Isaac Laquedem

Governor Kulongoski spots a LULU in the oil industry

Governor Kulongoski said yesterday that high gas prices aren't the result of gouging, but of supplies being short, and correctly observed that one reason supplies are short is that no one has built a new oil refinery in the United States for twenty years.

There's a reason no one has built a new oil refinery in the United States for the last twenty years, which I'll cheekily illustrate by asking the Governor a question:  what location in the United States would you propose for a new oil refinery?  Or, more directly, what location within Oregon would you propose for a new oil refinery?  And would you approve giving the Public Utility Commission (or other state agency) supersiting authority to locate a new oil refinery within Oregon?  ("Supersiting authority" means the authority to approve the location of a disliked land use without regard to local land use regulations.  It's often implemented for "locally undesirable land uses," called "LULUs" in the trade.  The state most recently used supersiting authority to place the womens' prison near Wilsonville over the objections of local governments.)

I wouldn't blame the Governor for not answering these questions, but the fact that he, and likely the governors of the other 49 states, would decline to volunteer a site within their states suggests the real reason that the United States hasn't seen a new refinery for 20 years isn't because the oil industry is bashful about building them, but because the customers don't want them.

Move over, Sports Action; here comes Ballotto

The Oregon Lottery Commission will end its sports betting game so that the NCAA might consider the state as a host for part of the college basketball playoffs.  Until I saw the photo on Jack Bog's site today, I'd never seen an Oregon Lottery Sports Action ticket.  It reminds me of the ballots of my county of residence, in which instead of marking my ballot for (say) Smith, Jones, and Brown, I mark it for 23, 36, and 44, hoping that I've cross-referenced my favored candidates to the appropriate numbered circle. 

Which gave me an idea, a dangerous thing at this hour of the night.  As our fair state will no longer be running a sports book, we can replace the game with something else to raise money for whatever it is that the legislature is sending the lottery dollars to now.  As the sports card resembles our ballot, let's have the state make a pari-mutuel book on elections.  Just as the Sports Action game didn't accept bets on Oregon teams, the Political Action game (we might call it "Ballotto") wouldn't accept bets on Oregon elections.  But we could with profit accept bets on contested elections in other states.  Do you think Senator Clinton will win the New Hampshire primary?  Blacken oval 2.  Will Senator Feinstein be re-elected?  Blacken oval 34.  Which party will get Oklahoma's electoral votes in 2008?  Insert the ticket and a few dollars in the machine, and wait for Election Day. 

Would betting on elections corrupt politics?  If betting on Notre Dame versus SMU doesn't corrupt sports, it's hard to see how betting on Senator Feinstein versus Governor Schwarzenegger would corrupt politics.  The principle, after all, is exactly the same.

Ballotto:  why give when you can bet?

How to cook and eat corn

The end of summer is a special time for people who prefer to eat corn on the cob and not in the Doritos bag.  I've tried a number of ways of preparing corn on the cob -- roasting, boiling, baking in foil, and over campfires.  My favorite is this. 

On a weekend day in early September, visit My Aunt the Winemaker.  Bring a box of candy.  While My A. the W. boils water and nibbles at the candy, walk through the back acre with Uncle Farmer, where the cornstalks will be about seven feet high, and pick 10 or 12 likely-looking ears.  Shuck them in the field, and (using your Swiss Army knife and the penknife that I think Uncle Farmer got in high school in 1934) cut the ends off each ear.  Bring the cleaned ears back to the house at once (pick a beefsteak tomato from the vine on the way in) and plunk the ears, four at a time, into the boiling water.  Salt the water lightly and let the ears cook, covered, for 6 or 7 minutes.  Take them out, butter them, shake some pepper on top, and eat.  Finish with the sliced tomato.

This isn't going to last for many more years; for one thing, Uncle Farmer and My A. the W. are well past eighty, and whoever buys their house will no doubt subdivide.  But it's a small pleasure that's still possible in the Portland area -- barely -- if you know where to look.

Lunch with Jack Bog

Yesterday Professor Bogdanski and I had lunch together and talked about a wide range of current events.  It's been many years since we last met and I enjoyed the chance to catch up with him and swap ideas.  I have some further thoughts on school funding, which I'll write about over the next few weeks.  I think the South Waterfront will get the attention it deserves, blogically speaking, without me.

The Public Utility Commission could learn from Luigi Vampa

The editorial page of today's Whimperer calls for the city of Portland to keep its nose out of Portland General Electric and to leave ratemaking and other regulation to the Public Utility Commission.  In the Whimperer's view, the PUC is much better suited than the City to supervise how to extricate PGE from Enron, and has demonstrated its ability to regulate the local power companies, which the City hasn't.

It wasn't the City, but the PUC, that approved the sale of PGE to Enron in the first place -- hardly a triumph of regulation -- and then let slide the question of PGE's phantom income taxes in the rate base.  It's the PUC that should be making up for those mistakes.

I'm reminded (in that farfetched Laquedem way) of a line from The Count of Monte Cristo which the PUC could take to heart.  A bandit named Luigi Vampa kidnaps a friend of the Count.  The Count goes to Vampa's lair and asks him to release the friend.  Vampa grovels and eloquently begs the Count's forgiveness.  The Count graciously tells him, "You apologize for your mistakes in so gentlemanly a way, that one almost feels obliged to you for having committed them."

It may be too much to expect the PUC to be as aggressive as (say) Eliot Spitzer, but it should at least rise to the standard of apology of Luigi Vampa.

Clean money in politics: Portland compared to New Mexico

In the midst of our local debate on the "clean money" initiative in Portland to allow candidates to receive public campaign money if they limit private contributions comes another communication from Our Man in New Mexico, this one also having to do with money in politics.  Our M. in N.M. reports that the New Mexico state treasurer, Robert Vigil, and his immediate predecessor, Michael Montoya, have been indicted on federal extortion charges for demanding and receiving kickbacks from some of the state's investment advisors.  Mr. Montoya is accused of receiving more than $700,000 in kickbacks, and Mr. Vigil of receiving about $50,000.  The difference is not because Mr. Vigil's needs might be more modest than those of Mr. Montoya; buried in one of the stories is the tidbit that when he succeeded Mr. Montoya, Mr. Vigil was irritated to find out that Mr. Montoya had committed most of the state treasury's money to long-term management contracts, and so Mr. Vigil could steer hardly any of the public fisc to people who would pay the rakeoff to him, instead of to Mr. Montoya.  (Counsel for Messrs. Montoya and Vigil may insert the word "allegedly" wherever they wish.)

New Mexico is putting us to shame.  If all we can come up with in Portland is to note that some contributors are making multiple contributions from different entities to be able to give as much as -- horrors! -- $3,000 to a single candidate, then we're not trying very hard.

The Laquedem School Finance and Energy Conservation Plan

A few weeks ago, Betsy asked if I would give some thought to school finance.  One one level, solving the problem is easy: either the schools should spend less, or the taxpayers should pay more.  But neither alternative is as simple as it sounds.  Much of the schools' budgets are set by contract, law, or outside forces.  And to say that "the taxpayers" should pay more begs the questions of which taxpayers, and how much more.

First, how much money do the public schools need?   In 2004-05, Oregon had 552,000 public school students (the Oregon Department of Education has enrollment data here), and the average cost to educate each one should be about $10,000 per year.  (Most students should cost a little less, some should cost a little more, and a few cost much more.)  This yields a desired public school and ESD budget of $5.5 billion per year.

We're funding most of that.  I figure the gap is about 10% of that number, or $550 million per year.  (Again, these are rough estimates; see notes below.)  If we are to cover that gap through taxes, the next choice is whether to raise existing taxes, to impose new taxes, or to do a combination of both.  The most commonly-suggested new tax is a general sales tax.

I oppose a general sales tax.  Our lack of a sales tax can be turned to competitive advantage (as border merchants already do) and the state would need to expand the Department of Revenue to administer and collect a sales tax.  I suggest the following taxes instead:

1.  A tax of one cent per kilowatt-hour on all electricity consumed in the state.  Our power companies already have the mechanism in place to collect the tax.  This would raise about $300 million per year (see the continuation for the calculation) and have the side effect of encouraging the conservation of electricity.  This tax can be billed and collected through the utility companies and requires almost no new administration.  PGE's current residential rate is 8.05 cents per kW-h so this is about a 12% tax on residential electricity consumption.  Industrial users often pay less and it's a higher percentage tax on their consumption.

2.  A tax of 20 cents per gallon on gasoline and diesel fuel.  Thirty-five years ago, before the 1971 energy shock, gasoline sold for about 30 cents per gallon at retail.  Four cents of this was the federal tax and seven cents was the state tax, so the pretax price was about 19 cents.  The state tax was about 35% of the pretax price.  Today the state tax is 24 cents and the federal tax is 18.4 cents, out of a retail price between $2.50 (pre-Katrina) and $3.00, or a pretax price between $2.12 and $2.58.  The state tax is only 9% to 12% of the pretax price.  Adding 20 cents to the state tax would leave the state tax at about 17% to 21% of the pretax price, still cheaper in real terms than the levels of the 1960s.  This would raise about $300 million per year for the schools.  (See the continuation for my calculation.)

These two taxes have the side benefit of encouraging businesses and individuals to save energy, and they're consistent with public policy.  They don't require any new bureau to administer, and they're easy to understand and explain.

These two ideas are how we fund the shortfall in school financing.  I have some other ideas on how to restructure the property tax and the state and local contributions to schools, which I'll save for another day.

A thought for those businesses that want graduates but not schools

Without singling out any particular business for opprobrium, it seems to me that any enterprise that depends for its livelihood on being able to hire educated workers should be embarrassed to ask the government for an exemption from paying its share of the school taxes that educate its future employees.

Isaac to PGE: Be nice to people who can lower your rates

Back on August 8 I wrote about ORS 221.420, a little-known state law that allows incorporated cities to set electric rates within the city limits.  The rate-setting power of cities overrides that of the Public Utilities Commission.  I suggested that ORS 221.420 gives Portland the power to set the rates that Portland General Electric can charge within the city.

Several weeks later the newspaper quoted Dan Meek, a longtime public power advocate and PGE watchdog, as saying that the city should consider exercising this power while Enron is trying to get rid of PGE.  And today's Oregonian reports that Commissioner Randy Leonard has proposed a resolution to have the city staff look into this long-overlooked bit of municipal authority.

While I'd love to claim a little bit of the credit for this development, I'm sure that Mr. Meek came across ORS 221.420 long before I did, and he's long been prominent in the efforts to keep PGE honest and aboveboard.  I do offer another small suggestion, which is for the City of Portland to provide that PGE's franchise fee will be increased by the difference between the income tax payments that it claims in its rate filings and the income tax payments, if lower, that it actually makes.  So if it claims tax payments of $75 milllion when it files for rates, but actually pays $10, it would pay the city the difference of $74,999,990.  Look at it not as a penalty, but as a convenient way to keep PGE's books in balance.

The Oregonian pushes the suburbs away to boost the John Ross condominiums

The front page of the business section of the Sunday Oregonian yesterday had an intriguing story about the John Ross condominium in the North Macadam / South Waterfront redevelopment area.  The story shows floor plans and asking prices and includes some bar charts to show that condominium sales and prices are rising, and that in fact nationwide the median price for condominiums exceeds that for houses.

I was fascinated by the story -- for one thing, it evinces an enthusiasm for the North Macadam condominiums similar to that which the "advertorial" matter in the automobile section of the newspaper shows for virtually any car higher in the status chain than a Yugo -- and I was particularly taken with a table and map headed "What do you get for $240,000?"  The $240,000 price was chosen because it's what the John Ross developer is asking for an 823 square foot, one-bedroom unit.  The table says that the John Ross is 1.9 miles from Portland City Hall (which sounds about right) and compares it to five houses and one condominium of the same price in other parts of the city.

I'm guessing that the author identified specific houses offered for sale, because the chart shows distances from City Hall to tenths of miles, and shows exact square footages.  (I've copied the chart in the continuation below.)

I raised an eyebrow at the mileages shown.  The comparison house in southeast Portland, for example, is 9.8 miles from city hall.  For comparison, three miles across the Hawthorne Bridge will get you to about SE 39th Avenue.  Another three miles (about 60 blocks, because of our grid system) get you to about Interstate 205.  Three miles later (another 60 blocks) and you're in the SE 150s-160s, verging on Gresham.  And that's only 9 miles, closer in than the Oregonian's comparison. 

The Lake O - West Linn house is 13.4 miles from downtown, or about 12.5 miles farther than the John Ross.  Downtown Lake O is only about six miles south of the John Ross.

At this point I was suspecting, probably unfairly, that the author was doing his best to make the John Ross look like not too bad a value -- put another way, that a buyer could get more house for the money, but only at the cost of being much farther from City Hall.  (Which people bitten by the Multnomah County income tax would see as a benefit.)  So I looked at the real estate advertisements to see what else is available for about $240,000.  Was the Oregonian playing fair with its readers?

In southeast Portland, I found a new 4 bedroom house at $249,900, only 6 miles from city hall (instead of the 9.8 miles for the O's choice).  A 3 bedroom house a mile farther is offered at $212,000.  In Lake Oswego, where the Oregonian's comparison condo was 13.4 miles from downtown and had 1283 square feet, I found a slightly larger unit, 1383 square feet, also with 2 bedrooms and 2 bathrooms, offered at $190,000, only 8 miles from city hall.

Harry Truman used to read five or six newspapers each day because he believed that you can't get the complete picture from just one newspaper.  Our local newspaper has simplified this: to get the complete picture, you have to read not just the news stories but also the advertisements.