Transcript Local Economy - semoonchang.com

Navigating the Gulf Coast Economy:
Supply Chain Implications
The Mobile
Association of
Purchasing
Management
by
Semoon Chang
semoonchang.com
October 6, 2015
Seven Supply Chain Trends to
Watch by Adam Robinson I of II
 1) Customer-driven supply chains
 adapt to the changing demands of end
customers.
 2) Connected supply chains
 “Internet of Things” to monitor products
and delivery
 3) Risk Management
 Reduce dependence on sole supplier
Seven Supply Chain Trends to
Watch by Adam Robinson II of II
 4) Management of Complexity
 Supply chains evolve into networked
economies, impacting procurement proc.
 5) Technology Matters: “IoT”
 6) Rethinking Workforce
 data-driven decision makers
 7) Total Cost Perspective
 data-driven optimization on inventory,
transportation, handling, etc.
Order of Presentation
(Data-Driven)
 The U.S. Economy
 Population increases by county
 Mobile County
 Key supply chain: retail sector
 Baldwin County
 Key supply chain: public school system
 Cruise Ship
 Quality of life through pictures
Growth Rate of Real GDP (%)
Annual<3%; 2015: 0.6%/3.9%
2QTR GDP (Sept. 25)
Likely Impact?
Projection of the U.S. Economy
by the Federal Reserve in %
Why slow growth?
Too much regulation
Too many depending on
government
Economy needs to be
flexible
Too much debt >>>
Public Debt
 How much?
 $18,000,000,000,000 total ($60,000/person)
 $450,000,000,000 annual interest
 $1,500/per person per year
 Long-term impact?
 What if no one is willing to lend
 Higher interest rates (Why Not?)
 Slowing economy & loss of jobs
 Limit what gov’t can do during
emergency (big recession or war)
Stock Market, Anyone?
 Old Times
 Low price earnings ratio
 Expected capital gains
 Today
 Rising income
 Rising demand unrelated to P/E
 Wider/wilder fluctuations
 Index funds with low expense ratios
2015: Year of Retail Boom
 Retail
 McGowin Park
 Westwood Plaza
 Pinebrook Shopping Center, & more!
 Non-Retail
 Airbus
 Return of Carnival
 Austal expansion
 Interaction to Tax Revenues?
Sales Tax Revenue by Month: Mobile
Co: Jan 2005 to July 2015
Mobile Co. Sales Tax Revenue by
Month (Jan 2012 – July 2015)
Sales Tax in Mobile:
What are the problems?
Problem #1
Many different rates within an area
City: 4%+1%+4%+1%
PJ: 4%+1%+2%+0.5%+0.5%
County: 4%+1%+0.5%
PJ/County 0.5% - MCPSS;
Mobile/Prichard: property tax
Problem #2 Exemptions - too many
& varying among jurisdictions
 TNSTFL: Others pay more for
exempted groups (at least 25)
 Hawaii & LA do not exempt
schools, churches & nonprofits
 Tax forms complicated
 Why problem?
 Leads to noncompliance & higher rate
 Difficulty in pursuing online taxation
 What do others say?
http://mercatus.org/print/1393402?utm_source=Twitter&utm_me
dium=research&utm_campaign=MercatusTweets&91814622=
http://mercatus.org/print/1393402?utm_source=Twitter&utm_me
dium=research&utm_campaign=MercatusTweets&91814622=
Problem #3
Tax rates too high
 Leads to lower retail sales and thus
tax revenues
 How?
 (A) Out of town purchases
 (B) Non-local on-line purchases
 (C) More non-compliance
 (D) Impact of retail boom
 Let us review one by one: A>B>C>D
(Non-Indian) Cities with 200,000+
State, County and City Sales Tax Rates in Cities with Population Over
200,000, Ranked by Combined Sales Tax Rate (Rates as of July 1, 2010)
________________________________________________________________
Locality State State
County City
Total
Rank
_______________ _______
_______
_______
_______
Birmingham AL
4.000%
2.000%
4.000%
10.000%
Montgomery AL
4.000%
2.500%
3.500%
10.000%
Long Beach CA
7.250%
2.000%
0.500%
9.750%
Los Angeles CA
7.250%
2.000%
0.500%
9.750%
Oakland CA
7.250%
2.500%
0.000%
9.750%
Fremont CA
7.250%
2.500%
0.000%
9.750%
Chicago IL
6.250%
2.250%
1.250%
9.750%
Glendale AZ
6.600%
0.800%
2.200%
9.600%
Seattle WA
6.500%
3.000%
0.000%
9.500%
San Francisco CA
7.250%
2.250%
0.000%
9.500%
St. Louis MO
4.225%
0.000%
5.266%
9.491%
Phoenix AZ
6.600%
0.800%
2.000%
9.400%
Memphis TN
7.000%
0.000%
2.250%
9.250%
Nashville TN
7.000%
0.000%
2.250%
9.250%
San Jose CA
7.250%
2.000%
0.000%
9.250%
Tucson AZ
6.600%
0.600%
2.000%
9.200%
Mesa AZ
6.600%
0.800%
1.750%
9.150%
Scottsdale AZ 6.600%
0.800%
1.650%
9.050%
18
Stockton CA
7.250%
1.500%
0.250%
9.000%
New Orleans LA
4.000%
5.000%
0.000%
9.000%
Baton Rouge LA
4.000%
5.000%
0.000%
9.000%
Fresno CA
7.250%
1.725%
0.000%
8.975%
Chandler AZ
6.600%
0.800%
1.500%
8.900%
Gilbert AZ
6.600%
0.800%
1.500%
8.900%
New York City NY 4.000%
0.000%
4.875%
8.875%
________________________________________________________________
Source: Sales Tax Clearinghouse, Census Bureau, and Tax Foundation
____
1
1
3
3
3
3
3
8
9
9
11
12
13
13
13
16
17
19
19
19
22
23
23
25
(A) Out-of-town purchases
 Where in out-of-town?




Eastern Shore
Mississippi
Groceries in Florida
Other cities & unicorp areas in Mobile Co.
 Chain effects
 Shopping > movies > restaurants >
 Habit-forming: making it difficult to
bring shoppers back with lower rates
(B) On-line purchases
 Currently: Only if your business has a physical
presence in a state, such as a store, office or
warehouse, you must collect applicable state
and local sales tax from your customers.
 Marketplace Fairness Act of 2013 provides
states with ability to collect sales tax on online
purchases made by state residents from 2014.
 Applies to online sellers that have sales of at
least $1 million in states where they do not
have physical operations
SSUTA Section 302: STATE
AND LOCAL TAX BASES
 SSUTA (Streamlined Sales and Use
Tax Agreement) adopted Nov. 12,
2002; amended May 24, 2012
 “The tax base for local jurisdictions
shall be identical to the state tax base
unless otherwise prohibited by federal
law.”
 As of Sept. 2014, 44 states and DC
passed law to conform SSTA: ALA?
(C) Non-compliance
- for instance
 Small stores may collect sales tax
but not submit or under-report
 Large stores may find ways to avoid
collecting and submitting sales tax
 Stores may ship products to out of
state addresses for customers to
pick up later
 Although legal, rising food stamp
uses lower tax revenues!
P. Cary Christian, “Why Evasion Under a National Sales Tax Would
Explode the Tax Gap: Lessons Learned from the States,” IRS-TPC
Research Conference, June 20, 2013
 Direct quotations on non-compliance
 “the real issue is not sales tax evasion; it
is sales tax theft by the parties who collect
the tax as an agent of the state” (p. 143)
 “Sales tax theft is primarily a small
business problem” (p. 145)
 “Larger businesses tend to rely instead on
exploitation of the ‘gray areas’ of the law
to reduce liabilities, which may in some
cases rise to the level of evasion” (p. 145)
Continuing…
 “it was not uncommon to find individual
businesses stealing 90 percent or more of
all sales tax collected” (p. 146)
 “Many states boast of voluntary sales tax
compliance rates of 95 to 99 percent, but
… these quoted rates are generally based
on delinquent returns” (p. 147)
 [excluded from 95-99 are] “taxpayers
who collect taxes and report smaller
amounts of tax to the state” (p. 147)
 “those always file returns on time”(p 147)
Tallahassee Democrat
tallahassee.com, Oct. 14, 2014
 “Florida Department of Revenue investigators
determined that Tallahassee business owner
Rodney W. Watts took more than $7,300 in
sales tax he collected [March 09 to July 14]
and never remitted to the state. Watts, 57,
was arrested Tuesday on felony charges
related to the theft of state funds and the
failure to file six consecutive sales tax returns,
according to DOR. Watts owns Southeast
Digital Networks Inc., which sells office
equipment and located on Capital Circle NE.”
(D) Impact of Retail
Boom?
 Sales tax revenues will increase
above the trend in recent years..
 The rising trend in sales tax will make
leaders to proclaim that “we are
doing a good job!” and
 Hide all the problems of current
sales taxation with no attempt
made to solve them!!!
How is local support for BCPSS?
National perspective
 Alabama ranks 44th in local revenues
per ADM, 43rd in local expenditures
per ADM. (Source: U.S. Department of Education,
National Center for Education Statistics, Common Core of Data,
"National Public Education Financial Survey," 2010-11, v.1a)
 If BCPSS is not ranked high within
Alabama, the current low ranking of
BCPSS indicates a near bottom
ranking when compared to school
systems for the rest of the country.
Let me introduce:
Property tax equivalent (PTE)
 Hypothetical property tax rate
based on the assumption that
the amount derived from
property tax and all other
tax sources (e.g. penny tax)
is ALL coming from property
tax:
 PTE = (RPT + ROS)/AV
Rankings of Baldwin County (67) and
Baldwin County Public School System (135)
7
Unemployment Rate
5
Per Capita Income
6
College Graduates
3
High School Graduates
50
Property Tax Equivalent
87
Property Tax Rate
0
10
20
30
40
50
60
70
80
90
100
Now, let me introduce
Foundation (Equity) Program
 Equity
 collect 10-mill in local property tax
 distribute to all school systems solely
based on ADM
 BCPSS FY 2014 (applies to 10 mills)
 $127.23 per ADM (6th highest out of
134 reporting systems)
 received only $64.18 per ADM
When adjusted for equity funding, the 50th
and 87th Rankings should be LOWER!
7
Unemployment Rate
5
Per Capita Income
6
College Graduates
3
High School Graduates
50
Property Tax Equivalent
87
Property Tax Rate
0
10
20
30
40
50
60
70
80
90
100
To summarize rankings of local
support for BCPSS
 Pre-referendum without equity funding
 Property tax
 Property tax equivalent
87th
50th
 Pre-referendum with equity funding
 Property tax
 Property tax equivalent
below 87th
below 50th
 Post-referendum rankings
 I do not believe you want to know!
When County-Wide Public
Schools Are Under-Funded…
Two possible developments
 Multiple public school
systems within a county
 More private schools
Jefferson County?
Is it bad to have multiple school
systems?
 Advantages (1)
 Some systems in wealthy neighborhoods
will have greater local support
 Disadvantages (3)
 Some systems in poor
neighborhoods suffer lower support!
 Costly due to diseconomies of scale
 Foundation program will take a
greater bite out of local taxes!
…
Passengers per Cruise by Month
(October 2004-March 2011)
Capacity: 1452 till 2009 to 2052 in 2010
3,000
2,500
2,000
Katrina
shelter
1,500
1,000
500
10-04
01-05
04-05
07-05
10-05
01-06
04-06
07-06
10-06
01-07
04-07
07-07
10-07
01-08
04-08
07-08
10-08
01-09
04-09
07-09
10-09
01-10
04-10
07-10
10-10
01-11
0
Section IV
Survey of 2,546
Cruise Passengers
in Mobile
 June 2008 to February 2011
Top 12 States in Percent
All Other, 14.6
Alabama, 16.3
Alabama
Georgia
Tennessee
Indiana, 3.5
Mississippi
Ohio, 3.5
Illinois, 3.6
Florida
Georgia, 13.0
Arkansas
Kentucky
Missouri, 3.9
Louisiana
Missouri
Louisiana, 4.3
Kentucky, 4.3
Illinois
Tennessee,
12.5
*Alabama Arkansas, 5.6
excludes Mobile
Mississippi, 7.6
Florida,
7.3
& Baldwin Co.
Ohio
Indiana
All Other
Top Counties of Passenger Origin
Knox (TN)
6%
Gwinnett (GA)
7%
Escambia (FL)
17%
Escambia (FL)
Shelby (AL)
7%
Davidson (TN)
8%
Jeffeson (AL)
Madison (AL)
Okaloosa (FL)
Jeffeson (AL)
15%
Shelby (TN)
Cobb (GA)
Davidson (TN)
Cobb (GA)
8%
Shelby (AL)
Gwinnett (GA)
Knox (TN)
Shelby (TN)
9%
Okaloosa (FL)
10%
Madison (AL)
13%
*Mobile & Baldwin
Co. excluded.
Sources of Information used by Passengers of
Cruise
13
billboard
33
TV ad
17
newsp/mag
95
brochure
1467
web/internet
24
welcome c.
696
trevel agent
903
fam/friends
0
500
1000
1500
Quality of Life
Internet of Things (IoT)
 Network of physical objects or "things"
embedded with electronics, software,
sensors, and network connectivity,
which enables these objects to collect
and exchange data.
 Allows objects to be controlled remotely
across existing network infrastructure,
creating opportunities for improved
efficiency and economic benefit.
Valuable Source of Local Data:
ALL FREE
 Semoonchang.com – Just Click!
 Key data for Mobile (& Baldwin) Counties
 Shows contact information to semoon
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