Tuesday, October 31, 2017

Amazon HQ2 #3

Amazon said this week it had received proposals from 238 cities and regions across North America that are vying for its new, second headquarters, HQ2.

The leading contenders appear to be Atlanta, Austin, Denver, and Washington, D.C. In the news I read not much was said about explicit financial incentives to Amazon. The city of Austin's bid stated none at all. Austin in its bid asked Amazon: “What if your new headquarters was more than just a building or a campus, but rather an integral part of the economic, cultural, and social fabric and future of an entire city?” (link). Incentives might be made more explicit as the decision process continues. Amazon will make site visits to a short list of contenders, and a final decision is probably a year or so away.

Monday, October 23, 2017

Epic Systems

We did a long weekend trip to visit friends in Verona, WI. With them we did a self-guided tour of the Epic Systems campus in Verona. I had not known anything about Epic, since it is privately-held and its business is medical records. The campus is a beautiful site with lots of unique, quirky decor (and many offices). Visitors can tour the site for free. We were told Epic has about 9,500 employees world-wide, with about 7,500 at the Verona campus.

Our visiting some interesting place in or near Verona has become a pattern. During our previous visit we toured an aquaponics farm owned and operated by our friends' daughter and her husband. The microgreens amazed us. Maybe we will visit the National Mustard Museum the next time.

Wednesday, October 18, 2017

Trump's "Across State Lines" Baloney

By executive order President Trump "is expected to direct a trio of agencies to rewrite federal rules to allow trade associations and other groups [to] offer their own health plans" (link). "They will be able to buy, they'll be able to cross state lines and they will get great competitive health care and it will cost the United States nothing," Trump said today.

Baloney to his implying that group rates are inherently cheap. Group insurance has been sold across state lanes for decades. The major kind is employers who buy insurance for their employees who live and work in multiple states. Employers with many employees all in the same state also buy group insurance. For decades state insurance departments or state legislators decided what makes a legitimate group. The criteria has become less strict. Now Trump and others want the federal government to decide what makes a legitimate group, and it's likely no rules at all.

However, this will have little or no effect on insurance underwriting. Insurers will continue to evaluate members of small groups individually. Imagine a group consisting mostly of people in very poor health, e.g. most have had heart attacks. If it offers coverage, a rational insurer will do so with a very high premium, one commensurate with the poor health of the individual members. There is no miraculously cheap rate simply as a result of making a group. Also, why would a relatively healthy person -- even if he/she is a member of the group -- buy this high-priced group insurance when he/she could buy cheaper individual insurance?


Trump's move is not near radical enough. The medical insurance market for individuals under age 65 is a lousy market because the risk pool is too small. The risk pool is too small because millions of individuals have medical insurance via his/her employer's group insurance. That is a result of irrational government policy. The radical move would be to change employer-paid medical insurance like I said here.

In contrast the individual insurance market for individuals over age 65 is large, vibrant and competitive. Many retired people buy Medicare supplement or Medigap or Medicare Advantage policies because they don't have an employer buying post-retirement medical insurance for them.

Saturday, October 14, 2017

Sports contests

I was very disappointed that the Cleveland Indians lost 3 games to the New York Yankees, and thus the series, after winning the first 2 games. The Indians had the best W-L record in the American League during the regular season, thanks in part to 22 consecutive wins, an all-time record, during late August to mid-September. Hopes were high for Indians fans.

The thrill of victory… and the agony of defeat - Jim McKay/ABC Sports.

Now it's Cubs vs. Dodgers and Astros vs. Yankees to see who plays in the World Series. Go, Astros!

I finished in first place in my CBS Sports Fantasy Baseball League this year.  I was in the middle of the pack until almost mid-season, suddenly jumped to first, and fell back to 7th in early September. I was fortunate to have Paul Goldschmidt, Carlos Correa, Willson Contreras, Corey Kluber, and Kenley Jensen all season (minus short stints on the disabled list). I grabbed Ryan Zimmerman as a Free Agent early in the season. Zimmerman had a career best year after disappointing ones in 2014-16. I also grabbed Trevor Bauer as a Free Agent for about the last 6 weeks of the season. During those 6 weeks he W5-L1 with an ERA of 3.19.

Sunday, October 8, 2017

Amazon HQ2 #2

State and local governments surely want HQ2 for an expanded tax base and economic prosperity. Many are willing to give tax breaks, other subsidies and/or privileges to Amazon to get what they want. How much they give in tax breaks and subsidies, or spend on more infrastructure, may make an overall good deal or bad deal financially speaking for existing residents. More often than not politicians will be more generous to Amazon or another company since they are spending other people's money, not their own.

See The Math Won't Add Up For Winner In Amazon HQ2 Contest by Jeffrey Dorfman at Forbes for more about this. An article in today's Cleveland Plain-Dealer about HQ2 is titled Like love-sick puppies, cities woo Amazon. The article begins with 52 cities that are the author's top 52 candidates. She narrows the candidates in stages and finally down to one. That is Denver because it has the space and "willingness to pay to play." Such willingness is to provide tax breaks and other subsidies and/or privileges.

Often the state or local government incurs debt in its effort to attract something like HQ2. The debt and interest thereon add to the burden of taxpayers.

Some locals may get jobs or higher pay at Amazon. Their net benefit will be high. Others may benefit indirectly such as increased revenue to local businesses. Of course, there will the nuisances of more traffic, higher real estate taxes for schools or other infrastructure, etc. Some folks, e.g. retired people on fixed incomes, may receive little or no benefits, or net disadvantage, from HQ2.

Tuesday, October 3, 2017

Amazon HQ2 #1

Amazon is looking to have a second headquarters (HQ2). It is expected to be a $5 billion investment and offer up to 50,000 jobs. The folks in many cities would like it to be in their city. In choosing the location for HQ2, Amazon has a preference for:
-Metropolitan areas with more than one million people
-A stable and business-friendly environment
-Urban or suburban locations with the potential to attract and retain strong technical talent
-Communities that think big and creatively when considering locations and real estate options

HQ2 could be, but does not have to be:
-An urban or downtown campus
-A similar layout to Amazon’s Seattle campus
-A development-prepped site (link).

That is very sketchy. But several websites have given opinions about the leading candidates. According to BloombergView, there are six possible cities that are most likely to become the home of HQ2: Toronto, Boston, Washington, Atlanta, Dallas and Denver. Along with some candidates, this one shows a neat table of data for different criteria, such as tech talent rank and office price per square foot.

My metro area Cleveland is not a leading contender, but its Plain-Dealer on Sep 24 had an interesting article about some of the considerations that Amazon will face at some time. Cleveland's airport at present doesn't have the kind of capacity that could handle a big increase in flights and number of passengers.

Wherever HQ2 goes it will likely boost housing prices.

There is the issue of state and local governments providing incentives, especially tax breaks, to Amazon for locating HQ2 in their state or local area. Amazon has been awarded more than $1 billion in state and local subsidies since 2000, according to estimates by watchdog Good Jobs First.

My next post will consider the pluses and minuses of having HQ2 nearby at a more individual level.