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Rosland Gammon

Rosland Gammon is a former business journalist turned college instructor. Her newsroom experience includes reporting for The Philadelphia Inquirer, and reporting and editing at Bloomberg News. Gammon currently teaches communications at Alverno College in Milwaukee. Follow her daily posts. | E-mail: Rosland Gammon

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Have individual investors been pushed out tax-lien auctions in your area?

tax lien auctionWith increasing property tax delinquencies, many local governments have turned to tax-lien auctions to collect the money and avoid budget shortfalls. It’s not much of a business story until you look at who’s buying the liens – which is what Megan O’Matz and John Maines of the Sun Sentinel did.

Historically, individual investors bought the liens to save for things like retirement, college educations and vacations, Megan says. But now, banks and hedge funds have dominated Florida’s market, which is worth about $1 billion, she says. The reason: Florida tax liens can generate annual returns of as much as 18 percent, Megan and John write.

Megan O'Matz

Online auctions have helped larger companies outbid competitors in tie bids, Megan says. They create “tens and hundreds of thousands of shell companies to bid on their behalf. That way, one hedge fund can have, for example, 450,000 chances of being declared the winner in the tie vote,” she says. “An individual investor, by comparison, essentially has only one shot.”

If you’re interested in pursuing this story, start by asking your local officials how they conduct tax lien sales, Megan says. In-person auctions can decrease the number of bidders. However, a group of bidders illegally can decide upfront which liens they want to avoid the competition, she says. “Look for whether there is competition in bidding and whether the liens are sold repeatedly at the highest interest rate,” she says.

If your area does online auctions, ask if “subaccounts” or proxy bidders are permitted, which could indicate whether shell companies are bidding, Megan says. She says they found one bidder had set up 20,795 affiliated companies, which had names such as Polka Dot Cupcakes, Cricket Trapper, and Ms. for Ms. Onetwothree. “Others were named after superheroes,” she says.

You can trace the companies by using state incorporation records and Securities and Exchange Commission filings. For instance, they linked one bidder, which had more than 450,000 affiliates, to US Bank, Megan says.

Megan says most homeowners don’t realize their debts have been sold to private companies. “They simply thought they were paying interest and penalties to the county, not to some odd company named Toad LLC or Pork Chop Sandwiches!” she says.

 

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AJC reporters use closed state grant files to track promised jobs

By Flickr user Marcin Wichary

Gathering information about economic development deals isn’t easy so I’m always looking to highlight stories by reporters who’ve managed to get inside this issue. Atlanta Journal-Constitution reporters Michael Kanell, Shannon McCaffrey and J. Scott Trubey have done just that in a recent two-part series. (Read Part 1 and Part 2)

The reporters wanted to compare the number of jobs promised to jobs actually created, Shannon says. They found that 48 percent of the companies that received state grants didn’t create all of the jobs they’d promised. They also learned the state rarely recouped the money, and often allowed companies to keep the grants by extending deadlines and making other allowances, she says.

To get the numbers, the reporters used only closed files, Shannon says. “This eliminated many of the larger projects that have recently grabbed headlines, as most are still in progress,” she says. “But only when a file is closed could you get a meaningful job tally.”

With no computerized files, they spent about three weeks digging through paper files with tens of thousands of pages. They’d limited their search to 10 years so they could include multiple economic cycles and ended with about 160 grants to review, Shannon says.

Initially, they found final reports and closeout site visits provided the data they needed. Later, they realized they also needed to collect information about big local incentives. We “should’ve been doing so from the first file,” she says. “Gather everything you think you might need from the start. Better to have things you don’t need than vice versa.”

Additional information in the files allowed them to write vignettes about the companies and “make an informed judgment about the program’s success in a way the state had not done,” Shannon says. “We were telling state officials something they did not know about the program they ran.”

 

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Look at trading, fees to determine soundness of school district bonds

oc registerMelody Petersen at the Orange County Register did the math on capital appreciation bonds area schools use to finance projects. She found that one $22 million borrowing will cost taxpayers $280 million, her story says. That’s because the loans delay payments for decades as “interest is charged on a growing pile of unpaid interest,” she writes.

Although Melody is a former CPA, she says the rest of us can tackle stories like this, too. I asked her what the worst possible outcome could be for reporters: “The worst outcome would be to not write a story that gets inside these school bond deals because you believe the details are too complex,” she says.

Start by checking EMMA, the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access website. It provides details such as how much taxpayers will have to pay for the bonds in coming decades and how much the district paid the financial firms to issue the bonds, Melody says.

Not all bond deals are bad, she says. But to find the ones that are, check EMMA for early trading in each bond. “If you see speculators snapping up a bond and then quickly selling it for a profit, the school most likely agreed to an interest rate that was too high,” Melody says.

Use Bond Buyer, which publishes the national average for fees paid to underwrite education bonds each year, to determine whether the districts pay higher fees, she says.

“Before getting too deep into the details, you want to get a sense of whether the schools are getting unfair deals from their banks and other financial firms,” Melody says. “School bonds do serve a great purpose, but here in California, the firms have been taking advantage of officials who were not financially savvy.

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Lesson from payday, title-loan stories: Check impact on related industries

Katrina Sutton of McDonough, Ga.,

Katrina Sutton of McDonough, Ga., she took out an installment loan from World Finance in August 2009. Erik S. Lesser/EPA for ProPublica

Until ProPublica and Marketplace co-produced a series this month, installment lenders had remained in the shadows of payday and title-loan lenders, which have received a lot of scrutiny.

That was the case even though installment lenders have a comparable market size and often charge annual rates of more than 200 percent, ProPublica reporter Paul Kiel says.

Paul points out in part one of the series that the installment lending industry has “survived” laws that try to limit these types of loans. For instance, he writes:

Borrower Katrina “Sutton’s loan contract said her annual percentage rate, or APR, was 90 percent. It wasn’t. Her effective rate was more than double that: 182 percent.

World [Finance] can legally understate the true cost of credit because of loopholes in federal law that allow lenders to package nearly useless insurance products with their loans and omit their cost when calculating the annual rate.”

Paul Kiel

Paul’s story uses borrowers and employees to tell the story.  He follows Ms. Sutton’s loan chronologically. Using another borrower’s story, he illustrates how companies earn profits on the loans. He writes that borrower Emma Johnson received her first loan from lender World Finance in 1993 and has taken out 48 loans, which includes new loans and refinanced loans.

“When Johnson finally declared bankruptcy early this year, her two outstanding loans had face values of $3,510 and $2,970. She had renewed each loan at least 20 times, according to her credit reports,” he writes.

Paul says reporters can localize the story by finding installment lenders in their areas, particularly near military bases, which is the focus of his second story.

He says to find garnishment lawyers to explain details because state and federal laws differ. To find sources, contact legal service lawyers and bankruptcy attorneys. He says reporters should always ask borrowers if they have multiple loans, which was the case for Ms. Johnson.

Like most reporters know, finding people may not be that easy. He estimates he approached about 50 people and found six to talk with him.

 

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L.A. Times examines unique tax loophole for companies

L.A. Times reporters Jason Felch and Jack Dolan found a 35-year-old law that has contributed to California’s economic crisis. The law allows companies buying business properties to avoid reassessments and the resulting tax increases if “no one acquires a majority stake in a company that owns the property.”

For instance, Jason and Jack write:

“In 2002, E&J Gallo, the world’s biggest winemaker, purchased Louis M. Martini, which owned more than 1,000 acres of prime Napa and Sonoma County vineyards. None of the property was reassessed because Martini was divided among 12 Gallo family members, none of whom acquired more than 50%.

Some of that property today is worth more than $150,000 an acre but continues to be taxed based on its 1975 value of a few thousand dollars an acre, according to Napa County assessor John Tuteur.”

Jason Felch

“It’s one of the reasons why the property tax burden shifted from corporations to homeowners,” Jason says. “We were looking to explain how the shift happened.”

Your state may not have the same law, but you can dig into this story by looking at property reassessment laws. If you understand the tax law, you can find loopholes and what companies do to qualify for them, Jack says. Contact lawyers who’ve used the loopholes for their clients to help you, he says.

Jack Dolan

Property tax records from county assessors’ offices will show how parcels of land are taxed. Submit public records request because the website data is limited, Jason says. Look for disparities in tax rates and work backwards to find commercial property owners.

For Jason and Jack, determining if companies used the majority-ownership loophole wasn’t easy, Jason says. In California, corporate entities have to report changes in majority ownership to the state; however, the information is exempt from public records laws, he says.

“That’s when it helps to have really good human sources,” Jack says.

 

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Skilled temporary foreign workers and the impact on U.S. jobs

visaThe Seattle Times does a comprehensive job of exploring how foreign worker visas affect American workers in the technology field. Reporters Kyung Song and Janet Tu start the story with a recent computer science graduate who struggled to find a job. They write thousands of programmers and engineers have faced the same challenge “despite reports of a scarcity of qualified American high-tech workers.”

Kyung and Janet focus on H-1B visas that allow companies to temporarily hire foreign skilled workers. They use data for Microsoft in their story, but Kyung says the story can be localized. “It would require some digging, and a bit of spreadsheet analysis,” she says.

Kyung says to start with the Department of Labor’s Office of Foreign Labor Certification, which keeps a database of visa and green-card applications. The information can be sorted by employers or by state. For instance, this link shows national information such as number of applications and top 10 employers.

The U.S. Department of Homeland Security has specific company data; however, contacting Ron Hira, a professor at the Rochester Institute of Technology, who uses the data, might be quicker, Kyung says.

“I suspect most employers will not readily divulge the percentage of foreign workers on their payroll,” she says. “Microsoft did, but even it refuses to say how many visa workers it hires through contracting firms.”

Also, find and interview workers hired through the visa program, since there is a direct impact on them as well, she says.

 

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Crafting the narrative of an oil spill: A Pulitzer winner’s process

oil spill

A map turtle released in Wilder Creek. Photo by U.S. Fish and Wildlife Service Midwest Region

Elizabeth McGowan, Lisa Song and David Hasemyer won a Pulitzer Prize this year for their InsideClimate News series “The Dilbit Disaster: Inside the Biggest Oil Spill You’ve Never Heard Of,” which looked the impact of a diluted bitumen or “dilbit” spill in Michigan.

Elizabeth says she discovered the spill while looking at energy and environmental concerns as an election issue. She realized the spill in the Gulf had overshadowed the one in Michigan. “The local papers had covered it, but it was not on the radar screen of anybody else,” she says.

Many months later, the three-part series and epilogue as well as an e-book launched on the InsideClimate News site. (A follow-up version of the e-book is now on Amazon.) Reporter Lisa Song, who did the scientific research for the series, described it as a “suspenseful tale like a crime thriller” when I spoke with her for a previous post.

That’s partly because Elizabeth and her editors chose cinematography as the writing style early on, Elizabeth says. “It’s important what you put in and what you leave out,” she says. “If you do a notebook dump, readers will be lost.”

That style is apparent from the beginning. Elizabeth says she met the lead character John LaForge when she traveled to Marshall, Mich., in November 2011. She starts the series with him noticing an “acrid stench” as he left his home. When he returns later, she writes:

“LaForge said he was stooped over the creek, looking for the source of the gunk, when two men in a white truck marked Enbridge pulled up just before 10 a.m. One rushed to LaForge’s open front door and disappeared inside with an air-monitoring instrument.

The man emerged less than a minute later, and uttered the words that still haunt LaForge today: It’s not safe to be here. You’re going to have to leave your house. Now.”

Elizabeth says she and editor Susan White worked closely from the first draft to add the “little bones, flesh and skin” to the skeleton outline, she says. “In telling a story, it helps to have more than one set of eyes,” Elizabeth says. “The writing was back and forth, line by line. We had to keep the reader coming along.”

Elizabeth McGowan

Elizabeth organized her notes by sources, she says. Separating by source allowed her to easily find notes from neighbors, Enbridge officials and others as she worked through the story, she says.

Elizabeth does not have a feature writing background like many reporters who write long narratives. But, she says, “It’s something my brain seems to be able to do.”

She’s using lessons learned from writing the Dilbit series to write a book about a cross-country bike ride and cancer survivor, she says. She left InsideClimate News last year to write the book.

She was working on the book when an Associated Press reporter called to interview her about winning the Pulitzer Prize, she says. It was her birthday and she hadn’t heard the news. “I said, ‘You’re making that up!’” Then she called a friend who confirmed the win. “It still feels unreal.”

The reporters and editors had to “steal time” to get the project done because of the organization’s small staff. Elizabeth kept going because there was something wrong, she says. She also had sources like LaForge who – despite her warning that she would call often, talked to her because they wanted to help others.

“We didn’t do this because we thought we needed to win an award,” she says. “We did the series because it’s egregious and there are too many situations like this.”

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Pulitzer Prize winner used science background for spill series

Inside Climate News Pulitzer PrizeElizabeth McGowan, Lisa Song and David Hasemyer won a Pulitzer Prize this year for their InsideClimate News series “The Dilbit Disaster: Inside the Biggest Oil Spill You’ve Never Heard Of,” which looked the impact of a diluted bitumen, or “dilbit,” spill in Michigan. I talked with Lisa, whose science background helped research the series, and Elizabeth, who left InsideClimate News last year to write a book. They gave tips from different perspectives so I’ll break them into two posts.

Lisa Song

From Lisa, I learned you don’t always have to leave the newsroom to find an expert. She has degrees in environmental science and science writing from the Massachusetts Institute of Technology. She says her background allowed her to comprehend what sources said without too much explanation. Because she understood the information, she was able to ask important follow up questions, she says.

Her primary task in the project was determining the technical aspects of the oil that caused it to sink into the water instead of lying on top like most oils, she says. With no specific research available, Lisa had to do her own. “I couldn’t get at the question directly,” she says. She searched for articles, interviewed scientists, and dug through government records, she says.

The reporters needed information about the oil to show how the Michigan spill differed from others, including the Gulf of Mexico spill that also happened in 2010. They found most procedures and equipment focus on floating oil. “Because the Marshall accident was the first major spill of dilbit in U.S. waters, cleanup experts at the scene were unprepared for the challenge of submerged oil,” one story says.

Lisa also had to crunch numbers from a database of pipeline spills. (You can read more about that process in this Investigative Reporters and Editors post.)

One of her most daunting tasks was reviewing about 10,000 pages of a National Transportation Safety Board investigation. “I was able to go through the documents to pull out key facts,” she says. “It helped strengthen the story and fact check information from the Congressional Record.”

 

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Investigating beef: Public universities and selling science

cattle

As part of a joint project “America’s Big Beef” with The Kansas City Star, Peggy Lowe of Harvest Public Media and KCUR in Kansas City found a connection between university research and corporate donations. Her lead sums the story nicely:

“Agricultural colleges in the top five beef-producing states have become quasi-arms of the cattle industry, selling science to corporate bidders who set the research agenda with their dollars.”

I contacted Peggy because she was among this year’s winners of the Radio Television Digital News Association’s Edward R. Murrow Awards. I also reached out to get tips on gathering financial details about colleges and universities.

“It’s a rich, fertile soil for business reporters or higher education reporters,” Peggy says. “It’s really insidious the way money comes into these schools and flows out in research dollars.”

Some schools don’t hesitate to divulge information. Many even distribute press releases touting the donations, Peggy says. But getting donation information from other public schools takes more than filing public records requests.

One hurdle that surprised me was the separation of financial information for colleges within colleges. For instance, an agriculture school could have separate Animal Health or Crop Science schools within it, Peggy says. Tracking this can be difficult so carefully phrase public records requests, she says.

Peggy Lowe

Reviewing alumni groups, boards of regents and naming rights can indicate who’s giving money, she says. Commodity boards or interest groups such as the American Farm Bureau also can provide clues or information, she says. She warns some schools receive money through private foundations or other private entities, which removes the donations from the purview of public records requests.

For those of you looking to get around hefty charges for information, Peggy says to ask for a cost breakdown. One school wanted to charge $5,000 to fulfill a records request, but once she asked for the cost details (and did some negotiating), the cost dropped to $138, she says.