KeNo's Housing and Economic Portal: Monday June 21 Housing and Economic stories

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Gulf Coast businesses frustrated - (www.cnn.com) After 41 years in business, the Schaefer family have pretty much seen it all. Good times when business was booming, and tougher years that brought hurricanes such as Katrina and Ike. Now, a man-made oil disaster is trying the Gulf Coast, and the Schaefer family is in crisis mode -- again. "Everything else taught you how to survive," says Merlin Schaefer, who runs the family business. "It feels like another hurdle: Get over this, and hopefully after that, we'll have a little straightaway." Merlin Schaefer and his family and employees were working hard to get the crawfish and shrimp ready for their Memorial Day customers. The business is near the 17th Street Canal, by the levy, in the Bucktown section of New Orleans. With this past weekend's failure to shut down the underwater oil gusher in the Gulf, Schaefer is frustrated. "It's almost like it's another attempt that they don't know what they're doing." "I don't know how many more days we're gonna have to be able to get the good seafood that we've been getting."

State pension funds headed for crisis of national proportion - (www.thebusinessledger.com) According to new research from the Kellogg School of Management, taxpayers, public workers and state and federal officials alike have cause for serious concern about an issue that often falls under the radar but poses serious risk to the future health of the national economy: state pension liabilities. Data presented today in Washington, DC, at a conference called "New Retirement Realities: Pensions at a Crossroads" demonstrates that several state pension funds will not last the decade, a situation that will place tremendous pressure on the federal government to bail out financially insolvent states at a price tag likely to match or exceed the recent bailout of the U.S. financial system. In his presentation, Joshua Rauh, associate professor of finance of the Kellogg School of Management at Northwestern University, predicts that without basic reform to the current pension system, many large state pension funds will run out, even if they achieve predicted 8 percent annual returns. As a result, Rauh warns that promised benefit payments would be so substantial that raising state taxes to make the payments would be infeasible, offering no other choice than to call on the federal government to bail out the failing states. As an example, Rauh points to Illinois. If the state's three main pension funds earn 8 percent returns and the state makes contributions accordingly, the funds will run out of money in 2018. In the following years, benefit payments owed to existing state workers would be an estimated $14 billion - more than half of the revenue Illinois is projected to receive in 2010 - and states are under legal obligation to make these payments….. "Right now only a quarter of all public workers contribute to Social Security," said Rauh. "While the cost for the Pension Security Bonds over 15 years would be about $250 billion, under this plan the Social Security system would see a net gain of over $175 billion. All told, the cost to the federal government for such a program would be around $75 billion, far less than the minimum $1 trillion it could risk if the state pension fund system is left in disrepair."

White House Struggles as Criticism on Leak Mounts - (www.cnbc.com) The Obama administration scrambled to respond on Sunday after the failure of the latest effort to kill the gushing oil well in the Gulf of Mexico. But administration officials acknowledged the possibility that tens of thousands of gallons of oil might continue pouring out until August, when two relief wells are scheduled to be completed. “We are prepared for the worst,” said Carol M. Browner, President Obama’s climate change and energy policy adviser. “We have been prepared from the beginning.” Even as the White House sought to demonstrate that it was taking a more direct hand in trying to solve the problem, senior officials acknowledged that the new technique BP will use to try to cap the leak — severing the riser pipe and placing a containment dome over the cut riser — could temporarily result in as much as 20 percent more oil flowing into the water during the three days to a week before the new device could be in place. “This is obviously a difficult situation,” Ms. Browner said on NBC's “Meet the Press” on Sunday, “but it’s important for people to understand that from the beginning, the government has been in charge.”

France Warns on Credit Rating, Germany on Taxes - (www.cnbc.com) France admitted on Sunday that keeping its top-notch credit rating would be "a stretch" without some tough budget decisions, following German hints that Berlin may resort to raising taxes to help bring down its deficit. Euro zone trade unions are preparing for possible confrontations in the coming week if governments impose austerity measures or labour reforms unilaterally. But ministers made clear they were ready to take unpopular steps to prevent the Greek debt crisis spreading to their economies, although doubts are growing about whether the Spanish government in particular has enough support to get its way. Budget Minister Francois Baroin indicated on Sunday that France should not take for granted its AAA rating, which allows Paris to borrow relatively cheaply on international markets and finance its big budget deficit. "The objective of keeping the AAA rating is an objective that is a stretch, and it is an objective that, in fact, partly informs the economic policies we want to have," Baroin said.

San Francisco's Parkmerced in default - (www.sfgate.com) The commercial real estate meltdown has caught up with one of the largest apartment complexes in the country -- San Francisco's Parkmerced. The complex's owner is due to announce that the loan on the property is in default. "Parkmerced and its lenders engaged a special servicer (a company that specializes in handling loans in default) to support the payments of the loan on the property," said Seth Mallen, an executive vice president of Stellar Management, a co-owner of Parkmerced, in a statement to be released Wednesday. The statement did not disclose the amount owed, much of it in October, but real estate analysts have said there are two notes due amounting to $500 million, or more. "We knew the October date was looming. This was a decision to move to the servicer so that our financial obligations will continue to be met," said P.J. Johnston, a spokesman for Stellar Management, a New York real estate company, in a telephone interview this afternoon. He did not name the servicer. "We will be facing challenges in the next couple of months," said Johnston. "This may cause some anxiety to some residents. But we are reassuring them this will not impact their daily lives here. We're still committed to this project."

Seattle's backyard cottages make a dent in housing need - (www.usatoday.com) John Stoeck is building a one-bedroom, 437-square-foot cottage on the spot where his garage stood before a tree fell on it. Construction costs: about $50,000. When the cottage is finished this summer, he plans to rent it for at least $900 a month, which will make a nice dent in his mortgage payments. His is just one of about 50 tiny cottages sprouting in backyards across the city as it tries to expand affordable housing options in established neighborhoods without resorting to high rises and apartment complexes. The city changed zoning rules to allow cottages in single-family neighborhoods citywide, rejected a proposed cap of 50 cottages a year and helped organize a design competition to spur creation of reasonably priced plans. The point is not just to allow the cottages, but to encourage them. "I want to preserve rural areas around Seattle, and I don't want the suburbs continuing to march on without any limits. One way to do that is to add more density to these inner-city neighborhoods," says Stoeck, 47, an architect. Backyard cottages are a promising way to address the need for affordable housing without diminishing the character of urban neighborhoods, and they're creating more options for families who want to live near an elderly parent or adult child. "It's harder and harder for working people to live in the city," says former Seattle mayor Greg Nickels, now a fellow at the Harvard University Institute of Politics.