The Local Budget Scam Explained: An Example

By Karl Denninger
From my back yard — literally….. the bridge is visible out my back door.

Vest says it is a cold hard fact that tolls on the Mid-Bay Bridge will not increase to $7.50 next year. It is likewise written in stone, he said, that there will be no bridge toll hike of any amount before Oct. 1, 2015, the beginning of the 2016 fiscal year.


In fact, the Mid-Bay Bridge, built with $81 million in bonds in the early 1990s, these days carries a debt load of $260 million.

That’s why it is possible, Vest concedes, that if the Bridge Authority does find it needs to raise tolls for the third time in its existence, the cost of the trip across could go from $3 to $4 for two-axle vehicles and $2 to $3 for SunPass holders.

Nobody is talking about how the bridge went from $81 million in bonds to $260 million outstanding.

Nor are they talking about the “fact” that the terms of the bonds dictate that tolls must (if necessary) rise.

Even if doing so cuts use, and thus the total revenue falls, producing a death spiral.

Which, incidentally, has happened already not so far away (Garcon Point anyone?)

The problem with these projects is that they invariably obtain their “go ahead” from the local residents predicated on two promises — first, that they will be built and operated on time and on budget, and second that the bonds will be retired and once they have been the tolls will be lifted or reduced to that which is necessary only for ongoing maintenance.

The latter never happens and the former almost-never does.

The people responsible for that gross dereliction of duty, resulting in the tripling of the bridge’s debt, from the County Commissions on to these “authorities”, never, ever face prosecution or even debarment from public office for the outrageous deception they run on local residents in the promises they make and never keep when it comes to these “projects.” Never mind that if I screwed someone in the private sector to this degree I would, and the Commissioners and Authority “trustees” should, find themselves on the wrong end of a felony conviction.

But see, political promises carry no weight and are utterly unenforceable even when they screw the taxpayer blind. As a politician you can make claims that you have absolutely no rational backing for or even lie outright and when your “projections” and “expectations” turn out to be crap nothing happens to you for buying votes with what proves up to be a pipe dream or worse.

Instead of being accountable these very same public officials now make excuses and tell us how “wonderful” the cut of 20 minutes will be on our mythical trip that they dream will fill the coffers and pay the coupon on said unsustainable and outrageous debt — debt that their outrageously unrealistic expectations and projections caused to triple from what was originally proposed and agreed to by the people in the first place.

The “add-on” extension now being constructed is responsible for $143 million of this debt. But there is no evidence — absolutely zero in fact, even based on the rosiest of projections — that the bond issues outstanding will be retired on or before the roadway requires resurfacing.

Indeed, had there been any record of the Authority being able to pay down debt predicated on operating revenue the problem, and debt, wouldn’t exist — right?

The inevitable resurfacing and upkeep in coming years will be yet another expensive act that will in turn requiring issuing even more debt.

This is a “tiny” little ponzi scheme in the grand litany of lies and scams promulgated by County Commissions and “local authorities” of all sorts, from these feifdoms to school boards, all over the land, backed up by bond issuers at banks who “help float” debt that mathematically cannot be retired on or before additional capital expense in maintenance and repair becomes necessary.

The banks, for their part, don’t give a damn provided they get their fee. The accuracy of their projections for sustainability and paydown of the debt issued, just like everyone else’s, are never coupled to accountability.

Indeed I’m willing to bet that under any reasonable estimate of actual historical use and toll collection, less operating expense (salaries of the toll collectors, routine maintenance and inspections, etc) the bond issues can never be retired when the imputed operating costs, including resurfacing and other work on the expected intervals, is taken into account.

Those in the “authority” and County Commission who think that traffic will rise to meet the required revenue are flat out of their minds.

The fact of the matter is that ramping toll costs over the last years have already prompted WalMart and Publix to build stores on this side of the bridge. WalMart is open now and Publix will be soon; the earth-moving equipment is in daily operation on that project right now.

That has and will continue to reduce, dramatically so, the “need” for local residents to cross said bridge and thus reduce the number of trips — and the tolls collected.

The market has and will continue to spit in the face of the Okaloosa County Commission and MidBay Bridge Authority, reducing their pipe dreams of “efficiency in transportation” (not to mention their delusions of grandeur) to ash.

The market, of course, has a long history of doing exactly this quite efficiently; as price rises the utility value ex-cost to the local residents decreases. That increased net cost in turn causes businesses to find a reason to make it easier, faster and cheaper for residents to avoid paying said price.

Oh sure, the theory goes, the county can******the tourists, right after they spend $5 million in advertising to herd them in on their vacation so they can get bent over the fish-cleaning table while their wallet is vacuumed out. And let’s not kid ourselves — for those tourists who don’t have a SunPass (that would be nearly all of them) when they get surprised by the all-automatic plaza on the extension and are forced to pay $11.50 (which will show up in the mail when they get home) that is likely to have a rather serious impact on their view of this area — and not in a good way either.

But heh, the MidBay Bridge Authority will cackle at their playing of the proverbial troll.

The question is whether said tourists will come back to be screwed again, and if not, what happens to those precious “bonds” and their demanded coupon.

PS: The rolling of that debt, historically thus far, has been made possible only due to the secular decline in interest rates over the last 30 years. That secular decline is now over which means that all such projects that cannot retire their debt from operating revenue before it comes due are inevitably going to blow up in the coming years and decades. This is a mathematical certainty Mr. Vest.

A 12% Tax Increase Of No Benefit

The proposed Okaloosa County Budget includes an approximately 12.3% increase in the millage rate on all property in the county, which will raise the property tax on a taxable $200,000 residence (after homestead exemption) by about $67 and raise $5.2 million in revenue.

The shortfall being covered is due to increases in county spending in a few key areas.  Three of them, totaling more than twice the revenue increase ($12 million) are found in road construction, water and sewer (including a hinky deal in the form of a “loan” from 2012 for $3.6 million) and solid waste/recycling.

Then there is $3.34 million in increase spending plus drawing down of $2m in reserves toward increased spending on the promotion of tourism. Absent that spending no millage increase would be required.

The promotion of tourism is a great idea however it should generate enough additional bed and associated business tax revenue through increased tourism to be entirely self-supporting.  If it does not then it is a waste of money as it does not bring sufficient economic benefit to the community to cover the expense.

Our County Commission is clearly out of control.  A 12% increase in millage is unconscionable, given these figures, and will materially dampen economic activity by destroying personal economic surplus.

Remember too that the entire $5.2 million they wish to tax from you is money you can’t spend at local merchants yourself.

You’ll need a lot more tourists to replace that.

Karl Denninger

Okaloosa Schools: Hypocrisy On Display

By Karl Denninger
March 01, 2011 2:52 PM

Why aren’t Ruckel Middle School students allowed to sit with who they wish at lunch? What values are Okaloosa District schools actually teaching our kids?

I had to ask myself those questions after my daughter was given detention by Ruckel Middle School for merely crossing the lunch room floor and sitting with another student.

On 24 February I met with the Superintendent of Schools Ms. Tibbetts, Principal Ms. Goolsby and Assistant Principal Mr. Whiddon.

I spoke about my high school years, relating how easily a school administration can lose the respect of the students and the possible consequence of that. Respect, you see, is earned — it’s not owed.

The Principal came up with four objections as to why the students couldn’t choose where to sit in the lunchroom on their own: “they might miss the next class,” “they might not clear the table of their debris,” “there are cliques in middle school” and “we have students with food allergies.”

I asked how many kids had missed their next class when open seating was allowed and pointed out the fact that I might have to FOIA that information. Given that tardy slips are a common feature in schools and attendance is taken, there is a record. That is, if there ever was such a problem. I don’t believe it, to be blunt, and said so.

Further, cliques are a part of life. We choose our associates every day. And students who fail to clear their tables can be appropriately disciplined.

As for the food allergies, there’s a solution to that of course. You set aside one table for kids with food allergies and prohibit the common things there, the most serious of which are allergies to nuts. Oh wait, the school district already has to do that, right? These sorts of allergies are real, but punishing everyone in the class by making them sit against their will for something beyond their control is not only inappropriate, it’s Kafkaesque.

There was no resolution offered by the superintendent or the school principal. Mr. Whiddon tried to argue there was a student led representative process about things like seating assignments at lunch. I pointed out the administration had previously admitted the students voted for open seating, but the policy was unilaterally changed by the administration, thus revealing the illusion of a student’s say in policy. I also pointed out that this process was like presenting a petition in the former USSR, or to Mubarak before he was deposed. Mr. Whiddon didn’t like that analogy, and the other administrators were unwilling to take responsibility for claiming there was a representative process in the student council when there in fact is not.

Clearly, there was no intent to move on the school’s part. I remained steadfast that these sorts of policies are self-destructive, disrespectful of basic human dignities and indefensible on the plain facts. Further, this not a countywide policy; Pryor Middle has open lunch seating.

But then the funniest thing happened.

My daughter and I attended registration for her high school, which she enters in the fall. One of the first items presented to both parents and incoming students in the auditorium was a program called “The Nest”, which is an opportunity for the kids entering high school to mingle and hang out with one another — and with upperclassmen — during the summer months. The first reason presented to attend? So you will have some idea of who you would like to sit with, and at which table, in the lunchroom on your first day in high school.

Excuse me?

The peanut allergies, the late class attendance, the lack of clearing of tables by the students, the cliques that are found in middle schools and the inability of perfectly-competent staff members that the school district pay a handsome salary to keep order in the lunchroom all suddenly disappear in a high school with more than twice the enrollment of the middle school literally next door when a student becomes a mere three months older?

Ruckel, drop the invented nonsense and do the right thing. Recognize fundamental human rights, including the right of peaceable assembly and conversation. Rights you should be teaching and honoring, not abrogating.

Let the kids sit where they’d like and talk to whom they want during their lunch period. Punish real wrongdoers, not everybody. Teach real responsibility to our kids.

Karl Denninger is a resident of Bluewater Bay, a well known financial analyst, and author of the Market-Ticker.

Okaloosa Schools And Fundamental Liberties

Mr. Denninger’s passionate case for school reform highlights the arbitrary nature of the state monopoly known as our education system, and the apparent contradiction that free people are taught in the autocratic state institutions known as public schools. Removing the barriers to real competition among schools, both economic and legal, would go a long way to preventing the arbitrary use of power that state schools across the country have become accustomed to, as well as make them better teachers.

I was called at approximately noon today to inform me that my daughter had sat at a table with other students, rather than at the table for her class. Her purpose in doing so, which she informed me she intended to do last evening, was to peaceably assemble with another student of her acquaintance during her lunch break. For this act of peaceable assembly she had been told to go to lunch detention at the front of the room, and she had politely refused. For this refusal she was sent to the office. These facts have all been admitted to and are without dispute.

A call was made to me in an apparent attempt to enlist me in applying some sort of sanction for her conduct. You may consider this letter my pointed and vociferous refusal, and a direct challenge to this School policy.

In reaching my conclusion I asked what purpose of the alleged rule had that she violated, that is, how her decision to peaceably assemble with another student of her acquaintance during non-instructional time while consuming her lunch in any way harmed the educational mission or execution within the school day. I was told that in the past some students had behaved in an unruly manner, including leaving trays and other debris after departing the lunch room at some point during previous school years.

However, it was explicitly admitted that she had not committed any such offense. Under questioning the administration admitted that she properly disposed of her tray and other debris, there was no student displaced from a seat at the table to which he would have otherwise been entitled and there was no misbehavior such as a raucous conversation. The alleged rule which she had intentionally broken, that of demanding that she refrain from said peaceable conversation with a person of her choosing, under obvious logical analysis, is nothing more than both prior restraint and collective punishment for an offense that has not in fact taken place. The sanction applied also implicates a fundamental human right of peaceable assembly.

Certainly any school has a right to sanction students who are unable to behave in a cordial and peaceable manner during lunch or any other time while on school grounds. It is unquestionable that the educational mission of a school requires that conversation between students be refrained from during instructional periods when attention should be paid to the material being presented. But no such argument can be made of disruption of the educational environment by a student simply choosing to have a quiet conversation with a friend while consuming lunch in the cafeteria.

Further, I was told that she had a right to attempt changing this policy through a representative process in the Student Council. Upon further questioning, however, this assertion proved to be false. Not only does the Student Council have no binding power of any sort this matter had been previously put to them in past years, they had passed open seating at lunch as a resolution, and the Administration then unilaterally revoked the decision of the Council instead of applying sanction to any wrong-doers. This was a mistake on the part of the administration as my willingness to cooperate always instantly evaporates if an attempt is made to deceive for the purpose of enlisting my agreement.

Collective punishment and deprivation of a student’s right to peaceable and quiet assembly with their classmates during non-instructional periods of the day is a poor and unwarranted excuse for the apparent rank arrogance and incompetence displayed by school staff who are unable or unwilling to do their job in policing the lunchroom and sanctioning those students who engage in inappropriate behavior on an individual basis.

Nobody who is aware of recent world events can miss the fact that we currently have an entire nation that is on its feet over exactly this right – that of peaceable assembly. The Egyptian body politic has risen and refused to cede the streets. I cannot help but draw the parallel between Ruckel Middle School’s refusal to recognize this fundamental human right and those protesting in Egypt, and find it particularly ironic that a civil rights complaint given to the governor was found discarded in the trash outside Port Said.

The right to peaceful assembly and conversation is a fundamental human right and the peaceful exercise thereof is being displayed right now, literally “in your face”, on television each and every night.

It is outrageous that our so-called “public schools”, which claim in their handbooks to be “a partnership between student, parent and school”, would fail to recognize, support and protect such fundamental human rights simply for the convenience of their incompetent staff. It is beyond ridiculous that Ruckel Middle School would choose, when challenged on these facts, to apply collective punishment rather than yield to the clear logic that is being demonstrated each and every day on international television.

Our schools should be teaching and respecting fundamental liberties, not wantonly abrogating them and threatening dissenters. Each student should be able to recite the three fundamental human rights: Life, Liberty and the pursuit of (but not entitlement to) Happiness. The right of free speech and peaceable assembly, contained in the First Amendment, is formal recognition of a portion of that right of Liberty. All rights may be infringed upon only where doing so reasonably prevents another’s rights from being harmed.

This is fundamental to our government and nation’s history and our schools, collectively and individually, have an affirmative obligation under both ethics and law to not only teach this but live it.

I have made clear to my daughter through her years at Ruckel and prior to that at Bluewater Elementary that all respect is earned. There is in fact nobody, not even myself as her father, who is owed respect. My first and foremost task in raising her from infancy to adulthood is for her to transition from someone dependent on another, in this case myself, to an independent adult who is able to think for herself, recognize what human rights are, and stand for them on her own two feet. Part of this educational process is informing her of the fundamental human rights declared but not granted in The Declaration of Independence, that rights are not bestowed by a nanny government or authority figure but rather are unalienable, and that with those rights come responsibilities.

In this case she is responsible for conducting herself in a cordial fashion while on school property and adhering to reasonably defensible rules that have a sensible and sound connection to the conduct of the school’s educational mission. The US Supreme Court supports this position. The Court has ruled that students do not cede their Constitutional Rights in the general sense at the door of a publicly-funded school. Only those constraints that can be linked to a colorable impairment of the educational mission and environment of the school, when they impugn fundamental liberties, are permissible. In Tinker .v. Des Moines (1969) the United States Supreme Court held that peaceable speech, in this case two students peaceably wearing armbands protesting the Vietnam War, could not be lawfully removed from school for their refusal to comply with a demand from administration officials to remove the armbands.

This is exactly the issue before Okaloosa County and Ruckel Middle School.

I am fully in support of a reasonable student dress code, restrictions on the use of electronic devices during instructional hours and any other conduct that could otherwise have a rationally-argued negative impact on the educational mission at Ruckel. She is fully-aware of my support of these objectives and constraints.

At the same time she is expected to both challenge authority when it is unjustly displayed in an abusive or repressive form and is, as I have explained to your administration in the past, within her rights to refuse to respect those who deliberately and intentionally engage in such conduct. She has never been and is not now or in the future under any obligation, either by the rules of my household or under well-settled law of The United States, required to cede to any authority that fails to comport with the above.

Civil disobedience has both a long and colorful history throughout the world and comes with the risk of sanction, which she was fully aware of at the time of the incident. Her conduct was not furtive in any way; there was no attempt to conceal the act and her intent was to lead to a reasonable discussion and resolution. The actions by your staff probably shouldn’t surprise me, given the nature of collective and prospective punishment that was first devised and implemented.

Ruckel and all other schools should be aware, however, that sanctions imposed by putative authority figures are subject to review through several paths. First, of course, is public exposure and protest. You might consider my publication of this letter as part of that. Perhaps this is a trivial matter in most students’ and their parents’ minds, or perhaps not. The decision as to whether other students and their parents wish to protest and what form that protest might take is, of course, up to them. Second, sanctions that appear to be improperly applied or impugn a fundamental liberty with justification can and may lead to legal review. I, as with all citizens, reserve the right to initiate that lawful and proper process should I deem it appropriate.

After careful consideration I cannot support the claimed need for a seat assignment in the Ruckel cafeteria as a means of prospective and collective punishment without any offense of the peace having first taken place. These students are not in primary school; all are of ages 12-14 and can certainly comport themselves with reasonable decorum and make it to their next class. Those who are unable to do so should be individually punished for their transgressions. In short, this restriction is unconscionable and must be dropped. If school staff is incompetent to supervise the students they must be publicly identified, fired and replaced.

Our school employees work for us as parents, not the other way around. They run a school, not a prison. Our children and school students have rights; they are not pawns on a chessboard or notches on a broomstick. We as the source of school funds have every right to demand accountability for every dollar of our tax money that is spent and the policies implemented. When apparent idiocy rears its head you can expect me to hold the schools to account, as I have in the past and both will in the present and future.

A version of this letter was sent directly to the administration. If you agree, the Principal is Ms. Goolsby and her fax number is (850) 833-3291. The Superintendent for Okaloosa County Schools, Alexis Tibbetts, has a fax at 850-833-3436.