16
The San Juan Daily Star
February 27 - March 1, 2015
Giuliani Says He’s Eyeing Move to PR, But Cites Crime as Critical Problem
In Investment Summit Keynote, Ex-NYC Mayor Notes Complexity of Tax Incentive Requirements for Wealthy Transplants
By EVA LLORENS VELEZ
[email protected]
F
ormer New York City Mayor Rudolph Giuliani
acknowledged Thursday he is considering moving to Puerto Rico to take advantage of tax incentives that allow wealthy Americans to pay little or
no taxes.
Giuliani, nonetheless, said he is thinking about it
not only because of the taxes but because of the people
and the climate. The former mayor spoke to a group of
potential investors gathered at the Puerto Rico Convention Center for an Investment Summit to learn about
the tax incentives designed specifically for them.
Giuliani noted, however, that the requirements
to apply for the incentives appear to be complicated.
Before he spoke, a group of panelists went into detail
on the numerous requirements that have to be met for
investors to take advantage of the incentives, including the importance of moving to the island to live.
Giuliani, a lawyer, has a firm in New York that
advises on emergency preparations and security.
He said Puerto Rico was one of his favorite vacation spots.
“Being in Puerto Rico … is like being at home,” he
said. “Part of America, the part of America that I feel
comfortable in. … When you live in the United States,
you live in Puerto Rico …”
Giuliani spent a good portion of his speech giving
advice to Puerto Ricans about how to reduce crime since he was able to do so as mayor of New York, where
crime went down by 66 percent during his term in oﬃce. He said he has spent the past six months visiting
the island to study the problem.
He noticed that Puerto Rico has reduced crime
significantly. “Don’t stop,” he said.
Giuliani said Puerto Rico will not be able to stop
crime all at once but that it needs to start in the “iconic
areas” like Old San Juan and Condado, where visitors
form their first impressions of the island. He also stressed the need to keep those areas clean.
He noted that visitors equate cleanliness with
lower crime levels.
“People measure the safety of a place by the cleanliness of a place,” the former two-term mayor said. “If
you make those areas safe, if you make those areas secure and if you make those areas clean … if you improve the quality of life in those areas, that alone will lift
Puerto Rico. … All discussions about taxes and advantages don’t mean anything if people do not feel safe.”
He said the government needs a philosophy and
a process to carry it through. The government needs
to organize its police and pay attention to the small
things, such as getting rid of the vagabonds on the
streets because it makes visitors feel unsafe.
“The dirty people on the street, they don’t feel safe
with that,” Giuliani said. “You have to pay attention to
small things as well as the big things like murder and
rape and home invasions.” Economic Development
and Commerce (DDEC) Secretary Alberto Bacó did not
mention anything about the island’s crime, something
that appeared to go unnoticed by most investors, and
concentrated on the positive.
The tax incentives oﬀered to wealthy Americans
are not going to be aﬀected by the proposed tax reform
that will impose a 16 percent tax on most goods and
services and reduce income tax rates.
“Why are you here? Let’s not beat around the
bush. … You are here because you have spotted an opportunity to make you company more profitable and
eﬃcient,” Bacó said. “And why are we here? Exactly for
the same reason, but for our country: Puerto Rico. Our
five-year economic plan is already jump-starting Puerto Rico’s economic engine, leading us to sustainable
long-term economic growth. We have clear, achievable
goals and benchmarks that we are confident will result in thousands of new jobs and the repositioning of
Puerto Rico as a competitive business and investment
destination.”
Most of the potential investors were young or
middle aged, and included people already living on the
island such as Nicholas Prouty, CEO of Putnam Bridge; Chris Cannon, CEO of Zurixx, Toby Neugebauer,
head of QR Energy; and Justin Sullivan, of Auramet
Trading.
Sullivan, who has been living in San Juan for two
years, said he loves Puerto Rico.
Bacó highlighted Act 20, which provides incentives for exporters by allowing for a 4 percent tax on
exports. Act 22, the Individual Investors Law, provides
for exemptions on passive income, capital gains and dividends for people who relocate to Puerto Rico.
He also praised other incentives that are benefiting companies, what he called “the stars of the show,”
such as Act 273 for the International Financial Center,
Act 399 for the International Insurance Center, Act 27
for film incentives, and EB5 for Investment Visas, the
latter being “the new kid on the block!” the DDEC chief
said.
Bacó said Bloxtrade, James Walker & Associates,
and Sunwest Mortgage Co. are benefiting from diﬀerent laws and not just Act 20 and Act 22. Sunwest, for
instance, is benefiting from Acts 20, 22, 399 and 273,
while James Walker & Associates is benefiting from
Acts 20 and 22 as well as Act 399.
“When it comes to the international insurance
arena, Act 399 is simply impressive. A steady increase
in recent years in total written premiums. An outstanding rise in less than two years in authorized international insurers, and more than 200 approved segregated asset plans and protected cell arrangements,” he
said. “These figures not only picture a steady industry
growth, but also an increase in the number of players
and a diversity of business plans approved.”
The island’s film incentives, Bacó said, have injected “millions of dollars … into our local economy and
thousands of job opportunities.”
“Sandra Bullock was here filming ‘Our Brand Is
Crisis,’ produced by none other than Hollywood royalty, George Clooney. Victoria’s Secret Angels landed
here to film their first swimsuit TV special,” he said.
“And guess what? It premieres tonight at 10 p.m. on
CBS and it will be viewed in more than 120 countries.
Warner Brothers alone has brought in two big multimillion-dollar productions in the past year, and more
are on the way. Pilots, series in episodes, live recorded
performances,” he said, noting that Puerto Rico has become an Oscar-winning destination.
The San Juan Daily Star
February 27-March 1, 2015
17
Next Goal for Walmart Workers: More Hours
Anthony Rodriguez, a Walmart worker; his fiancée, Melinda; and their son.
By HIROKO TABUCHI
F
or Anthony Rodriguez, every diaper for his 2-year-old
son means less money to put food on the table, or to fill
up his car at the gas station. His fiancée, Melinda Prothero, tries to make each diaper last longer, but there’s a limit
to that, he says.
Mr. Rodriguez, 26, makes those trade-oﬀs even though
he already receives above-minimum wages at Walmart, and
will make at least $10 an hour next year, part of a move by
Walmart to raise wages for hundreds of thousands of workers.
“It’s not going to help us. We need the hours,” said
Mr. Rodriguez, a member of the union-supported workers’
group, Our Walmart.
He says he constantly begs his managers for full-time
work at the bustling Walmart superstore in Rosemead, Calif.
He generally works around 28 hours a week, but can be assigned as few as 18.
“I work as hard as I can, and when they oﬀer me hours,
I stay,” he said. “But when the time comes, and I beg them for
hours because I’m not going to aﬀord rent, they don’t want to
help me.”
The move to increase hourly wages by Walmart, which
employs 1.3 million workers as the country’s largest private
sector employer, is sending ripples through the retail industry. On Wednesday, the TJX Companies, which runs the discount chain T. J. Maxx, said it would follow suit, raising the
pay of its hourly wage workers to at least $9 later this year,
and to $10 next year.
With some progress on the hourly wage front, labor activists are highlighting another longstanding demand: more
hours — and more consistent hours — for hourly-wage workers like Mr. Rodriguez, something they say will make as
much a diﬀerence to workers’ pocketbooks as an increase in
wages.
Walmart says about half of its hourly-wage workers
work part time, and that percentage can be even higher at
other retailers. Stores change many of their workers’ schedules week to week. And while many people prefer to work part
time — for instance, college students eager for extra spending money — the number of part-timers who would prefer
to work full time is growing, especially in the retailing and
hospitality industries.
In 2007, about 685,000 of a total of 19.2 million workers
in the retail sector were involuntarily employed part time,
according to the Bureau of Labor Statistics. By 2014, the num-
ber of involuntary part-time retail workers had more than
doubled, to 1.4 million, even as the total number of retail workers declined to 18.9 million.
Wages are just the first step in getting Walmart on the
road toward being the type of employer that treats its employees with respect, and part of that is to set some standards
around hours and work schedules,” said Rashad Robinson,
executive director of ColorOfChange, an online civil rights
organization that has campaigned for Walmart to raise wages
and give workers better hours.
“It’s about creating an environment where employees
are not just at the whim of Walmart,” he said.
At the heart of demands for higher wages and better
hours, experts say, is the dwindling number of middle-class
jobs. More primary wage earners who in the past may have
held stable blue-collar jobs in manufacturing are now relying
on low-wage jobs at Walmart or other discount retailers to
support their families.
Mr. Rodriguez, who works at Walmart assembling
bikes and other products, supports his fiancée on an income
that can be as little as $900 a month. After spending about
$550 on rent, $65 on gas for his car, as well as paying for food,
diapers, cellphone costs and insurance, he can rarely aﬀord
new clothes or recreation, and when hours are especially
scarce, he borrows money from his sister. He is looking for a
second job to supplement his income, most likely a graveyard
shift as a security guard. He is already $4,000 in debt.
“Walmart always provided jobs at the margins of the
labor force — to people who were just re-entering the labor force after many years, for example, or supplementing a
spouse’s income,” said Gary N. Chaison, professor of industrial relations at Clark University. “But what you’re increasingly finding is that it’s the primary wage earners who work at
Walmart, because a lot of workers have more or less given up
on getting middle-class jobs.”
“Now these workers are being pushed into Walmarttype jobs, they’re demanding higher wages, full-time jobs
and better benefits,” he added. “So I wouldn’t necessarily interpret Walmart’s higher wage as a sign of an economic turnaround. I would interpret it as permanently bad news.”
At the same time, Walmart and other retailers, facing
stiﬀ competition and shrinking margins, have taken a more
severe approach to controlling labor costs, doing more to
align staﬃng to customer traﬃc. Sometimes that involves
sophisticated software that tracks the flow of customers and
allows managers to assign just enough employees to handle
the anticipated demand.
By hiring a large pool of hourly workers whose hours
can expand or contract depending on business need, retailers
can better sync hours to demand, experts say; posting schedules with limited advance notice allows managers to further
minimize the risk of assigning too many hours. Restricting
work hours also limits outlays on overtime and employee benefits.
“A number of companies have become more focused
on keeping a very tight link between variations in consumer demand and the number of staﬃng hours,” said Susan
J. Lambert, an employment expert at the University of Chicago. “It’s easier to do that if you have a lot of people who
can be scheduled for very short shifts, and who are hungry
for hours.” She added, “But that makes it harder, harder and
harder for these workers to move up the ladder in terms of
wage growth.”
Walmart has said that on top of raising wages, it will
work to give some employees more control over their schedules. It is also pursuing broad changes to its hiring, training,
compensation and scheduling programs, said Kory Lundberg, a company spokesman.
“The company is creating clearer career paths for associates so they know what is expected of them in order to
move from entry-level positions to jobs with more responsibility, including full-time positions,” he said. “Associates across
the country have access to more than one million extra hours
a week. The good news is, associates are able to select these
open shifts whenever they want to pick up more hours beyond what they are scheduled.”
At both state and federal levels, there have been some
eﬀorts to address the problem of hours and scheduling. The
San Francisco Board of Supervisors in November passed a
law requiring retailers to post schedules two weeks in advance and to give any extra hours that become available to
existing workers, rather than hire new workers.
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[email protected]
February 27 - March 1, 2015
The Star
18
Stocks
Market Mixed as Energy Stocks Follow a Drop in the Price of Oil
U
.S. stock indexes closed mostly lower, pulling the
Dow Jones industrial average slightly below its latest high.
The Dow fell 10 points, or 0.1 percent, to close at 18,214
Thursday. The Standard & Poor’s 500-stock index fell three
points, or 0.2 percent, to 2,110. The Nasdaq rose 20 points, or
0.4 percent, to 4,987.
Energy stocks fell more than the rest of the market as
the price of oil plunged again. Chevron and Exxon Mobil
were among the biggest decliners in the Dow.
Sears fell 5 percent after the company reported its
fourth straight year of falling profit and revenue.
ECONOMIC REPORTS The Commerce Department
reported that orders for long-lasting manufactured goods
rose 2.8 percent in January, the biggest increase since July.
Also Thursday, the Labor Department said that prices paid
by consumers, excluding food and energy, rose 0.2 percent.
Over the last year, core prices have risen just 1.6 percent,
below the 2 percent the Federal Reserve considers optimal
for a healthy economy.
THE QUOTE Investors were mostly focused on the
consumer prices report, a measure of inflation. Rising inflation would make it more likely that the Fed would move
sooner to raise its key interest rate.
“It’s definitely a mixed report,” said Randy Frederick,
a managing director of trading and derivatives with the
Schwab Center for Financial Research. “The market is in this
zone where it doesn’t know whether to cheer bad news because that means rates will stay low or good news because
it means the economy is getting better.”
UNEMPLOYMENT CLAIMS Weekly applications for
unemployment benefits rose last week to a seasonally adjusted 313,000, the most in six weeks. That total is still consistent with steady hiring. Applications are a proxy for layoﬀs.
SECTOR WATCH Six of the 10 sectors in the S.&P. 500
moved lower, with energy stocks dropping the most. Telecommunications services led the gainers.
ENERGY Benchmark United States crude fell $1.62 to
$49.37 a barrel on the New York Mercantile Exchange. On
Wednesday, the contract rose $1.71 to $50.99 after the Energy Department reported that diesel and gasoline inventories
fell more than expected, indicating a pickup in demand.
OIL FALLOUT Several oil drilling companies were
down sharply. Newfield Exploration fell 7.7 percent. Ensco
slid 6.6 percent, and Noble shed 5.6 percent.
EUROPEAN MARKETS In Germany, the DAX rose
0.9 percent, and in France, the CAC 40 was up 0.5 percent.
The FTSE 100 was flat in Britain. A survey of consumer sentiment in the 19-country eurozone showed consumer optimism in Germany climbed to its highest since 2001.
ASIA’S DAY The Nikkei 225 rose 1.1 percent in Japan,
while in Hong Kong, the Hang Seng gained 0.5 percent.
The Shanghai Composite Index added 2.2 percent in China.
The Kospi was up 0.1 percent in South Korea. In Australia, the S.&P./ASX 200 lost 0.6 percent. Stocks in Southeast
Asia were mostly lower while stocks in New Zealand were
higher.
MOST ASSERTIVE STOCKS
PUERTO RICO STOCKS
COMMODITIES
CURRENCY
LOCAL PERSONAL LOAN RATES
LOCAL MORTGAGE RATES
Bank
FHA 30-YR POINTS CONV 30-YR POINTS
BPPR
Scotia
CooPACA
Doral
First Mort
Oriental
3.00%
3.50%
4.50%
4.00%
4.00%
3.00%
0.00
0.00
2.00
0.00
0.00
0.00
3.50%
3.50%
5.75%
4.00%
5.75%
2.87%
000
0.00
1.25
0.00
0.625
5.50
Bank
PERS.
CREDIT CARD
AUTO
BPPR
8.49
17.95
5.75
Scotia
5.99
14.99
4.99
CooPACA
6.75
8.95
3.95
Doral
--.--
17.95
--.--
BBVA
--.--
16.95
7.59
First Mort
7.99
--.--
--.--
Oriental
6.75
9.99
5.49
The San Juan Daily Star
February 27-March 1, 2015
19
In Net Neutrality Victory, FCC Classifies Broadband Internet Service as a Public Utility
By REBECCA R. RUIZ and STEVE LOHR
T
he Federal Communications Commission voted on Thursday to regulate broadband Internet service as a public utility, a milestone in regulating high-speed Internet service
into American homes.
Tom Wheeler, the commission chairman, said the F.C.C.
was using “all the tools in our toolbox to protect innovators and
consumers” and preserve the Internet’s role as a “core of free
expression and democratic principles.”
The new rules, approved 3 to 2 along party lines, are intended to ensure that no content is blocked and that the Internet
is not divided into pay-to-play fast lanes for Internet and media
companies that can aﬀord it and slow lanes for everyone else.
Those prohibitions are hallmarks of the net neutrality concept.
Explaining the reason for the regulation, Mr. Wheeler, a
Democrat, said that Internet access was “too important to let
broadband providers be the ones making the rules.”
Mobile data service for smartphones and tablets, in addition to wired lines, is being placed under the new rules. The
order also includes provisions to protect consumer privacy and
to ensure that Internet service is available for people with disabilities and in remote areas.
Before the vote, each of the five commissioners spoke
and the Republicans delivered a scathing critique of the order
as overly broad, vague and unnecessary. Ajit Pai, a Republican
commissioner, said the rules were government meddling in
a vibrant, competitive market and were likely to deter investment, undermine innovation and ultimately harm consumers.
“The Internet is not broken,” Mr. Pai said. “There is no
problem to solve.”
The impact of the new rules will largely hinge partly on
details that are not yet known. The rules will not be published
for at least a couple of days, and will not take eﬀect for probably at least a couple of months. Lawsuits to challenge the
commission’s order are widely expected.
The F.C.C. is taking this big regulatory step by reclassifying high-speed Internet service as a telecommunications service, instead of an information service, under Title II of the Telecommunications Act. The Title II classification comes from the
phone company era, treating service as a public utility.
But the new rules are an à la carte version of Title II, adopting some provisions and shunning others. The F.C.C. will not get
involved in pricing decisions or the engineering decisions companies make in managing their networks. Mr. Wheeler, who gave a
forceful defense of the rules just ahead of the vote, said the tailored
approach was anything but old-style utility regulation. “These are
a 21st-century set of rules for a 21st-century industry,” he said.
Opponents of the new rules, led by cable television and
telecommunications companies, say adopting the Title II approach opens the door to bureaucratic interference with business
decisions that, if let stand, would reduce incentives to invest
and thus raise prices and hurt consumers.
“Today, the F.C.C. took one of the most regulatory steps in
its history,” Michael Powell, president of the National Cable and
Telecommunications Association and a chairman of the F.C.C.
in the Bush administration, said in a statement. “The commission has breathed new life into the decayed telephone regulatory model and applied it to the most dynamic, freewheeling
and innovative platform in history.”
Cracks Starting to Appear in Public Pensions’ Armor
Gov. Chris Christie of New Jersey, left, on Tuesday after he
proposed freezing his state’s public pension plans and moving workers into new ones.
By MARY WILLIAMS WALSH
F
irst in Detroit, then in Stockton, Calif., and now in New
Jersey, judges and other top oﬃcials are challenging the
widespread belief that public pensions are untouchable.
Gov. Chris Christie of New Jersey delivered the latest
blow on Tuesday, when he proposed to freeze that state’s public
pension plans and move workers into new ones intended not
to overwhelm future budgets or impose open-ended demands
on taxpayers.
The first crack came in Detroit, where a judge ruled that
public pensions could, in fact, be reduced, at least in bankruptcy. Then, just a few weeks ago, an opinion by the bankruptcy
judge for Stockton, which emerged from Chapter 9 on Wednesday, called California’s mighty public pension system, Calpers,
a bully for insisting in court that pension cuts were wholly out
of the question.
Such dogma “encourages dysfunctional strategies,” wrote the judge, Christopher Klein, chief judge of the United States
Bankruptcy Court for the Eastern District of California. He said
Calpers’s legal arguments were invalid, and he concluded that
it lacked standing to dominate the courtroom discussion the
way it had. Stockton did not even seek permission to freeze its
pension plans, but the judge nevertheless wrote that it was entitled to do so and went on to cite steps that struggling cities in
general should take to trim their pension costs legally.
For starters, he recommended negotiating with their
unions.
It may be sheer coincidence, but New Jersey seems have
taken Judge Klein’s instructions to heart, even though states
cannot file for bankruptcy and thus lack that particular leverage. For months, a pension commission formed by Governor
Christie has been working quietly with the New Jersey Education Association, normally one of the state’s most litigious pension adversaries. By talking to each other instead of battling in
court again, the two groups managed to find enough common
ground to issue what they called a “road map” toward solving
New Jersey’s daunting pension problems.
Many details remain in flux, and the union took pains on
Tuesday to say it was not endorsing Mr. Christie’s full proposal and might never do so. But the road map identifies certain
issues that are so important to New Jersey’s teachers that the
union is willing to consider a pension freeze if that is what it
takes to fully protect its members from the state’s looming pension collapse.
To appreciate how unusual it is for a state to propose a pension freeze, it helps to understand the “vested rights doctrine,”
the legal argument that public pension plans cannot be frozen or
reduced. Most states uphold some form of this doctrine, though
in some it is a matter of statute, in others it is enshrined in the
constitution and in still others it stems from court precedent. Of-
ten, the provisions have been in place for decades and attracted
little notice until recently, when baby boomers began to retire in
large numbers, placing unexpected pressure on public pension
funds and the state and local budgets that support them.
People have sometimes suggested freezing public pension plans to keep the hole from getting deeper. But oﬃcials
usually say that is impossible, and few want to mount a costly
test of the doctrine, especially because the judges who would
decide such a case usually participate in public pension systems
themselves.
Companies, by contrast, can legally freeze their pension
plans and have been doing so for years. Since 1974, companies
with pension plans have been governed by a single federal law,
the Employee Retirement Income Security Act, or Erisa, which
details how freezes must take place to pass legal muster. One
basic requirement is that workers midway through their careers
are entitled to keep whatever portion of a pension they managed to earn until the date of the freeze.
The states have long argued that because they are legal
sovereigns, federal pension law does not apply to them. When
states, cities and other local governments try to rein in pension
costs, they often create new “tiers” of much smaller benefits for
workers they expect to hire in the future, and call it a reform.
But there is no freeze for existing workers, who keep accruing
the same benefits as before.
In some places, it is increasingly clear that reducing benefits only for future hires does not save enough money to preserve overstretched pension plans, especially in places where
retirees outnumber current workers.
The clearest solution is to curb benefit accruals, but that
runs directly into the vested rights doctrine. Seeing no other
way out, oﬃcials often resort to issuing bonds to obtain cash for
their pension funds, a risky strategy that has failed in Detroit,
Stockton and other places.