re-advertise the positions. The county employees who had held the jobs could apply for their old jobs, of course, but so, too, could others.

Left unclear Thursday was whether Hamilton's position would be one of those emptied and then re-advertised.

On Thursday, Hamilton said he has talked to county commissioners about his idea, which is part of his larger strategy to shrink the cost of government. He declined to reveal what sort of reaction he has received.

He said that as he was filling out layoff forms Wednesday for nine workers, he realized that the county was cutting from the wrong end of the work force. Gone would be the jobs of a painter, a secretary, a veterans services officer, traffic technicians and others — people on the front line providing services that the residents of the county expect.

Because the idea is just a concept now, Hamilton couldn't say how many county workers might be affected. None of the people in the targeted positions are members of the Teamsters Union, which represents roughly 440 of the county's 663 employees.

"We want to do this rather than an across-the-board wage cut to allow us to rebalance the organization and meet the market levels,'' Hamilton said of his plan.

Hamilton already has some of the information needed to determine proper pay levels for his management staff from a study done months ago. At the time, he was recommending some small salary changes involving his leadership team. The County Commission told him it wanted a more comprehensive recommendation.

"Some of our salaries are out of synch with the overall salary structure,'' Hamilton said. Some managers earn almost as much as directors, for example.

"We want to look at what is out of synch and especially what the market is today'' and target those positions for closure and re-advertising, Hamilton said.

A similar budget-cutting technique is in place in Hillsborough County. Hamilton said he talked about the idea with Hillsborough County Administrator Mike Merrill last week, and Merrill's staff has offered to help show how the process might work in Hernando.

The idea of cutting higher-level pay has come up several times during budget talks in the past few months. Several commissioners have even supported cutting their own salaries, which are set by the state. A new law, however, would allow them to cut their own compensation.

Commissioners are paid an annual salary of $61,100. With benefits, the total cost is approximately $85,000.

The level of county employee salaries has been a hot topic for years. In the midst of the strong anti-government movement during the 2007 budget season, residents carried signs announcing the salaries of the county's top department heads and urged across-the-board reductions for staffers getting higher rates of pay.

Already this year, public employees are getting hit by changes.

Through the actions of the Legislature and with the support of Gov. Rick Scott, all public employees in the state must contribute 3 percent of their pay toward their state retirement plan.

Locally, the commissioners have also talked about increasing the amount that workers pay toward their health insurance and about changes in health insurance, paid-time-off policies and county holidays.

For employees represented by the Teamsters, those kinds of issues must be negotiated at the bargaining table.

Barbara Behrendt can be reached at or (352) 848-1434

Thursday, June 9, 2011

Hacking At Citi Is Latest Data Scare

This article talks about how to prevent the hacking. If you have a look at Australia and the different techniques they are using to thwart hacking the banks would find the answers this article poises?

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Hacking At Citi Is Latest Data Scare
Citigroup Inc. plans to send replacement credit cards to about 100,000 North American customers after its systems were breached by a hacking attack affecting about 200,000 accounts.

The Citi credit-card breach is one among many similar attacks, including those at Sony and Lockheed Martin. There are countless ways personal data can be compromised, but you can take steps to reduce the risk. Andrea Coombes has five tips.
.Citi said on Thursday that the hacked accounts amounted to about 1% of its 21 million North American card customers and that it has referred the incident to law enforcement. The bank said it is contacting affected customers and has implemented procedures to prevent a recurrence.

The cyberintruders were able to access information including holders' names, account numbers and email addresses, Citi said. But the breach, which was discovered in early May and is the latest in a series of hacking attacks against companies, didn't compromise additional personal information such as Social Security numbers, dates of birth, or card security codes or expiration dates. The bank didn't rule out that fraudulent activity might have taken place following the attack but said Citi's debit cards weren't affected. Citi didn't say when the attacks occurred.

Experts estimate the cost of replacing credit cards is as high as $20 apiece.

Citigroup's action in reporting the problem within weeks and replacing most of the cards appears to be an aggressive response. In an episode earlier this year at Michaels Stores Inc., thieves tampered with card- processing equipment as early as February, but more than a hundred customers didn't find out until three months later that their accounts were being looted. Once Michaels learned of the situation in May, the crafts store says it made a prompt public disclosure and replaced the equipment.

The Citi breach comes on the heels of other similar attacks, raising concerns among financial regulators and security experts that banks and other companies aren't doing enough to protect themselves and their customers.

Breaches Cost Firms $7.2 Million Per Incident
SmartMoney: A Silver Lining for Cardholders
Deal Journal: Big Data Breaches in History
News Hub: Citigroup Accounts Hacked
.Other recent incidents have hit range of companies, including Sony Corp. and Lockheed Martin Corp., but security experts say financial institutions remain a top target for cybercriminals. "The most sophisticated hackers in the world target banks, and they target government agencies," said Tom Kellermann, a former World Bank cybersecurity official and current chief technology officer at AirPatrol Corp., a Maryland-based wireless-security firm.

Security experts—whose business it is to advise and provide security to corporations and the government—say banks also need to strengthen the authentication procedures they use to identify consumers and employees who access accounts or a firm's network. Criminals increasingly are targeting such authentication credentials. The rise of mobile-banking technologies makes this vulnerability more acute, say security experts.

Regulators agree. A group that includes the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, months ago started work updating 2005 guidance on how banks can best authenticate the identity of customers accessing Internet-based financial accounts.

The attacks have lawmakers worried, too. Senate Banking Committee Chairman Tim Johnson (D., S.D.) is planning a hearing to examine data security in the financial-services industry, according to a Senate aide.

Citibank's peers defended the strength of their security.

"We are aware of the attack at Citi," Wells Fargo & Co. said in a written statement. "Security is core to our mission, and safeguarding our customers' information is at the foundation of all we do."

A J.P. Morgan Chase & Co. representative said, "Chase is unaffected by the incident involving our competitor," declining to comment further.

"We constantly evaluate the security of our systems, including all potential threats, and take appropriate steps to keep information secure," Bank of America Corp. said in a written statement.

A recent breach involving RSA Security, the company that provides security tokens used by millions of workers to access their company's computer systems, set off alarms for banking regulators, said people familiar with the situation. Not only do scores of banks use the tokens for their employees, but some banks also offer them to customers as a way to secure Internet banking activities.

The RSA event was discussed among banking regulators, the Treasury Department and the Department of Homeland Security, according to people familiar with the matter, and the Federal Reserve and the FDIC raised the issue with the banks they oversee.

The Citi incident and the RSA breach speak "to how sophisticated the bad guys have gotten," said David Robertson, of the Nilson Report, a newsletter about credit cards in Carpinteria, Calif. He added that RSA "is like Fort Knox. If RSA can get hacked, anybody can get hacked."

RSA said it is working with its customers to assess their risks. It has offered to provide customers with monitoring services or to replace tokens.

Banks including Citi are pushing for greater use of new wireless technologies. But the more consumers use devices such as iPhones, iPads, and Android-enabled phones for financial services, the more enticing mobile devices become for cybercriminals.

Officials at Citi in particular have talked up the future of online banking access. Citi has about one-sixth as many branches as its chief rivals J.P. Morgan and Bank of America Corp. At a recent panel, Tomasz Smilowicz, global head of mobile solutions at Citi's transaction-services unit, said processing payments through a mobile device compares favorably for merchants with the cost of handling cash, which can include using armored cars and guards to transport money.

Security officials say an infected application downloaded on a phone can be designed to take over a smartphone. When the user then logs on to his bank account with the phone, the hacker could steal the user's bank credentials. Many mobile-banking apps don't account for a phone being compromised, said Jason Rouse, a wireless security expert with Cigital, a software consulting firm.

"We're very comfortable that the way we're managing mobile makes this actually a very safe and secure channel," said Jack Stephenson, J.P. Morgan Chase's managing director for mobile e-commerce and payments. The number of registered users of the bank's various mobile-banking offerings has more than tripled since January 2010, from three million to 10.5 million last month, with about five million users active every month, he said. Mr. Stephenson said it is true that mobile banking introduces new threats, and that attacks will keep coming, but that "the ways you can prevent those threats are a lot deeper and richer on mobile devices."

Write to Randall Smith at

Wednesday, June 8, 2011

Tripped Up by the Margin

The crisis we had in 2008 was driven by leverage that investment banks like Goldman Sacs were able to get as a percentage of the capital they had on their balance sheets when compared to a FDIC backed bank. Following the crisis and the bail out investment banks were forced to reduce the leverage they could apply on capital to the levels of banks backed by the FDIC. Reduction of leverage reduces the crazy bets that can be made with other peoples money.

Aivars Lode

Tripped Up by the Margin

Commodity investors have long been used to wild market swings driven by wars and hurricanes. But recently a new risk has been added to their list: margin requirements.

Margins, the amount of collateral investors must post against their trades, are designed to help reduce the risk to exchanges and calm overheated markets.

But recently that safety valve is being blamed by some for wreaking havoc on markets such as silver, gasoline and cotton. As prices swung wildly, major commodity exchanges ratcheted up their demands for collateral, setting off a chain reaction that forced many investors to liquidate their holdings, sending prices tumbling.

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."Whenever the margins are reacting to conditions, such as higher volatility, they can essentially exacerbate the impact of those conditions," said Craig Pirrong, a finance professor at the Bauer College of Business, University of Houston. "It tends to reinforce the initial shock."

Silver's tumultuous ride in late April is a case in point, Mr. Pirrong said. Investors are still crying foul over CME Group Inc.'s decision to raise margins five times over just eight trading days. Between April 25 and May 5, the exchange operator increased silver margins to as much as 12%, or $21,600 per contract, from 6%. Silver tumbled 25%.

"There's no way that the market could handle it," said Neal Greenberg, a silver trader in New Jersey. "Silver was on the ledge. CME basically shackled its legs with cement blocks and pushed."

In early May, CME also raised margins on gasoline by 48%. Gasoline prices then dropped as much as 15%. In mid-February, as prices of cotton rose toward $2 a pound, ICE Futures U.S. boosted its margin by 50%. Prices fell 5% the next day.

Exchanges, Mr. Pirrong said, "should at least have some sort of recognition" of the impact.

"We do consider the timing and the notice, trying to make sure the market will have the time to absorb the changes and be able to arrange the funding," said Kim Taylor, president of CME Clearing. She said the exchange focuses on price volatility, rather than direction.

Margin moves have "a small order effect" compared with other influences, she said.

Some traders say current margin levels are equally puzzling. Margins for silver, cotton and gasoline remain unchanged from their peaks, despite a big drop in volatility.

Commodities investors are particularly sensitive to changes in margin requirements. One of the biggest attractions of the commodities markets is their combination of high volatility and low margins—usually 5% to 8% of the underlying contract's value—allowing them to generate outsize profits with limited amount of capital. Stock trading typically requires 20%.

That presents a dilemma for exchanges, said Thomas Peterffy, chief executive of Interactive Brokers LLC. They want small margins to encourage trading, but they need to protect against the collapse of a trader or broker.

For most in the market, the process of setting margins is couched in mystery, making it hard to predict whether, or when, they may be raised or lowered.

The CME has a group of 15 to 20 risk managers in Chicago, New York and London who monitor a variety of factors such as intraday price moves and other volatility measures. They also take into account other market-moving events, such as a pending storm or political turmoil, Ms. Taylor said. Changes usually take effect a day after being announced.

ICE Futures, a commodity exchange owned by IntercontinentalExchange Inc., says it looks at a set of nine factors when determining margins. A spokesman declined to specify all the factors, though adding that they include the size of the daily move relative to recent days, along with "other observable price and statistical triggers."

The lack of disclosure riles John Gray, a researcher at, a website dedicated to economic and market analysis.

"They need to be more transparent," Mr. Gray said, adding that margins should be a consistent percentage of the contract price, and that exchanges should give more warning of any moves.

Still, some say the current system works. If the exchange gives out details, traders can "game the system," said Todd Petzel, a former chief economist at CME Group.

Mr. Gray is among market participants who say the CME should have raised silver margins earlier. CME increased once in March, but didn't make any changes until a month later. Silver prices gained about 30% to $47.151 an ounce between those moves.

"It should have been a red flag to CME when silver crossed the $40 threshold that they needed to raise margins significantly," Mr. Gray said.

Other exchanges say their systems didn't pick up extraordinary volatility during silver's run up.

"The initial stage of that rally was relatively orderly," said Tom Callahan, chief executive of NYSE Liffe U.S., a competitor to CME, which started to raise margins on its silver contracts on April 27.

Brokers say they were well ahead of exchanges in taking action on margins.

Interactive Brokers in Greenwich, Conn., "overstepped the exchange twice" in hiking silver margins, Mr. Peterffy said. "It's too late to come in when prices are high," he said.

MF Global, another broker, had also charged more margins on silver than what was required by exchanges at the time, traders say. MF Global declined to comment.

—Liam Pleven contributed to this article.
Write to Carolyn Cui at

At Morgan Stanley, Focus Put on Costs

As I have discussed many times before in this BLOG that growth is over as it was in Aussie in the 90's and the focus will go to driving out costs and a consistent dividend that will provide stability of earnings.

Aivars Lode

At Morgan Stanley, Focus Put on Costs

Morgan Stanley offered a glimpse into Wall Street's future, and the outlook has changed so much from the heady days of the past that the firm is planning to keep a close watch on BlackBerry usage.

New cost-cutting moves were the focus of a 45-minute discussion at a Deutsche Bank conference by Morgan Stanley Chief Financial Officer Ruth Porat aimed at showing how the securities firm is trying to boost profits in the next few years. Barely mentioned were revenue opportunities that dominated other recent Morgan Stanley presentations.

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.Morgan Stanley's penny-pinching obsession is a sign of the struggle inside many banks and securities firms to overcome sluggish revenue growth and the looming costs of new regulatory and capital requirements. Banks including Wells Fargo & Co. and Bank of America Corp. have launched cost-cutting efforts, with BofA looking to reduce its branch count by 10%.

For Morgan Stanley, that means monitoring even routine expenses much more closely, ranging from travel to mobile devices. Brokerage clients will be prodded to give up paper account statements for cheaper electronic documents.

"We periodically ask employees to self-certify their usage of such services, which leads to constant monitoring and reduction of nonessential, redundant services," Ms. Porat said on Tuesday.

The overall expense-savings target: about $500 million in 2012, revving up to $1 billion in the next three years.

Some job cuts are likely over time in the company's 62,000-person work force, though Morgan Stanley's investment-banking and trading division won't be touched for now, according to a person familiar with the situation. Ms. Porat also said the number of financial advisers in the firm's majority-owned Morgan Stanley Smith Barney joint venture with Citigroup Inc. might shrink below the previous target of 17,500 to 18,500.

In March, Morgan Stanley dumped about 300 trainees and lower-producing brokers. The joint venture has 17,800 financial advisers, down 2% from a year ago. While the tech-investing frenzy is a pleasant distraction from those deeper troubles, investment banking is at a cyclical low until the economy improves, Ms. Porat said. She said she remains confident that the company is well-positioned.

Morgan Stanley's challenges are even bigger because the Wall Street company came so close to death in 2008. Then, the firm pared back substantially in early 2009, just as bond trading enjoyed a heyday that fattened profits at Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. Last year, Morgan Stanley's net income of $4.7 billion was slightly more than half of Goldman's.

In 2009, Morgan Stanley doubled down on the retail brokerage business by forming the joint venture, which is more stable than many of the firm's trading businesses but still dependent on a rising stock market.

Recent signs that cost-cutting was rising in the pecking order of strategic moves at the top of Morgan Stanley include the February announcement of a new office in charge of re-engineering and expense management. The office is led by Jim Rosenthal, the company's chief operating officer. Through a company spokesman, Mr. Rosenthal declined to comment.

This year, Morgan Stanley's shares have sunk more steeply than financial stocks overall as investors fret about how fast Chief Executive James Gorman, who took over at the start of 2010, can improve the bottom line as regulators rein in trading and other businesses.

Morgan Stanley's shares fell 26 cents, or 1.2%, to $22.26, in 4 p.m. New York Stock Exchange composite trading Tuesday, leaving them near a two-year low and down 18% for the year. By comparison, an exchange-traded fund following a Standard & Poor's financial-services index has fallen about 7%, though Goldman has fallen more—21%.

Mr. Gorman sarcastically joked at the company's annual shareholder meeting in April that the languishing stock price filled him with joy. He added that he was focused on things Morgan Stanley can control over the medium and long term.

Longer-range cost-cutting moves include outsourcing certain tasks, reducing the number of legal entities that Morgan Stanley is affiliated with and expanding operations in locations outside metropolitan areas, Ms. Porat said. Belt-tightening on BlackBerrys and travel likely will target relationships with vendors and perhaps employee usage, according to a person familiar with the matter.

David Trone, an analyst at JMP Securities, compared those moves to using a fine-toothed comb. "When you are trying to save peanut shells, you are really putting the effort in," he said.

One Morgan Stanley employee joked Tuesday that he planned to return a phone call from a land line because he didn't want to use a BlackBerry.

Like Goldman, Morgan Stanley will keep spending big money on technology, Ms. Porat said. Technology investments in institutional securities, global wealth management and asset management will "help us to execute better for clients but lead to better cost savings over time," she said.

About one-third of the firm's 14,000 technology-related employees and consultants are working on the integration of Morgan Stanley Smith Barney. Morgan Stanley plans to buy Citi's 49% stake in the next several years.

Ms. Porat said Morgan Stanley is plowing ahead with revenue-boosting plans in emerging markets in Asia and Latin America, as well as an effort to increase the firm's market share in fixed-income trading.

One of the biggest cost-savings opportunities at any investment bank didn't come up Tuesday. Ms. Porat said not a word about cutting salaries or bonuses.

—Dan Fitzpatrick contributed to this article.
Write to Aaron Lucchetti at

Threats to Town Halls Stir Voter Backlash

Well well, here we go I had these conversations nearly 4 years ago with a local councilmen that consolidation would happen as a crisis would drive it. So consolidation of cities is here, as I wrote in my blog a number of years ago. The questions asked in this article are answered by looking at what cities did in the 90's back in Australia. Consolidation saved money and ensured that tax's did not increase by eliminating the duplicity of functions.

Aivars Lode

Threats to Town Halls Stir Voter Backlash
Lynn O'Connor
Some residents of Onekama Village, Mich., are wary of a proposal to merge it into the township encircling it.
.ONEKAMA VILLAGE, Mich.—Michigan has 1,773 municipalities, 609 school districts, 1,071 fire departments and 608 police departments. Gov. Rick Snyder wants some of them to disappear.

The governor is taking steps to bring about the consolidation of municipal services, even whole municipalities, in order to cut budgets and eliminate redundant local bureaucracies. His blueprint, which relies on legal changes and financial incentives, calls for a "metropolitan model" of government that would combine resources across cities and their suburbs.

In doing so, Mr. Snyder, a Republican, is taking aim at that twig of American government so cherished by many citizens—the town hall. The long national tradition of hyperlocal government prevails in much of the Northeast and Midwest, with their crazy quilts of cities, towns, villages and townships.

"You do have to ask: 'Boy, do we really need 1,800 units of government?'" says Mr. Snyder's budget director, John Nixon. "Everybody likes their independence, and that's nice to have. But if you're not careful, it can cost you a lot more money."

Blurring the Lines
View Interactive
.See the web of boundaries in Oakland County, and how some communities have addressed the issue of consolidation of services.

More photos and interactive graphics
.Around the country public officials are asking themselves similar questions. Plunging property-tax receipts and rising pension and health-care costs have pushed many municipalities to the brink of financial collapse. The idea is that local governments can operate with fewer workers and smaller budgets if they do things like combine fire departments, create regional waste authorities and fold towns and cities into counties.

But selling the notion in small communities like Onekama is no easy job. Public officials have floated a proposal to merge this village of 1,500 along Lake Michigan into the township that encircles it. Some residents worry that a leaner government risks becoming a less responsive one.

Snow plowing already has emerged as a potential sticking point. If the merger passes a vote later this year, Manistee County would take over snow removal, and Onekama's quiet streets would be among the last sections cleared.

Bonnie Miller, a village resident for 43 years who emerged as an early opponent of the merger, doesn't want anyone to mess with the current plowing schedule. "At five in the morning, you can hear the plow truck is already out," she says.

Over the years, consolidation proposals haven't fared well with voters. Of the 105 referendums on city-county mergers since 1902, only 27 have passed, the most recent in 2000, when Louisville, Ky., merged into Jefferson County, according to David Rusk, a Democratic ex-mayor of Albuquerque and a proponent of consolidation. Last year, voters vetoed a merger of Memphis, Tenn., with Shelby County. In March, Memphis voters approved a merger of the city and county school systems, over strong suburban opposition. The county board of education has sued to block the merger.

Proponents of consolidation come from both ends of the political spectrum. Some conservatives argue that having fewer layers and divisions of government is cost-efficient and improves the economic climate by streamlining regulation and taxation. Some liberals support eliminating local-government boundaries that they say have cemented economic and racial disparities between cities and surrounding towns.

Researchers, however, have raised questions about whether such consolidation actually delivers significant savings. Typically, they say, only a few administrative positions overlap between jurisdictions, and further savings can't be realized without compromising service. Public-safety agencies, for example, need a certain staff level to ensure the response times that residents demand.

A 2004 study by Indiana University's Center for Urban Policy and the Environment found that costs creep back in, partly because bigger pools of employees can negotiate for better wages, offsetting the savings of job cuts. Academic studies of Jacksonville, Fla.'s combination with Duval County, and Miami's merger with Dade County found that costs actually rose post-merger as new bureaucracies emerged.

In a study of Wheeling, W.Va.'s proposed merger with surrounding Ohio County, Mr. Rusk, the ex-mayor of Albuquerque, estimated that the potential cost savings would be barely 2% of the combined budget, because the overlap of services wouldn't be as extensive as expected.

Mr. Rusk says the benefits of consolidation don't necessarily come from cost savings. Fragmentation retards economic growth, he says, "not so much because of waste and duplication of services as an inability to unify a region's resources" in everything from business development to road repair.

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.Various state legislatures are moving to spur consolidation. New Jersey, which has 566 municipalities, recently made it easier for communities to pursue mergers, and several are contemplating it. In New York state, which has more than 1,547 overlapping local governments—a system Democratic Gov. Andrew Cuomo once called "a ramshackle mess"—the Senate passed a bill in 2009 that gave voters the power to consolidate local municipalities and services. In Indiana, which has 1,008 townships, a legislative panel this year unanimously backed offering financial incentives to local governments that seek efficiencies through consolidation.

Michigan's laws make municipal mergers difficult. Minimum-staffing requirements and prevailing-wage laws protect public employees and make it hard to cut payroll costs. Thus far, only two mergers have occurred: The city and township of Battle Creek, and two cities and a village in the sparsely populated Upper Peninsula.

Gov. Snyder has pushed legislators to dismantle those barriers. The Legislature earlier this year strengthened the state's powers to take control of the finances of failing cities, empowering so-called emergency financial managers to void contracts, sidestep elected officials and dissolve municipalities.

While the governor can't force consolidations, he is trying to coax financially troubled municipalities to pursue them. He is withholding about $200 million of funds for cities in need, making that aid contingent on evidence of consolidation of services such as fire departments and trash collections. His budget sets aside $5 million in transition aid for communities seeking mergers.

Similar incentives are being offered to school districts to share services such as busing, or to merge altogether. In addition, the governor has proposed a new policy that would in effect blur the existing school-district boundary lines.

"It is an evolutionary process, starting with service consolidation." Gov. Snyder said in an interview.

The Detroit suburb of Hazel Park, in Oakland County, is considering merging its fire department with neighboring Ferndale's. North of Hazel Park, the suburb of Pleasant Ridge is discussing sharing police and fire services with two of its neighbors.

"The economic reality has come home to roost," said L. Brooks Patterson, county executive of Oakland County. "They are going to have to consolidate or find themselves in the cold grip of an emergency financial manager."

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Kate Linebaugh for The Wall Street Journal

Village President Bob Blackmore
.Gov. Snyder plans to introduce legislation to ease city-county mergers and allow for the creation of metropolitan zones to coordinate services and economic-development efforts. His hope is for affluent suburbs to share resources with fiscally strapped cities. Such an effort is already under way for Grand Rapids and Kent County.

Today's fragmented governments grew out of voter demands for home rule and tighter control over local resources such as emergency services and schools. Voters tend to protect those resources, even if it means paying more for them. "Local voters almost never approve voluntary mergers," says Mr. Rusk.

Earlier this year, half a dozen struggling communities in Oakland County held votes on property-tax increases to avoid consolidation of services with neighboring towns or the county. All but one of the increases passed comfortably.

In Hazel Park, one of the county's poorest communities, residents voted overwhelmingly for a five-year tax increase to avert deep cuts to the police and fire departments, whose costs, including retiree benefits, account for 64% of the city's $13.7 million budget.

Larry Wallace, a 46-year-old father of six, stood up at a public meeting to endorse the higher tax. He said he moved to Hazel Park two decades ago after he was robbed in his house in Detroit and a gun was held to his five-year-old daughter's head. He said he had waited eight hours for Detroit police, but they never showed. "I will pay whatever to live somewhere safe for me and my family," he said.

In Onekama, two governments—the village's and the township's—operate out of single-story buildings half a block apart on Main Street. Each employs a clerk and a treasurer. Each has an elected board of trustees. The village has a president to run its affairs; the township, a supervisor.

Many residents like it that way. Township residents pay lower taxes in return for a mostly hands-off administration that controls public access to Portage Lake. Village residents pay higher taxes for services that include maintaining a park on the lake and the early-morning snow plowing.

Several years ago, the two governments came together over a shared interest: the health of the lake. Concerns about aging septic systems in lake-side cottages spurred the passage of a new septic ordinance for both areas.

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Kate Linebaugh/The Wall Street Journal

Township Supervisor David Meister
.The village and township then began cooperating on a plan to protect the lake. In 2009, both the village and township approved a special tax to help protect the watershed—a vote described by local officials as a turning point.

Next came a joint master plan, and late last year, Village President Bob Blackmore, a retired auto executive, and Township Supervisor David Meister, a farmer and muscle-car enthusiast, began discussing an outright merger. Their goal was to avoid duplication of services and to jointly seek resources.

Under the proposal they are considering, the village government would be dissolved and the township would take over. Village residents would see their tax bills shrink, and township residents would see them stay the same. A couple of part-time administrative jobs would be eliminated. State funds to facilitate the transition could sweeten the deal.

But some village residents worry the plan will somehow change the character of their community, that a township government will not value what the village does.

Ms. Miller, who runs a summer fruit stand in the village, initially called the proposed merger a "hostile takeover" by the township.

Some township residents also are wary. Jim Trout, a retiree from Grand Rapids who recently moved from the village to the township, says he fears a merger with the village, whose voters he says are more politically active, will bring more demands, and costs, for municipal services.

"If they demand amenities, they can go down and live in urbanland," said Mr. Trout. "I chose to live here."

Public meetings that began in February raised a host of questions, recalls Mr. Meister, the township supervisor: "What's going to happen to their streets? Is the park system going to change? Will we have a new form of government? Who is going to lose their jobs?"

Mr. Meister is trying to work out a way for villagers to pay more to retain services such as early plowing.

Another public meeting is slated for Wednesday to include summer residents. Officials plan to address concerns raised at earlier meetings and to outline what the new government would look like. Residents will vote later this year.

"It will happen either now or later," says Mr. Blackmore, the village president. "It is going to happen."

Ms. Miller, who says she's beginning to soften her opposition, doubts the merger would be the end of the consolidation process. She sees Onekama ultimately being swallowed up by the county. "You can't stand in the way of progress forever," she says. "But sometimes you do like to see the little Norman Rockwell image of a quaint village."

Write to Kate Linebaugh at

Tuesday, June 7, 2011

The Aussie dollar is running out of rocket fuel.

Before every crash the press points out that it has hit a high and then the thud when the price falls.

Aivars Lode

The Aussie dollar is running out of rocket fuel.
The remarkable rise of the Australian currency in the past year, pushing it up 32% against the U.S. dollar, had solid fundamentals. Australia's aggressive central bank kept interest rates on the upswing, attracting yield-starved investors from around the world. The commodity-hungry economies of China and India have been gobbling up Australian coal, iron ore and natural gas, sparking a capital expenditure boom and lots of jobs for Australians. Add a generally feeble greenback and rising commodity prices, and an Aussie dollar piercing all-time highs made sense.
Yet those factors are falling away, leaving the Aussie dollar like cartoon character Wile E. Coyote, legs still churning, as it hangs temporarily suspended over a nasty drop. Growth in both China and India is moderating, and could be forced to slow seriously if inflation can't be tamed. Commodity prices seem to have peaked for now. Oil is down nearly 13% since its early May high, and coal and iron ore are off their tops. But the Australian dollar is only 3% lower than its post 1983-float high, achieved April 29. The Reserve Bank held pat on rates Tuesday and signaled it is less concerned about medium-term inflation risks. With interest rates already biting into home prices and consumer credit, some think the Reserve Bank is done with its tightening.
‪There are counterarguments. Bulls say demand from central banks diversifying reserves puts a floor under the Australian dollar. But central banks move slowly, and diversification into the Australian dollar likely hasn't happened quickly enough over the past 12 months to make a serious difference. It was exactly a year ago, during Act I of the Greek debt drama, that the Australian dollar fell more than 10% in 10 days, hitting $0.81 on June 7, 2010.
‪The other pro-Aussie story is that if China really begins to slow, Communist Party leaders will turn on the infrastructure taps once again.That might be true, but it will be tough to repeat anything like the scale of stimulus enacted during the financial crisis. In the interim, currencies linked to Chinese demand, especially the Aussie, are at risk of a correction. Other currencies to watch out for include the Malaysian ringgit, Indonesian rupiah and Korean won, all at elevated levels themselves.
Credit Suisse says the Aussie is 7% overvalued against the greenback, according to its currency models, which take into account two factors that often drive the Australian dollar's level, commodity prices and interest rates. But if the China support cracks, it is likely to fall a lot further than that.
Write to Alex Frangos at