Archive: April, 2010
Some Philadelphians are so eager to pay their late real estate and other taxes, they're mailing checks to the Revenue Department in advance of the May 3 - June 25 tax amnesty, city Revenue Commisioner Keith J. Richardson tells me.
But it's not enough just to pay. To qualify for interest and penalty relief on what they owe, taxpayers also need to file the required paperwork, available at the www.phillytaxamnesty.com Web site, among other places (more info here). "They can't do that til Monday," when the amnesty officially begins, Richardson adds.
Even when you use them to spend your own money, credit cards and debit cards aren't free; store and restaurant owners typically pay up to a few cents in transaction fees for every dollar you pay by Visa, MasterCard, American Express, Discover.
The card networks force merchants to eat that fee; no cash discounts allowed. Merchants have never been happy about this, especially where retail profit margins are penny-thin.
Today, Congress is reviewing a proposal to shift the expense to consumers. Think of it as a private tax - an extra few cents on every dollar for the privilege of paying by plastic. More here at the House Judiciary Committee testimony page.
"I do not think this will pass," Janney Capital Markets analyst Thomas McCrohan told me this morning. He said surcharges would be "disruptive" to merchants - and that the proposal is more of a tactic than a goal: "What merchants really want is the ability to negotiate directly with the various Visa and MasterCard member banks over the price they pay for accepting plastic." Like Wal-Mart and other giants already do.
ADD: How much do stores pay the card companies? Says Janny's Len DeProspo: "If you’re using a credit card, it’s going to be about 1.8% of the transaction amount. If you’re using a debit card where you sign the receipt, which is known as a signature debit transaction, it’s going to be about 1.3% to 1.6% of the total transaction amount. If you’re using a (no-signature) debit card, it’s going to be closer to 0.25% to 0.5%...
"The interchange rates are generally set by Visa and MasterCard. If your store wants to be able to accept Visa or MasterCard branded cards, you pretty much have to pay the rate, unless you think you can get by taking cash or checks only. Large merchants like Wal-Mart can sometimes negotiate special rates, but smaller merchants usually have hardly any success in doing so."
Update: Inquirer story here
Earlier: Comcast reports higher first-quarter profits and cash flow, "powered primarily by falling capital spending," according to Bernstein Research analyst Craig Moffett. Comcast says it paid $925 million for equipment last quarter, vs. $1.16 billion a year ago, as it nears completion of its all-digital networks. Moffett expects this spending will continue to drop, boosting cash flow, which he hopes will eventually make it to investors as higher dividends or share buybacks.
Meanwhile, "growth looks good," as cable slowly wins back market share from Verizon FiOS and other phone companies, Moffett adds. Comcast lost 82,000 cable video viewers during the quarter, vs. an expected 130,000. Elsewhere it gained: a net 399,000 new high-speed Internet customers, 273,000 phone customers, plus more business customers. Advertising recovered, boosting programming profits at minor-sports channel Verus and other Comcast cable networks, as the company presses its planned purchase of NBC Universal.
Bank of America Corp.’s board has picked ex-DuPont Co. boss Charles "Chad" Holliday its new chairman. Statement here, Bloomberg story here.
Among BofA's big, troubled properties is its Wilmington-based credit card bank, the former MBNA Corp., whose headquarters takes up four blocks (formerly six, but they've been cutting back) of downtown Wilmington, across Rodney Square from Holliday's former DuPont office. DuPont and MBNA are Delaware's largest private employers.
We'd like to think having Holliday on high at BofA is somehow good news for the region; but of course future investments, cuts or sales of the card unit will be bank ceo Brian Moynihan's job, not Holliday's. And Holliday knows a great deal about layoffs and asset sales, as his DuPont record shows.
Airline industry financiers are taking last week's decision by Carlyle Group, Washington DC, and RPK Capital Management, Chicago, to raise a $1 billion-plus equity and debt fund to buy jets, engines, and aviation finance securities and loans, as a sign the industry has hit bottom and is starting to attract new dollars. Carlyle is the largest US private equity investor; RPK, founded in 2004, specializes in aircraft leasing.
Since at least the 1970s, most US airlines don't own their planes; banks and investors do; but jet finance capital has become difficult to raise from any souce in recent years. "All kinds of perfect storm events since 9/11 have caused issues for commercial carriers," says Chris Sponenberg, vice president for client development at Wilmington Trust Co., trustee for thousands of jet aircraft, power plants, railcars and other capital goods on behalf of their investor-owners.
"Shrewd investors realize things are at the bottom," Sponenberg told me. "Lease rates have fallen, but they're starting to stabilize. Folks are looking at this point as an opoprtunity to jump in. It's an indication that traffic looks to pick up, domestically and then worldwide. It bodes well for aircraft manufacturers, carriers and investors."
"Capital is chasing opportunity," affirmed his colleague, David Vanaskey, vice president for the bank's administrative, maintenance, compliance division which tracks jet investments. "Carlyle's an example of the firms we've seen beginning to position themselves to take advantage of the opportunity to fund new aircraft," and refinance what's still flying.
Blake Jennelle (ex marketing boss of Center City-based TicketLeap) and a group of his IT compadres at Philly Startup Leaders are putting up $10,000 as a "Gigabite Genius Grant" prize for "the best idea for using super high speed Internet access technology to improve their community."
UPDATE: "The big prize isn't being awarded til the end of June," but a smaller $1,000 people's choice prize closes Friday, Jennelle told me. More than 3,000 people have voted among the 136 proposals. More at http://gigabitgeniusgrant.com/
Unisys chief executive J. Edward Coleman called it "good progress" in "our ongoing turnaround," but investors responded to the Blue Bell-based computer company's first-quarter loss by dumping the stock and driving it down more than 10 percent, to under $35 in morning trading. Unisys report here.
While Republicans (joined by Sen. Ben Nelson, D-Warren Buffett) voted last night to slow the Democrats' financial-companies reform bill, today's Goldman Sachs hearing, with boss Lloyd Blankfein sitting before Senators to defend Wall Steet's practice of betting against its own clients, will add to pressure for "a tough financial reform bill (to) pass and be signed into law by the end of May," writes FBR Capital Markets analyst Paul F. Miller Jr. in a report to investors.
Miller sat clients down with Peter Wallison of the American Enterprise Institute and Washington regulator-turned-corporate lawyer Thomas Vartanian to review prospects in a conference call yesterday. Highlights:
- Wallison says the Democrats' bill will force financial companies "to confer with the Federal Reserve before creating new financial products, making it hard to compete in a global market. He did not believe the Republicans will have much ability tosignificantly alter the outcome of this legislation," which is unlikely to be reversed even if the GOP gains in Congress this fall.
- Vartanian says the proposed inter-regulatory Systemic Risk Council will be a "political" body in danger of "stifling innovation"; while the proposed independent Consumer Financial Protection Agency "will certainly increase consumer protection, but it runs the risk of driving off costs (and) disclosures, and (reducing) credit to everyone but the most creditworthy."
- Bank tax. Both parties seem to accept a new $50 billion big-bank "resolution fund" for the next bailout. Democrats want to tax the banks and collect the money before anyone blows up; Republicans are resisting, which would force Congress to find around $17 billion from other taxpayers - maybe through banks' repaid TARP funds.
- Derivatives. Sen. Blanche Lincoln, D-Ark. passed a relatively strict bill through her Agriculture Committee that would push government-insured banks to sell off their swaps-trading businesses, consistent with the "Volcker rule" that would get commercial banks out of proprietary trading altogether. Vartanian thinks Lincoln's language will be added to the reform package; whereas Warren Buffett's "exemption for existing derivatives contracts" will likely fail.
"The most likely course of action remains a bipartisan compromise, but one that produces a bill tougher than originally expected), which allows for a Senate vote and reconciliation with the House's financial reform package in time for the President to sign a bill before the end of May."