The Aviation Conspiracy- That wasn’t
By: Rene Velez July 27, 2008
For those of you that don’t know, apart from my interest in business, politics and the global economy, I am also an aviation enthusiast and a licensed pilot. Some events in the not so distant past together with current events got me to thinking about the aviation industry as a whole. What lay ahead for an industry that in my opinion, is in for significant change. Or perhaps, I should say evolution.
Just a Thought
There was a time when I used to believe in conspiracy theories. Today, I largely discount them. Why you ask? I have learned two important facts of life and business. (1) Most large organizations that could gain in some way from conspiracy are having too hard a time trying to get the ordinary things right. Great conspiracies require a great deal of alignment and work to carry out. Hence, they usually don’t materialize. (2) In today’s information era it takes a small miracle to keep a secret. Sooner, or later, word gets out and it’s a conspiracy no more. So I am not a conspiracy theory believer. (although they do exist) However, I do think that when a lot of money is involved or at stake and that economic power is put to force…..the consequences are somewhat similar. So what does this have to do with anything? Judge for yourself.
What We Hear in The News
A large part of my comments here have to do with isolated stories and ideas that somehow have formed some linear and logical conclusion in my mind. I must admit, I amaze myself sometimes. Here are the headlines that make up my theory. Not quoted and in my own words.
(1) Airlines Face Challenges Due to High Fuel Prices
(2) Demographics are changing population density in urban settings.
(3) Airlines have Improperly Blamed General Aviation for Flight Delays.
(4) Airlines Want General Aviation to Pay User Fees.
(5) GPS Navigation is Transforming Global Navigation Systems.
(6) Airline Customer Satisfaction At An All Time Low.
(7) FAA Examines Changes in The 51% Rule.
(8) Kit Built Aircraft Outperform Production Aircraft of the Day.
(9) Fractional Ownership Flights Fastest Growing Segment of Aviation.
The Paradigm Shift In Aviation
Personally, I don’t think the airlines will disappear. I do however, think the airlines will change into something other than what they are today. Perhaps, on a smaller and even a nationally subsidized scale. Of course this type of change in a billion dollar industry could create a formidable force against General Aviation. The up and coming industry that I think has a real potential to change. If I am right, it will be one of the biggest changes to mass transit in the current century. (maybe)
Here is the theory……..One day you could drive to your local airport, hop on a small plane, type in your desired destination (say Miami to Orlando, Florida) and the small plane’s navigation system will connect into the aerospace commuter network and que your flight into a domestic air route superhighway. The plane will communicate with you, taxi itself to the runway and takeoff and land automatically, taxi you to the local terminal, while you make phone calls and read the paper. No pilot required!
To the average Joe or Mary this sounds right out of the Jetson’s. But the technology is already here. What does not exist is the infrastructure. And the airlines are worried their days are numbered.
Still don’t believe its here. Read the news on the war in Iraq. Predator, UAV’s (Unmanned Aviation Vehicles) are taking off in Afghanistan, remotely operated by pilots, sitting at a computer, from the USA. (Halfway around the globe!) They are doing reconnasince missions and when called on can even launch weapons and form offensive air to ground attacks or provide troop support. It’s here, its now!
What We Already Know
We are all tired of hearing and reading the stories of passengers who are frustrated with airline service. Delays, lost luggage, security checks, airborne health risks, extra baggage fees, passenger rage. It’s uncivilized to travel by airline these days.
We also know that fractional ownership and private air transport is in fact one of the fastest growing segments of aviation in the last decade. In large part for the corporate elite and wealthy but there are examples of low cost commuter options too.
The kit building industry is producing, safe, easy to build kit airplanes that are superior in performance and efficiency than certified production airplanes. These are kits you can build in your garage!
With general aviation, there is usually no need to arrive in a busy metropolitan airport. Travel to a nearby regional airport, with little to no traffic delays and you can even be picked up right at the door of your plane. No hassle, security checks or long lines. Often times your business professionals have business outside of the major metropolitan areas. So this is very convenient.
GPS navigation is slowly taking over other methods of navigation. In all my years of flying the only time I used NDB was simply to see if it worked. Although ILS approaches are still used today more and more these are being supplanted in use by GPS approaches. In fact some ILS approaches are being discontinued altogether. Every major flight school I have visited recently has trainers with IFR rated GPS systems. And students are requesting to be taught on their use.
One look at the general aviation instrumentation developments of the past decade and the only limit to what you can get is how much you can afford. And this will likely decline in cost much as all technology has come down in price over the years. Yet, the cost today is still within reach of many. The typical businessman who is also a pilot could afford a three dimensional GPS navigation system with terrain features and built in XM weather notification for what a couple of high end laptops would cost.
For $85,000 and about 700 hours of your time, you can buy a 2 seat kit airplane, that you bolt together, glue, add some minor body filler, sand and paint in your two car garage, that will outperform a $200,000 Cessna. Granted the Cessna may have 4 seats but depending on how heavy your payload is you may not be able to use all four seats. This aircraft will have a GPS system, and glass cockpit devices and get fuel efficiency that rivals a Honda Civic’s 30 miles to the gallon. This is close to the efficiency of airline travel. This is here and now.
Conclusion
I truly do not believe in conspiracy theories, but when you have at risk billions of dollars like the airlines and you see that your critical mass and economies of scale are slipping, it’s a fare bet that they will do everything they need to do to put the competition out to dry. It’s capitalism at play. The real danger is that General Aviation is highly fragmented. Many small companies that compete for a small market. Product liability is huge. Many of these companies are thinly capitalized. In fact many exist only because of the entrepreneurship of the owners, their hard work and their absolute love of aviation. If you think about that you can see why so much innovation has occurred in the last two decades. All the right human variables are there.
General Aviation can help our economy and promote transportation and logistical science to a level never before seen on this planet. This is another American dream waiting to happen. If we as a society stand behind General Aviation, we could create many competitive advantages in a global economy. Here are a few ideas that may emerge:
(1) Development of sciences for road traffic congestion and logistics in high density metropolitan areas.
(2) Create new cost effective modes of product distribution.
(3) Development of better satellite technologies.
(4) Enable the portability of Human Capital.
(5) Expansion of regional economies.
The sciences of General Aviation can lend themselves to so many economic models that its contribution could have a similar paradigm shift on the global economy as computers have on the way we do business today.
I guess I should send a few bucks to organizations such as AOPA and EAA. In addition, I should tell people more often; I am a pilot and how important that freedom is to our country. America is one of only a few countries where we have this freedom. Don’t let government and politics stand in front General Aviation. It would be a costly mistake.
Monday, July 28, 2008
The Cost of a Green Planet
The Cost of a Green Planet
By: Rene Velez July 27, 2008
I doubt that anyone has passed a day without some notice on the desire to live and prosper green. High energy prices, global warming and perhaps the new desire to have America become energy independent, is making headlines. Today it seems that ordinary citizens, corporations large and small and even government is making a move in the right direction. All of this is good. I hope we stay focused and on target.
T Boone Pickens even has his own ad that says we should seek out alternative energy sources. Frankly even if he has a vested interest, I don’t care if he makes another billion. Al Gore, has recently borrowed a JFK line to become energy independent in 10 years. People seem to think that this is very optimistic. Yes it is, but….I have to agree. We need to be very wary of the nay sayers.
Technology
The average American citizen does not understand how much technology already exists to make this happen. In addition even small changes, collectively, have very profound effects. In my home its been years since I implemented two plans that have saved me thousands so far. I have purchased energy efficient CFC bulbs for my home, where ever they could be used. Even my pool light, and inside refrigerator lights are CFC. I would guess total savings monthly….about $15.00. This doesn’t take into account the bulbs, although slightly more expensive, last longer too! In addition I invested in a computerized thermostat for the home and office climate system. At about $80.00 each I suspect, the cost of each was recaptured within 4 months, since my electric bill dropped about $20.00 per month. The unit turns itself off or on as programmed saving a lot of energy. I need to mention this is old technology used in a new way. CFC bulbs are in effect florecent bulbs that have been around for a long time. The computerized time thermostat is technology from the 1960’s.
Other, things that can save energy that are old technology are, solar panels and wind generators. Solar panels have been used in some form or another in South Florida since the 1970’s. However, wind energy has not been used as much because we don’t get enough consistent wind to make it viable. However, in the Midwest there are homes that have erected their own wind generators that enable these homes not only to go off the grid, but to actually sell excess power to the electric company. If I could make a profit center out of wind I would do it in a heartbeat.
Another old technology that I have not heard too much of as of late is “cogeneration”. Here is how it works. I like most homes in South Florida have an energy efficient central air conditioner. The outside unit which is composed of the compressor and coils generate a lot of heat as a by product of cooling my home. That unit would be tied to my hot water heater so that heat would make hot water for bath water and other home uses. What this means is that less energy is used overall, since the initial energy to cool your home substantially heats all of your hot water needs. In fact it can make your air conditioner more energy efficient as water is a great heat sink. Again simple technology, it exists today, yet it’s not used very often. I suspect we will here a lot about this in the future.
Okay I know what you are thinking…why is this not used more often? Simple business decision. I rather sell you two appliances than one. Ouch! capitalism hurts!
The Future cost of a Green America
If you think that $4.00 per gallon gas is expensive, you are really going to get sticker shock when you buy your 60 miles to the gallon Ford. We can in fact become more energy efficient, but of course everything that consumes energy of some kind or another will probably cost more. In fact that may really be the biggest obstacle to over come. Why? …lots of reasons. Many companies that are committed long term on old technologies will simply pass the cost of retooling to new products. The implementation of existing and new technology into current products simply will add a layer of sophistication that costs more. Although, I suspect with some products, sales volume and economies of scale will decrease prices somewhat.
In the near term I have made a decision to hold on to my gas furnace on wheels until new technology comes to market. And I suspect many others are thinking along the same lines. So instead of buying today’s hybrid, or the Honda Civic that gets 28 miles to the gallon, I will hold off and wait until say 2010 when Honda or some other company comes out with a car that gets 50 miles to the gallon. In fact, if petro prices maintain their upward curve, what I envision are a series of mass marketing attempts by auto manufacturers, to bring new technology cars to the market fast to prop up sales, until really great advances and innovation can be made affordable.
Getting over the Rainbow
I for one do not see that going green will mean a lower cost of living for everyone. In fact quite the opposite might occur. From cars to air conditioners to the office building where we work, everything will be greener and cost more. Kind of gives the green movement a new look. But, we must move on. We most get over it. In the end we can come very close to being energy independent. We can make a a serious contribution to saving our planet. We can also maintain competitive on a global market, as we license new energy technology to other countries that have us at a disadvantage on labor. That’s hard to see for most people but advances in fuel efficiency can amount, in the long term, to trillions of dollars in investments, research and development. This means jobs, it also means value. Any country that falls behind that curve will eventually loose global market share. So advances in this area are critical for our country.
Foreign Affairs and Wars
I have long suspected that one big reason for maintaining our dependency on foreign oil has been because: (1) its easy to maintain the status quo. Why bother to fix it if it works. (2) By pulling the billions of oil dollars out of the middle east we risk a geo-political imbalance.
I wish I was smart enough to tell you what are some possible outcomes. But I suspect even the best scholars on the subject really don’t know. I will however, take some guesses. I think much of the oil money that is reinvested in the USA will stay here. We are still a safe haven for foreign investment. In fact we are a good bet on new energy technologies. Suppose the middle east falls apart, having money in those countries is not a good idea. If I was a rich oil sheik I would be investing heavily on companies that will sell and license technologies to India and China. These are two huge energy consuming giants that will have to come up to the bar if they want to compete. Another very important point. We have taken the position to be the world's policeman. Although we need to be more cautious of which fights we pick, we also need to be more efficient has to how we fight them. We also have to be more independent to maintain global supremacy. At today’s cost of fuel and with our dependency on foreign oil we can be severely impacted by unstable political regimes and the cost to fight wars could send ripples through our economy, If it does not bankrupt us first. We wouldn’t be the first great nation to go bankrupt fighting wars and maintaining our borders.
Conclusion
We will either pay now or pay later, but we have to start to go green. We need to be first. We need to gain economic and political advantage.
As I have said many times before. Don’t assume your local politician or business leader will do this on their own. Again make your voice heard. Write/email your congressman or woman and your local and city officials. Tell them in no uncertain terms what you want. Send letters and emails to business leaders. People are still wondering whether Al Gore’s statement is plausible. Who cares! We need to start moving in that direction regardless. Let’s test the theory and see if it can be done. We can talk about it later. Hey….for years after we put a man on the moon, many people still didn’t believe it. This is something we can do while we have both feet planted on our own planet!
By: Rene Velez July 27, 2008
I doubt that anyone has passed a day without some notice on the desire to live and prosper green. High energy prices, global warming and perhaps the new desire to have America become energy independent, is making headlines. Today it seems that ordinary citizens, corporations large and small and even government is making a move in the right direction. All of this is good. I hope we stay focused and on target.
T Boone Pickens even has his own ad that says we should seek out alternative energy sources. Frankly even if he has a vested interest, I don’t care if he makes another billion. Al Gore, has recently borrowed a JFK line to become energy independent in 10 years. People seem to think that this is very optimistic. Yes it is, but….I have to agree. We need to be very wary of the nay sayers.
Technology
The average American citizen does not understand how much technology already exists to make this happen. In addition even small changes, collectively, have very profound effects. In my home its been years since I implemented two plans that have saved me thousands so far. I have purchased energy efficient CFC bulbs for my home, where ever they could be used. Even my pool light, and inside refrigerator lights are CFC. I would guess total savings monthly….about $15.00. This doesn’t take into account the bulbs, although slightly more expensive, last longer too! In addition I invested in a computerized thermostat for the home and office climate system. At about $80.00 each I suspect, the cost of each was recaptured within 4 months, since my electric bill dropped about $20.00 per month. The unit turns itself off or on as programmed saving a lot of energy. I need to mention this is old technology used in a new way. CFC bulbs are in effect florecent bulbs that have been around for a long time. The computerized time thermostat is technology from the 1960’s.
Other, things that can save energy that are old technology are, solar panels and wind generators. Solar panels have been used in some form or another in South Florida since the 1970’s. However, wind energy has not been used as much because we don’t get enough consistent wind to make it viable. However, in the Midwest there are homes that have erected their own wind generators that enable these homes not only to go off the grid, but to actually sell excess power to the electric company. If I could make a profit center out of wind I would do it in a heartbeat.
Another old technology that I have not heard too much of as of late is “cogeneration”. Here is how it works. I like most homes in South Florida have an energy efficient central air conditioner. The outside unit which is composed of the compressor and coils generate a lot of heat as a by product of cooling my home. That unit would be tied to my hot water heater so that heat would make hot water for bath water and other home uses. What this means is that less energy is used overall, since the initial energy to cool your home substantially heats all of your hot water needs. In fact it can make your air conditioner more energy efficient as water is a great heat sink. Again simple technology, it exists today, yet it’s not used very often. I suspect we will here a lot about this in the future.
Okay I know what you are thinking…why is this not used more often? Simple business decision. I rather sell you two appliances than one. Ouch! capitalism hurts!
The Future cost of a Green America
If you think that $4.00 per gallon gas is expensive, you are really going to get sticker shock when you buy your 60 miles to the gallon Ford. We can in fact become more energy efficient, but of course everything that consumes energy of some kind or another will probably cost more. In fact that may really be the biggest obstacle to over come. Why? …lots of reasons. Many companies that are committed long term on old technologies will simply pass the cost of retooling to new products. The implementation of existing and new technology into current products simply will add a layer of sophistication that costs more. Although, I suspect with some products, sales volume and economies of scale will decrease prices somewhat.
In the near term I have made a decision to hold on to my gas furnace on wheels until new technology comes to market. And I suspect many others are thinking along the same lines. So instead of buying today’s hybrid, or the Honda Civic that gets 28 miles to the gallon, I will hold off and wait until say 2010 when Honda or some other company comes out with a car that gets 50 miles to the gallon. In fact, if petro prices maintain their upward curve, what I envision are a series of mass marketing attempts by auto manufacturers, to bring new technology cars to the market fast to prop up sales, until really great advances and innovation can be made affordable.
Getting over the Rainbow
I for one do not see that going green will mean a lower cost of living for everyone. In fact quite the opposite might occur. From cars to air conditioners to the office building where we work, everything will be greener and cost more. Kind of gives the green movement a new look. But, we must move on. We most get over it. In the end we can come very close to being energy independent. We can make a a serious contribution to saving our planet. We can also maintain competitive on a global market, as we license new energy technology to other countries that have us at a disadvantage on labor. That’s hard to see for most people but advances in fuel efficiency can amount, in the long term, to trillions of dollars in investments, research and development. This means jobs, it also means value. Any country that falls behind that curve will eventually loose global market share. So advances in this area are critical for our country.
Foreign Affairs and Wars
I have long suspected that one big reason for maintaining our dependency on foreign oil has been because: (1) its easy to maintain the status quo. Why bother to fix it if it works. (2) By pulling the billions of oil dollars out of the middle east we risk a geo-political imbalance.
I wish I was smart enough to tell you what are some possible outcomes. But I suspect even the best scholars on the subject really don’t know. I will however, take some guesses. I think much of the oil money that is reinvested in the USA will stay here. We are still a safe haven for foreign investment. In fact we are a good bet on new energy technologies. Suppose the middle east falls apart, having money in those countries is not a good idea. If I was a rich oil sheik I would be investing heavily on companies that will sell and license technologies to India and China. These are two huge energy consuming giants that will have to come up to the bar if they want to compete. Another very important point. We have taken the position to be the world's policeman. Although we need to be more cautious of which fights we pick, we also need to be more efficient has to how we fight them. We also have to be more independent to maintain global supremacy. At today’s cost of fuel and with our dependency on foreign oil we can be severely impacted by unstable political regimes and the cost to fight wars could send ripples through our economy, If it does not bankrupt us first. We wouldn’t be the first great nation to go bankrupt fighting wars and maintaining our borders.
Conclusion
We will either pay now or pay later, but we have to start to go green. We need to be first. We need to gain economic and political advantage.
As I have said many times before. Don’t assume your local politician or business leader will do this on their own. Again make your voice heard. Write/email your congressman or woman and your local and city officials. Tell them in no uncertain terms what you want. Send letters and emails to business leaders. People are still wondering whether Al Gore’s statement is plausible. Who cares! We need to start moving in that direction regardless. Let’s test the theory and see if it can be done. We can talk about it later. Hey….for years after we put a man on the moon, many people still didn’t believe it. This is something we can do while we have both feet planted on our own planet!
Friday, July 25, 2008
Miami, South Florida - The Next Real Estate Boom
Miami, South Florida – The Next Real Estate Boom
By: Rene Velez (July 21st, 2008)
Good god, the bottom hasn’t even been reached and here I am writing about the next real estate boom in Miami. With 10 years of excess inventory in condominiums in downtown Miami and no one with a comprehensive answer as to how all those units will be absorbed. With rows of houses up for sale and a foreclosure rate that is keeping attorneys, banks and courts very busy why would I make a comment about the next real estate boom in Miami? I guess, it is inevitable that,……….. it will come. In fact I think it might come faster than what anybody may be willing to predict or admit. Yeah…I know it’s bad out there. For sure … I am not crazy and even the most pessimistic of economist will tell you….its just another cycle. But let’s not stop there. The reality is there is much about SoFlo (South Florida) that many have failed to really take in. In the end it adds up to a layer of insulation that SoFlo has. It’s something that few people get when they come here. In fact it’s something few people recognize on a daily basis even though we live here. We take it for granted. We hear of it. Yet somehow, the glare gets in our eyes and we don’t see it, the heat tires us until we can think no more. Then we start to sip on Cuba Libre, Mojitos or the local Margarita and suddenly it’s just not that important.
The Tropical Vibe
This is an element of the local life style that has in some way an insulating factor to the local economy. Certainly, this is not an economic factor that you would learn in a Harvard, Princeton or Yale economics class. But you might hit upon it at Florida International University or University of Miami. We have a certain Tropical Vibe and culture. Sometimes it shifts completely into the island mentality time zone but, if for no other good reason, only because we are attached and part of the upper 48 we maintain some sense of formality. Yes we have a Tropical Vibe. It’s in the food we eat, the cloths we wear, the warmth of the air. It’s in the way we relax and in the partners we attract. It’s in the sun on our faces and shoulders. We are a beautiful people in a beautiful place. The sun shines bright and the seasons soft and subtle. Yes this is an important variable as to why we do well. Everyone wants to be here. Everyone wants to live on vacation. So in the long run people will continue to come.
Value
Here is a term that most economist understand. We have “VALUE”! Yes it’s gotten very expensive to live here. I know that. In fact I am not sure how some manage. I am not sure how I manage. But here is something to consider. Go anywhere else in the USA, or internationally and find a place where you are 8 miles from the beautiful Caribbean waters and still find a home for less than $600,000. In a nutshell even expensive ocean front property is still a relative bargain considering its year round utility in a subtropical climate. So people will continue to come. We have “Value”!.
Culture
When I came here in 1976 from New York, I always new Miami had culture. Not in the New York kind of way, but you know, there was a way and a method to this place, and there were identifiable ethnic and cultural traits that gave Miami a culture. Today…..the scene is exploding. We have the Arts! We are in fact a metropolis recognized throughout the USA and the World. We have good food and dining. We have hotels. We have major universities. We have the people. People from all over the Caribbean, Central and South America, The USA, Europe, Asia and Canada. We are a cultural melting pot. We have glamour and the not so glamorous. We have baseball, hockey, basketball, football. We have festivals, air shows, auto racing, regattas. We have politics, trade, travel and tourism, music and cinema. We have a culture and a life. Hence people will come.
The Underground Economy
That’s right …….what no one in Miami wants to speak of. We have an underground economy. No one knows for sure how much, but it’s been here for decades scratch that “centuries”. Slave labor, rum running, drugs etc. etc. Today, we don’t have slave labor or rum running although some may argue that point, we have flight capital and offshore banking. This is money that comes to or through South Florida due to economic and political risk in the Caribbean and Central and South American countries, finds its way here and into our local economy. For sure we have some drug money also. Somehow, this adds to the economic stability of our local economy. I admit it is an ugly and seedy side of this economy but everybody has trash.
Retirement Stability Factor
People have been coming here for years for the warm weather and easy seasonal transitions. It’s easier on the bones and the subtle seasons makes life more pleasing. Sunshine is happiness and a good life. Yes. We need to give more credit to those retired folk who live on a fixed pensions, pay their taxes, spend a lot of money in healthcare goods and services and help stimulate the economy. Let’s also not forget the wealthy counterparts who come here to soak up the sun, play on our golf courses and eventually move into the varied assisted living facilities and nursing homes. This economic factor is not only stimulating but stabilizing in our local economy.
Gateway to the Americas
Here is a slogan I have heard often over the years. It’s time to really capitalize on this. No doubt that because of our inherent proximity to the Caribbean, Central and South America we are in fact the gateway to these countries. We have historically, benefited from this fact. Perhaps more so because we have a ready, willing and welcoming participatory population of Hispanics and culture that is very inviting to trade and business. Many of these countries are still developing countries. This essentially translates to further development and opportunities for business. There are many challenges in making this more of a robust and symbiotic relationship but the makings are already there. Although there are other states competing for this business, Miami is the ideal location for the furtherance of economic ties and for trade and tourism. Although I suspect the development of many Caribbean, Central and South American countries will take a long time I can see that many companies will choose to have their headquarters in south Florida. For this reason, this is a long term stabilizing factor and an opportunity to attract more business and population density into the area in years to come.
Conclusion
Here in South Florida we have many challenges ahead of us. Despite our economic melt down in the credit markets, overdevelopment in real estate, rising price of petro fuels and rising prices in the general cost of living….we have a vibrant future. I should mention that none of this will work out for the benefit of all if we do not have sound leadership in our local government. We need to have a local government that is focused on seeing many of these factors into fruition and not just consumed by petty politics, power grabbing and un-equitable squabbling. We must be united in culture and not divided in our vision. Our culture makes us vibrant and strong but I often fear it is also a factor that tears us apart as a community. Likewise, we need to have the right leadership at the national level in Washington, DC to help us achieve all of our economic capabilities. South Florida has a potential voice and influence in the Caribbean and Central and South American politics that can benefit the USA and these developing countries. We must be cognizant of this and exercise our unique knowledge and introspect towards moving Washington DC in the right direction. It’s safe to say Washington DC does not have a good foreign policy history. It’s very safe to say or simply to look back at how many businesses have come to South Florida and failed miserably simply because they didn’t understand the dynamics of our special populous. Along the way we need to make South Florida, more affordable so that we do not continue to widen the gap between the wealthy and the middle class. Many of the hardships, from our gateway partners are caused by just such an issue. Affordable and workforce housing will continue to be of utmost importance to our community. In addition transportation and education will be key drawing a population that will help achieve our local goals.
We will go through a variety of economic cycles. Those who stay and are aware of these cycles stand to gain from much opportunity. We are somewhat unique in our position and we might just be unique in the timing of history. Currently, we are in transition and we need to hope, pray and influence our leadership to invest in the future. We have unique economic variables and intangible drivers to our growth, our prosperity, our economy, our politics and how we live and see the future. We are SoFlo part of the Sunshine State!
By: Rene Velez (July 21st, 2008)
Good god, the bottom hasn’t even been reached and here I am writing about the next real estate boom in Miami. With 10 years of excess inventory in condominiums in downtown Miami and no one with a comprehensive answer as to how all those units will be absorbed. With rows of houses up for sale and a foreclosure rate that is keeping attorneys, banks and courts very busy why would I make a comment about the next real estate boom in Miami? I guess, it is inevitable that,……….. it will come. In fact I think it might come faster than what anybody may be willing to predict or admit. Yeah…I know it’s bad out there. For sure … I am not crazy and even the most pessimistic of economist will tell you….its just another cycle. But let’s not stop there. The reality is there is much about SoFlo (South Florida) that many have failed to really take in. In the end it adds up to a layer of insulation that SoFlo has. It’s something that few people get when they come here. In fact it’s something few people recognize on a daily basis even though we live here. We take it for granted. We hear of it. Yet somehow, the glare gets in our eyes and we don’t see it, the heat tires us until we can think no more. Then we start to sip on Cuba Libre, Mojitos or the local Margarita and suddenly it’s just not that important.
The Tropical Vibe
This is an element of the local life style that has in some way an insulating factor to the local economy. Certainly, this is not an economic factor that you would learn in a Harvard, Princeton or Yale economics class. But you might hit upon it at Florida International University or University of Miami. We have a certain Tropical Vibe and culture. Sometimes it shifts completely into the island mentality time zone but, if for no other good reason, only because we are attached and part of the upper 48 we maintain some sense of formality. Yes we have a Tropical Vibe. It’s in the food we eat, the cloths we wear, the warmth of the air. It’s in the way we relax and in the partners we attract. It’s in the sun on our faces and shoulders. We are a beautiful people in a beautiful place. The sun shines bright and the seasons soft and subtle. Yes this is an important variable as to why we do well. Everyone wants to be here. Everyone wants to live on vacation. So in the long run people will continue to come.
Value
Here is a term that most economist understand. We have “VALUE”! Yes it’s gotten very expensive to live here. I know that. In fact I am not sure how some manage. I am not sure how I manage. But here is something to consider. Go anywhere else in the USA, or internationally and find a place where you are 8 miles from the beautiful Caribbean waters and still find a home for less than $600,000. In a nutshell even expensive ocean front property is still a relative bargain considering its year round utility in a subtropical climate. So people will continue to come. We have “Value”!.
Culture
When I came here in 1976 from New York, I always new Miami had culture. Not in the New York kind of way, but you know, there was a way and a method to this place, and there were identifiable ethnic and cultural traits that gave Miami a culture. Today…..the scene is exploding. We have the Arts! We are in fact a metropolis recognized throughout the USA and the World. We have good food and dining. We have hotels. We have major universities. We have the people. People from all over the Caribbean, Central and South America, The USA, Europe, Asia and Canada. We are a cultural melting pot. We have glamour and the not so glamorous. We have baseball, hockey, basketball, football. We have festivals, air shows, auto racing, regattas. We have politics, trade, travel and tourism, music and cinema. We have a culture and a life. Hence people will come.
The Underground Economy
That’s right …….what no one in Miami wants to speak of. We have an underground economy. No one knows for sure how much, but it’s been here for decades scratch that “centuries”. Slave labor, rum running, drugs etc. etc. Today, we don’t have slave labor or rum running although some may argue that point, we have flight capital and offshore banking. This is money that comes to or through South Florida due to economic and political risk in the Caribbean and Central and South American countries, finds its way here and into our local economy. For sure we have some drug money also. Somehow, this adds to the economic stability of our local economy. I admit it is an ugly and seedy side of this economy but everybody has trash.
Retirement Stability Factor
People have been coming here for years for the warm weather and easy seasonal transitions. It’s easier on the bones and the subtle seasons makes life more pleasing. Sunshine is happiness and a good life. Yes. We need to give more credit to those retired folk who live on a fixed pensions, pay their taxes, spend a lot of money in healthcare goods and services and help stimulate the economy. Let’s also not forget the wealthy counterparts who come here to soak up the sun, play on our golf courses and eventually move into the varied assisted living facilities and nursing homes. This economic factor is not only stimulating but stabilizing in our local economy.
Gateway to the Americas
Here is a slogan I have heard often over the years. It’s time to really capitalize on this. No doubt that because of our inherent proximity to the Caribbean, Central and South America we are in fact the gateway to these countries. We have historically, benefited from this fact. Perhaps more so because we have a ready, willing and welcoming participatory population of Hispanics and culture that is very inviting to trade and business. Many of these countries are still developing countries. This essentially translates to further development and opportunities for business. There are many challenges in making this more of a robust and symbiotic relationship but the makings are already there. Although there are other states competing for this business, Miami is the ideal location for the furtherance of economic ties and for trade and tourism. Although I suspect the development of many Caribbean, Central and South American countries will take a long time I can see that many companies will choose to have their headquarters in south Florida. For this reason, this is a long term stabilizing factor and an opportunity to attract more business and population density into the area in years to come.
Conclusion
Here in South Florida we have many challenges ahead of us. Despite our economic melt down in the credit markets, overdevelopment in real estate, rising price of petro fuels and rising prices in the general cost of living….we have a vibrant future. I should mention that none of this will work out for the benefit of all if we do not have sound leadership in our local government. We need to have a local government that is focused on seeing many of these factors into fruition and not just consumed by petty politics, power grabbing and un-equitable squabbling. We must be united in culture and not divided in our vision. Our culture makes us vibrant and strong but I often fear it is also a factor that tears us apart as a community. Likewise, we need to have the right leadership at the national level in Washington, DC to help us achieve all of our economic capabilities. South Florida has a potential voice and influence in the Caribbean and Central and South American politics that can benefit the USA and these developing countries. We must be cognizant of this and exercise our unique knowledge and introspect towards moving Washington DC in the right direction. It’s safe to say Washington DC does not have a good foreign policy history. It’s very safe to say or simply to look back at how many businesses have come to South Florida and failed miserably simply because they didn’t understand the dynamics of our special populous. Along the way we need to make South Florida, more affordable so that we do not continue to widen the gap between the wealthy and the middle class. Many of the hardships, from our gateway partners are caused by just such an issue. Affordable and workforce housing will continue to be of utmost importance to our community. In addition transportation and education will be key drawing a population that will help achieve our local goals.
We will go through a variety of economic cycles. Those who stay and are aware of these cycles stand to gain from much opportunity. We are somewhat unique in our position and we might just be unique in the timing of history. Currently, we are in transition and we need to hope, pray and influence our leadership to invest in the future. We have unique economic variables and intangible drivers to our growth, our prosperity, our economy, our politics and how we live and see the future. We are SoFlo part of the Sunshine State!
Wednesday, July 16, 2008
Vacation Alternative Methods of Transport / a reflective journey
Vacation Alternative Methods of Transport / a reflective journey
By: Rene Velez July 14th, 2008
This year my family and I took an alternate travel medium for our vacation. Instead of living the jet set life, we took the train. Yes, for those of you who routinely fly and get there in record time this may sound slow, however, I saved on gas and travel expenses and made a “Green” travel. In the process I felt more……..civilized.
Train travel is still considered a method of luxury travel. Names such as the Orient Express, or the Hiram Bingham to Machu Picchu are well known examples. There are several in Europe as well. But you need not go to distant places. Amtrak still has places to go and things to do.
When you come to think about it, a typical two and one half hour jet flight, say Miami to New York still is a 5 to 6 hour ordeal when you account for: (a) time to get to the airport, (b) advance check in, (c) extra baggage fees, (d) degrading security check points, (e) taxi and ramp time waiting for takeoff clearance, (f) claiming luggage, (g) travel to your destination.
Rail travel provides coach sleeping, or sleepers. Coach sleeping is basically sleeping in an oversized First Class Airline Seat. Sleepers are in effect small rooms with beds and can accommodate two to four in a given configuration. The sleepers also provide for showers and other amenities. On our trip from Sanford, FL. to Lorton, VA., we dined at night in the dining car. The food was fairly tasty. Much better than at many restaurants. In fact much better than I can ever recall in any first class flight I have ever taken. The dinner even included wine! A continental breakfast was served in the morning. A movie was shown in the lounge cars were you could buy beer and other alcoholic beverages and where snacks, fruits and coffee were offered for free. Yes…for free! In fact all the meals where included as part of the fair. The lounge cars was the place to get into a card game, a board game or simply to hang out and talk. Each coach seat has its own 110V electrical outlet. So bringing your laptop, play station or even charging your phone is no trouble at all. In our case we took the auto train so we even brought along the car, fully packed with all our travel gear. This is a real savings as we need not wait for a taxi or rent a car. In about 20 minutes after we got off the train our car was there waiting for us to be on our way.
I must say I was impressed. The whole mode of travel was fun, less restrictive than air travel. I felt comfortable and I even enjoyed talking to some of my fellow travelers. I haven’t said that about airline travel in quite some time. I was less stressed. I had time to read the paper or even a book if I wished. I could walk the train, go to the lounge cars and look out the window and see the rest of America.
So what did this luxury travel cost me for the four of us inclusive of on board meals, snacks and to bring my car along……$987.00 round trip! I actually felt even better when I started to think the trip I took was more fuel efficient than driving or airline travel. Taking the train is “Green”.
Okay…. Now that I have told you how good all this is what are the down sides. I must admit…if you’re in a hurry this isn’t for you. So airline travel is still safe in that respect. Sanford, FL. to Lorton, VA was a 13 hour ride. You get to sleep though. There were some sections were the view was not that great. Some towns seemed like remnants of the industrial revolution. In a weird way they called upon memories of old times and an economy that is no more. Although not pretty some of these old defunct towns have an artistic beauty all there own. In yet other areas you do see American poverty. Small towns with old wooden homes, or brick buildings in agricultural or industrial settings that depict our neglected sectors of society.
Nonetheless, I am a better man for my travels. The meandering railway together with the faded glory of yester year towns adds to my understanding of changing times, a changed economy, a population that is in need and how America has much to accomplish in the years to come. The slower place of travel added to my vacation as it made me reflect and think of my place in society and how fortunate I am. It also made my feel for my fellow citizens and their struggle to make an existence in a changed economy. Vacations are supposed to give you that time to see things you have missed and my train travel did just that.
This year is an election year and how appropriate that we visited our nations capital. This is a year of change and many Americans have change in their mind. I hope train travel develops further in years to come as a more energy efficient method of transportation. Train travel can be cost effective and affordable to all and green. I also hope many Americans get to see America in the way I saw part of America you otherwise may not see through jet travel. Some of these poor towns simply are not travel destinations and some might well be avoided altogether. It worries me that America, in this year of election will vote for change for the sake of change and not really understand the issues.
When visiting Europe I was impressed with the abundance of train stations, travel destinations and the affordability of train travel. I wondered how America did not follow suit. How can we as a nation have so badly neglected such a mode of transportation vital to many of our people? Why has industry not supported major railways and formed distribution hubs for goods based on a backbone of railways and regional trucking companies?
To some extent train travel, may well be taken for granted for people who live in metropolitan areas with diverse railway systems such as New York or Chicago. But, here in South Florida the railway system leaves much to be desired. With the cost of petro fuels on a sharp increase, perhaps no time is better to start considering these options than now.
I was reading an article that Warren Buffet is buying the rights to Southwestern rail lines. I suspect he is getting very good prices for these lines. Do you suppose he is buying these lines in anticipation of high oil prices? Do you suspect that railway distribution networks can be created to ship goods over long distances and then trucked to remote locations is cheaper and more cost effective than trucking small loads across the United States. At today’s prices, if sustained, I think there is a good bet on that! My guess is what’s old will come again and technology will improve what we once thought of railways.
My train travels have left me thinking of old ideas and old technology in a new way. However, changing political leadership will not create opportunity of itself, changing the way our political leaders think and how we as citizens reward them and how they stay in office will create change for the better. The cards are in our hands as citizens.
By: Rene Velez July 14th, 2008
This year my family and I took an alternate travel medium for our vacation. Instead of living the jet set life, we took the train. Yes, for those of you who routinely fly and get there in record time this may sound slow, however, I saved on gas and travel expenses and made a “Green” travel. In the process I felt more……..civilized.
Train travel is still considered a method of luxury travel. Names such as the Orient Express, or the Hiram Bingham to Machu Picchu are well known examples. There are several in Europe as well. But you need not go to distant places. Amtrak still has places to go and things to do.
When you come to think about it, a typical two and one half hour jet flight, say Miami to New York still is a 5 to 6 hour ordeal when you account for: (a) time to get to the airport, (b) advance check in, (c) extra baggage fees, (d) degrading security check points, (e) taxi and ramp time waiting for takeoff clearance, (f) claiming luggage, (g) travel to your destination.
Rail travel provides coach sleeping, or sleepers. Coach sleeping is basically sleeping in an oversized First Class Airline Seat. Sleepers are in effect small rooms with beds and can accommodate two to four in a given configuration. The sleepers also provide for showers and other amenities. On our trip from Sanford, FL. to Lorton, VA., we dined at night in the dining car. The food was fairly tasty. Much better than at many restaurants. In fact much better than I can ever recall in any first class flight I have ever taken. The dinner even included wine! A continental breakfast was served in the morning. A movie was shown in the lounge cars were you could buy beer and other alcoholic beverages and where snacks, fruits and coffee were offered for free. Yes…for free! In fact all the meals where included as part of the fair. The lounge cars was the place to get into a card game, a board game or simply to hang out and talk. Each coach seat has its own 110V electrical outlet. So bringing your laptop, play station or even charging your phone is no trouble at all. In our case we took the auto train so we even brought along the car, fully packed with all our travel gear. This is a real savings as we need not wait for a taxi or rent a car. In about 20 minutes after we got off the train our car was there waiting for us to be on our way.
I must say I was impressed. The whole mode of travel was fun, less restrictive than air travel. I felt comfortable and I even enjoyed talking to some of my fellow travelers. I haven’t said that about airline travel in quite some time. I was less stressed. I had time to read the paper or even a book if I wished. I could walk the train, go to the lounge cars and look out the window and see the rest of America.
So what did this luxury travel cost me for the four of us inclusive of on board meals, snacks and to bring my car along……$987.00 round trip! I actually felt even better when I started to think the trip I took was more fuel efficient than driving or airline travel. Taking the train is “Green”.
Okay…. Now that I have told you how good all this is what are the down sides. I must admit…if you’re in a hurry this isn’t for you. So airline travel is still safe in that respect. Sanford, FL. to Lorton, VA was a 13 hour ride. You get to sleep though. There were some sections were the view was not that great. Some towns seemed like remnants of the industrial revolution. In a weird way they called upon memories of old times and an economy that is no more. Although not pretty some of these old defunct towns have an artistic beauty all there own. In yet other areas you do see American poverty. Small towns with old wooden homes, or brick buildings in agricultural or industrial settings that depict our neglected sectors of society.
Nonetheless, I am a better man for my travels. The meandering railway together with the faded glory of yester year towns adds to my understanding of changing times, a changed economy, a population that is in need and how America has much to accomplish in the years to come. The slower place of travel added to my vacation as it made me reflect and think of my place in society and how fortunate I am. It also made my feel for my fellow citizens and their struggle to make an existence in a changed economy. Vacations are supposed to give you that time to see things you have missed and my train travel did just that.
This year is an election year and how appropriate that we visited our nations capital. This is a year of change and many Americans have change in their mind. I hope train travel develops further in years to come as a more energy efficient method of transportation. Train travel can be cost effective and affordable to all and green. I also hope many Americans get to see America in the way I saw part of America you otherwise may not see through jet travel. Some of these poor towns simply are not travel destinations and some might well be avoided altogether. It worries me that America, in this year of election will vote for change for the sake of change and not really understand the issues.
When visiting Europe I was impressed with the abundance of train stations, travel destinations and the affordability of train travel. I wondered how America did not follow suit. How can we as a nation have so badly neglected such a mode of transportation vital to many of our people? Why has industry not supported major railways and formed distribution hubs for goods based on a backbone of railways and regional trucking companies?
To some extent train travel, may well be taken for granted for people who live in metropolitan areas with diverse railway systems such as New York or Chicago. But, here in South Florida the railway system leaves much to be desired. With the cost of petro fuels on a sharp increase, perhaps no time is better to start considering these options than now.
I was reading an article that Warren Buffet is buying the rights to Southwestern rail lines. I suspect he is getting very good prices for these lines. Do you suppose he is buying these lines in anticipation of high oil prices? Do you suspect that railway distribution networks can be created to ship goods over long distances and then trucked to remote locations is cheaper and more cost effective than trucking small loads across the United States. At today’s prices, if sustained, I think there is a good bet on that! My guess is what’s old will come again and technology will improve what we once thought of railways.
My train travels have left me thinking of old ideas and old technology in a new way. However, changing political leadership will not create opportunity of itself, changing the way our political leaders think and how we as citizens reward them and how they stay in office will create change for the better. The cards are in our hands as citizens.
Thursday, June 12, 2008
It's my Vote and it WILL Count!
This election year is truely remarkable. However, the more things change the more they also stay the same.
Firstly, a few words about our candidates. I am very proud to see an american running for the highest office of the land. But of course you say; only an american can run for office. The issues that face this great nation are equally great and americans seem to have gone beyond the notion of race to vote for individuals who will bring about change. This is as it should be. I am prooud that americans from all walks of life and nationalities support Senator Barack Obama. We have accomplished a great deal as a nation in this. The dreams of many civil liberty leaders, as well as many citizens are being materialized despite the fact that racism is still all too alive and well. What an exciting moment in history when race does not matter as much as we may have all thought. Secondly, I think its been quite a year for women. Yet this doesn't surprise me as much, for women have been a staple of the accounting profession for years now. Nonetheless, Hillary Clinton has shown grace and strength and in time a women will be president of this great nation.
None of this is really new, we have voted for african americans and women for high offices and they typically have done very well in their careers. Why should we expect anything different. I hope the trend continues as diversity makes this country great and it will continue to make this country great in many years to come. Surely we can accumulate any amount of statistical evidence to support all kinds of notions for or against whether race or gender matters and in the end its all about the issues. The only reason race or gender matters now is only because this is a first.
As a hispanic minority I have often been rather confused by how people refer to me as a latino, a Puerto Rican or an American. Why broad brush me as one culture? I am of course all of that but I am an American first and foremost as this is where I was born, raised and educated and where I live, work and raise my family. Yet I have come to love my latin heritage, culture, music, language and everything else that goes along with being latino. In fact to nationalize my latin culture I am today less Puerto Rican and perhaps more Cuban simply because I live in Miami and am married to a Cuban woman. But on any given day I might feel close to a Colombian, a Venezuelan or a Mexican. Tomorrow I will meet a midwesterner and the next I will meet with a Bostonian. I can relate to all of them, and I love it. I do business in English and in Spanish. My parents were right, I am the future in a global sense and I am an American.
Perhaps this year is not about race or gender in elections. Perhaps not as much as the media has reported. My guess is that by November it will be the real issues. The economy, fossil fuels prices, the war in Iraq, social security, the trade deficit, the value of the dollar. Bad foriegn policy and missed opportunities by miopic leaders and business who only plan for the next day instead of the next decade are all to blame. For some time I have said that we are on the verge of some kind of social revolution in this country. You can not continue to live an elitist life and not worry for the middle and lower class. It does come back to undermine you. Yet what I am beginning to see is not so much a revolution in terms of civil rebellion but rather a generation that is starting to look at the world economy, culture and scarce resources on a wholistic sense. With more highly educated individuals on this planet than has ever existed and scalable technologies each of us will start to create new ways of thinking that will create wholistic solutions for our country and perhaps the world. It's a situation where the needs and wants of the one will create momentum in the masses to change for comprehensive solutions to many life problems. This bottom up approach has far reaching implications.
On the war in Iraq, this was a devasting failure. This country reacted to a threat that did not merritt the reaction. We should not have taken that action. Having said that, now that we are there we can not simply give in too easily. We can not throw in the towel. Seeing that democracy through is the right thing although we can not do it indefinetly. What we do not know is how and how long?
On Fossil Fuels, we need all kinds of alternatives. Nothing we have today would replace fossil fuels entirely. We need gas, biodiesel, ethanol, hydrogen cars, solar electricity, thermal enerygy, hydro electric, wind generators, hybrid cars, Co2 reclamation, nuclear power etc. etc.. There is no one magic solution. We need it all and we need it now. Of course we need less fossil fuel. We can do this in 5 to 10 years. Its doable with no more pain to the economy that what we are already feeling. The real failure here is that auto makers have failed to take a position early on and government was asleep at the wheel in mandating milestone changes over the last 20 years. We talk things to death in this country instead of making it happen. Shame on us. We could take lessons from Brazil. Again this is old news. We were hear in 1974 and the Japanese have since then capitalized on shortsighted automobile manufacturers. Here we go again.
On the economy, we need to regulate the way credit is administered in this country. This is not so much of the products offered as it is a lapse in judgement about how credit policy was administered in a prolonged period of low interest rates. Again our politicians and regulators were asleep at the wheel while loose credit policy was weilded without concern. Absolute power and greed lead to corruption and abuse. If I had $1 for every ad I get in the mail for credit advertisements, credit cards and mortgages I could pay off my debt. This is an old story.
Our trade deficit, We have let China off too easy for way to long. However, I am recently impressed with their open policy and the response to earthquake victims. They are an evolving country and an economic power that needs closer attention. Dispite our trade imbalance I would prefer this scenario than having to invade that country as we did in Iraq to supplant our view of denocracy on them. Seems like capitalism and the desire to be a world economic giant together with the US demand for Chinese made products that are affordable are doing very nice in their democractic conversion in the long run. A more affordable alternative. If we could only have Iraq produce more oil and make them trading partners with the US. Forget about seeing the light of democracy, I wonder if they can see the dollar?
On foriegn policy, we have much to do. America is too American Centric. Among the many nationalties that I deal with none display a sense of their country being the center of economic power and might as the US does. This despite many are very fierce nationalists. Our failure in foriegn policy mimics our own national failure in accepting race and gender in positions of importance. It is reflective of our nearsightedness even today in accepting work life balance. It is reflective in that we are failing to address the needs of the middle class and poor citizens. It is reflective that we the nation of democracy still have many tensions tied to nationality, race and gender. We do not at times practice what we already know. Diversity and the understanding of cultures and social classes dictate the appraoch we take to form strong allies from developing countries. Because of our shear size and might we bully our way through delicate issues. At times even when we feed the poor and help the sick we do the right things the wrong way. We fail to understand the dynamics of culture, race, religion and the fundamental priorities of people in foriehn countries. It has been said 911 occured becuase of poor intelligence in our country. Perhaps nothing speaks more to how centric we are than the admission of that statement. It's not like we didn't know who are enemy was, or that this was a new enemy. We just underestimated their potential and their will. Nothing new. This has happened again and again in history.
The real story of this election year is that many of our problems are tied together. We have a perfect storm of issues that need to be addressed. Let's try to tie these up. The war in Iraq has in part to do both with oil and terrorism. By shifting to alternative sources of eneragy of every kind and creating mandates to theis end we can reduce our consumption and involve our military less in the middle east, while at the same time assist in helping our economy to be more efficient and energy concious. By reducing our consumption of fossil fuels and conserving energy we will limit the amount of green house gases immited into our atmosphere and slow global warming. By limiting the war effort, reducing consumption of fossil fuels and alleviating green house gases and providing affordable fuel alternatives we begin to address economic issues and strengthen the dollar. This in turn will lead to ideas to continue to spur the economy and address social security, healthcare and other social and economic issues.
Yes, I know that it looks neat and simple. It will be anythng but that. But we have to have the vision to forge ahead. We need to stay focused. We need to be innovative and we need to put our next generation to work on planning out the future.
Monday, May 15, 2006
E-Commerce Tax Preparation- A Conceptual Value Chain
The following white paper is being published for the benefit of anyone looking for information on the state of e-commerce within the context of tax preparation. It gives insightes to current issues, trends and business opportunities for software development, tax professionals and the B2B market.
Prelude to Value Chain Analysis
E-commerce is defined as:
“the use of electronic transmission mediums (telecommunications) to engage in the exchange of , including buying and selling , of products and services requiring transportation, either physically or digitally, from location to location” (Greenstein, M., Vasarhelyi, M . 2002 Electronic Commerce – Security, Risk Management and Control 2nd Ed., chap. 1)
The term e-commerce as used in this paper is intended to be comprehensive to include e-business which includes other business functions such as the exchange of information, and operations which are performed electronically.
The conceptual model of tax preparation offered here is intended as a model to consider potential and existing e-commerce opportunities. There could be many varying paths to deconstruct (Greenstein, Vasarhelyi 2002) the value chain of tax preparation. The deconstruction or unbundling (Ge, Konana & Tanreverdi 2004) process itself, in the context of tax preparation, may need to consider such issues as what potential market is to be served. For example, government versus private businesses and individuals. Perhaps the type of tax return that is being prepared. Whether or not the components of a deconstructed value chain or unbundling (Ge, et al. 2004) of business processes, are economically viable and sustainable, would take many further explorations to determine. These considerations will not be discussed as part of this paper as these considerations are outside the intended scope. Instead we portray a simple model that will allow the reader to form a thought process in relation to e-commerce applications for tax preparation.
A Theoretical Tax Return Preparation Value Chain
Assuming the following are deconstructed components of the tax preparation value chain, how can e-commerce be used to create new business opportunities?
Value Chain Components
1. Gather taxpayer information.
2. Research and analysis of tax laws.
3. Input of information into correct form(s).
4. Tax return(s) preparation and assembly.
5. Collection, payments or refunds of tax(s).
We should first consider some of the traditional goals or enhancements in the electronization (Greenstein, Vasarhelyi 2002) of business processes. Traditional goals have centered around operational efficiencies. Efficiencies that created savings in labor costs, reduced processing time and higher rates of accuracy (Anderson, Fox & Schwartz 2005). However, bitable (Ge, et al. 2002) information, such as tax return information, lends itself to a host of different management systems. These might include, management information systems, decisions support systems, information storage and retrieval systems, auditing systems, collection and payment systems. Although, this is not intended to be a complete list it is enough to discuss existing and potential market opportunities for tax return preparation via e-commerce.
E-commerce opportunities
Perhaps no business process related to tax preparation lends itself to e-commerce opportunities like data collection. This is represented in our first step of the value chain model above. Aside from leading the way towards paperless systems, it is a vital aspect of tax preparation services. One company, Thompson Creative Solutions, www.creativesolutions.thomson.com/portals/ readily markets web sites to accountants with a client server feature. Via the accountants web site clients can log onto their secure site, and download and upload information. Looking down the evolutionary chain we can see how this e-commerce application can be enhanced to provide for an interactive, tax organizer interview, to gather client information for tax preparation. In other words, the formation of a client oriented extranet. In a recent article that discusses off the shelf tax preparation software (Carey, Yakal 2006, p.45), targeted to self preparers, TurboTax® and TaxCut®, already have interview features. This interactive feature may someday be adapted for a tax organizer, tax data collection system utilized by tax preparers to service clients. Another company Armen Computing at http://www.armencomp.com/ has developed software that is aimed at the retrieval of stock and other security trade transactions (Carey, Yakal 2006 p.46). The software will extract server information, from third parties, and populate Schedule D, in order to calculate gains and losses from securities transactions. As noted in their article, (Carey, Yakal 2006 p.45) many companies today are readily creating extranets that will make information available to their clients. The Internal Revenue Service (Berger 2005) is making attempts to expand its services to authorized third party preparers to promote e-filing. As revealed in a recent report, (Federation of Tax Administrators 2005) this development is usually a direct result of significant cost savings in labor, improved processing, and other increased efficiencies in delivering services to their clients.
E-commerce creates an opportunity for significant savings by providing access to markets, often on the other side of the globe, where the hourly cost of professional tax research and analysis services are a fraction of the rates typically charged domestically (Maher, 2004). A report by The Wall Street Journal, (Maher 2004) describes Mindcrest, Inc. with offices in Chicago. Located on the web http://www.mindcrest.com/ , Mindcrest offers a variety of services typically performed by law firms. Included in their services is research work with a staff of 15 located in Mumbai, India. The global reach of information technology and the application of e-commerce, creates 24 hour operations (Soled 2005), where foreigners, can perform “commodity legal work” (Maher 2004) anywhere in the world. This e-commerce model is likely to include competing alternatives to maintaining a fully staffed tax research department and all the associated functional costs.
Many software applications for tax preparation have been developed for the following business processes. (1) input of information into correct form(s), (2) tax return(s) preparation and assembly. These items are reflected in the proposed value chain as items 3, and 4 above. However, more recently there has been widespread use of business process outsourcing in these two areas. Cheaper labor costs together with advances in information sharing technology are enabling many tax preparers to outsource clerical, input and low level processing of tax return data. The type of work which usually creates seasonal employment opportunities for preparers. Business processes that tend to be more human intensive, (Ge, et al. 2004, p. 2) in nature and require a lower amount professional decision making, have seen a great deal of outsourcing opportunities in the e-commerce market. In their publication, Global Sourcing and Value Chain Unbundling (Ge, et al. 2004) the authors cite four “classification of sourcing mechanisms: domestic insourcing, offshore insourcing, domestic outsourcing, offshore outsourcing” (p. 6). However, a hybrid approach is also possible (Ge, et al. 2004). In their publication (Ge, et al. 2004) “governance”, or who owns and manages the business processes, are described as follows: Insourcing involves the use of a separate entity owned by a firm for the purpose of delivering a product or service. Outsourcing is the use of an unrelated third party firm in delivering a product or service (pp. 7-8). In practice today hybrid combinations are more often utilized for a variety of reasons. Outsourcing provides a means to re-channel, (Greenstein, Vasarhelyi 2002) certain aspects of the value chain.
As late as 2002, the Internal Revenue Service , had taken a position that it would not offer e-file services as it was not in a position to compete with commercial entities that provide those services (Hogan 2002). Today, not only does the Internal Revenue Service offer competitive e-file services, for free, it is also embracing new directives in utilizing e-commerce to provide new levels of services to taxpayers and tax professionals through disintermediation, re-channeling and to some extent cannibalization of existing operations. (Greenstein, Vasarhelyi 2002 chap. 2 ). For example, by means of re-channeling and perhaps a bit of cannibalization, (Greenstein, Vasarhelyi 2002 chap. 2) taxpayers enjoy the benefits of cooperative agreements between the Internal Revenue Service and other tax collection mediums on the internet. Accounting Web, Inc. (2005) reported two web sites: http://www.pay1040.com/ offers the ability for taxpayers to pay tax liabilities via credit card online. Another company Link2Gov located at http://www.officialpayments.com/ offers, an online tax payment portal that allows federal, state and local income tax payment capabilities in various forms, and also performs collection services for a host of different taxes and government collection agencies. In addition, the Internal Revenue Service offers its own Electronic Federal Tax Payment System through, http://www.eftps.com/ as yet another means to pay taxes. In just a few short years, many tax collection agencies are not only competing with the private sector in e-file capabilities but also assisting and welcoming new competitors and offering new mediums to their file and pay functions.
In a recent survey (Anderson, Fox & Schwartz 2005), for tax year 2004 61.5 million 1040 returns where filed electronically. That’s almost 47% of all 1040’s. In addition there is growing momentum by the Internal Revenue Service to make e-filing even more prevalent. Following the Restructuring and Reform act of 1998 (RRA 98), the Internal Revenue Service has had as its goal, 80% of tax returns be filed electronically by 2007 (IRS Oversight Board: Annual Report to Congress 2005). Although, the IRS has fallen short of that goal, advances in information technology together with a growing acceptance trend, would indicate high levels of participation in years to come (IRS Oversight Board: Annual Report to Congress 2005). However, in order to accomplish this the IRS Oversight board is asking for an extension date until 2011 (IRS Oversight Board: Annual Report to Congress 2005). It would stand to say that public private alliances, by re-channeling, deconstruction or unbundling (Ge, et al. 2004) of the tax preparation value chain, will continue to play a major role in achieving those deliverables established by RRA 98.
Implications of e-commerce in relation to tax preparation
Although e-commerce has many benefits for taxpayers as well as for initiatives in efficiency and effectiveness within government there are many different issues that will require resourcefulness if not a delicate balance to over come. Some of these issues are as follows:
Privacy Issues
Two important considerations in furthering e-commerce applications in tax preparation are: (1) Internal control systems in use by firms who process private and confidential taxpayer data and (2) the legal system that prevails when violations in privacy occur. India, a country who has extensive investments in outsourcing business processes, has no extensive legal framework to enforce electronic privacy rights (Dresner 2005). In Dresner’s article (2005), India is caught in a political debate between enacting law to enforce electronic data privacy or allowing companies to make contractual agreements as to how to protect privacy rights under existing laws already afforded under the law. Those who prefer a contractual solution claim it is less costly than compliance costs associated with legislation. In either case, internal control systems will be the key to complying with privacy rights.
Dilution of the Voluntary Tax System
With the proliferation of digitized taxpayer data, some private citizens and organizations are concerned about fueling big government (Lassman, 2002). Some view e-government as a threat. A fundamental aspect of the federal tax system in the U.S. is voluntary tax compliance (Lassman, 2002). Essentially, this allows taxpayers to use existing tax laws in making their own assessment of their tax liability. In an article published by a public policy think tank (Long, 2002), the author explains the expansion of the Internal Revenue Service through e-commerce applications, means they are in a position to be “tax collector, preparer, auditor and adverse litigant to the taxpayer”. Reading articles such as in Long, (2002) and Lassman (2002) we can envision the possibility of extensive databases of digitized taxpayer information, used improperly, could give government the ability to profile taxpayers. Alternatively, because a given tax transaction may have more than one tax treatment, a justified tax position and a subsequent audit, brought by profiling, could preclude a legal tax position due to the costs of an audit.
Information Security
Digitized taxpayer information residing in databases have by their very nature the inherent risk that the databases may become compromised by a variety of threats. These threats include viruses, natural disasters, unauthorized access just to name a few. A breach in system security could mean vast numbers of taxpayer records could be compromised in seconds. The April 2005 report by the GAO (United States Government Accountability Office 2005), to the House of Representatives, on Internal Revenue Service information security, outlined 21 security risks not addressed by the Internal Revenue Service from a prior 2002 GAO report. In addition, 39 newly created security control weaknesses were cited in the same report. The weaknesses noted in the report range from impairment of the Internal Revenue Service to maintain confidentiality, integrity and availability of sensitive financial and taxpayer data. Also noted were deficiencies in training, impairment to control authorized access and physical system security concerns.
In light of today’s war on terrorism, breaches of sensitive taxpayer information could create many challenges for outsourcing to certain countries or even to outsourcing as a whole.
Professional Standards and Concerns
Advances in technology are requiring accountants to rethink risks, exposure and adherence to professional standards. According to an article in the Journal of Accountancy, (Shamis, Green, Sorenson & Kyle 2005) The American Institute of Certified Public Accountants requires under the rules of ethics, that all CPA’s who disclose confidential client information to an outsource provider or an independent contractor, disclose this information to the client preferably in writing. In addition the article points out the number one professional concern to outsourcing is maintaining client information security. In the article, (Shamis et al. 2005) focus groups of clients felt uneasy about their personal financial information being displayed across the globe. Furthermore, there is some doubt as to coverage under liability insurance, for third party vendor employees if they are not accountants.
In an article published by The CPA Journal, (Soled 2005) depending on the extent of involvement by a third party outsource vendor, would the Internal Revenue Service consider an outsourced third party to be a paid tax preparer? The article points out, according to the Internal Revenue Service, certain third parties who prepare tax returns in return for compensation and who engage in acts beyond typing, reproducing or other mechanical systems are liable and subject to liabilities and civil actions under the code.
Other legislation beyond those imposed by the Internal Revenue Service are also affecting how tax preparers practice. According to The CPA Journal (Soled 2005) the Gramm-Leach-Bliley Act of 1999 requires certain privacy disclosures to be made including, the firms information collection and sharing practices. The 1999 Act also requires to give clients an opt-out right.
All indications would lead accounting professionals to develop their own e-commerce strategies for tax preparation as well as for other services rendered. However, acceptance of outsourcing and other e-commerce applications will require evaluation of professional, regulatory and other social political implications before moving forward. Due to significant operational efficiencies and cost savings of e-commerce , e-government is likely to see further development. However, there will likely be privacy and big government issues that will have to be addressed, in order to continue these efforts and protect taxpayer rights and privacy concerns.
References
Accounting Web, Inc. (2005) Online tax-paying options, Accounting Web web site. Retrieved Feb. 02, 2006 at the following URL: http://www.accountingweb.com/cgi-bin/item.cgi?id=101720&d=659&h=660&f=661
Anderson, T., Fox, M. & Schwartz, B.N., (2005, October) History and trends in e-filing: A survey of CPA practitioners, The CPA Journal , The CPA Journal web site, Retrieved Feb. 01, 2006 at the following URL: http://www.nysscpa.org/printversion/cpaj/2005/1005/p66.hm
Berger, S., (2005, January) Federal electronic filing of tax returns and e services, The CPA Journal, The CPA Journal web site, Retrieved Feb. 08, 2006 at the following URL: http://www.nysscpa.org/printversions/cpaj/2005/105/p68.htm
Carey, T. W., Yakal, K., (2006, February 13) Computing your taxes, Barron’s, pp. 45-46
Dresner, S., (2004, March/April) India gives commitment to new privacy initiative, Privacy Laws & Business, 72, 1
Federation of Tax Administrators Washington, D.C. (2005, June) Electronic mandates: Lessons learned, (Preliminary version), publication available at the following URL: http://taxadmin.org/fta/ftapub.html
Ge, L., Konana, P., & Tanreverdi, H. (2004) Global sourcing and value chain
unbundling , Austin, TX: The University of Texas at Austin, Department of MSIS McCombs School of Business
Greenstein, M., Vasarhelyi, M. (2002) Electronic commerce: Security, risk management, and control, (2 Ed.), Overview of electronic commerce, New York, NY: McGraw Hill/Irwin
Hogan, Mike (2002, March 20) Protesting the e-filing penalty, PC World, PC World web site, Retrieved Feb. 02, 2006 at the following URL: http://www.pcworld.com/resource/printable/article/0,aid,90144,00.asp
IRS Oversight Board (2005, December) Annual report to congress: Electronic filing, The IRS Oversight Board website, publication available at the following URL: http://www.treas.gov/irsob/reports/2005_e-Filing_report.pdf
Lassman, Kent (2002, October 15) Thresholds of e-government: How far should government go?, Original publication on: Privatization Watch (Oct. 15, 2002) retrieved on Feb. 02, 2006 on the Reason Public Policy Institute web site at the following URL: http://www.rppi.org/thresholdsofgovernment.html
Long, Morgan (2002, October 15) The digital advance of government, Original publication on: Privatization Watch (Oct. 15, 2002) Retrieved on Feb. 02, 2006 on the Reason Public Policy Institute website at the following URL: http://rppi.org/digitaladvance.html
Maher, Kris, (2004, March 23) More professions feel outsourcing’s impact, The Wall Street Journal, p B1, Retrieved on Feb 01, 2006 from the CollegeJournal web site at the following URL: http://www.collegejournal.com/careerpaths/findcareerpath/20040329-maher.html
Shamis. G. S., Green, C. M., Sorensen, S. M., & Kyle, D. L., (2005, June) Outsourcing, offshoring, nearshoring: What to do?, Journal of Accountancy, AICPA web site. Retrieved on Feb. 01, 2006 at the following URL: http://www.aicpa.org/pubs/jofa/jun2005/shamis.htm
Soled, Jay A., (2005, March) Outsourcing tax return preparation and its implications, The CPA Journal ,The CPA Journal website, Retrieved on Feb 01, 2006 at the following URL: http://www.nyscpa.org/printversions/cpaj/2005/305/p14.htm
United States Government Accountability Office. (2005, April). Information security: Internal Revenue Service needs to remedy serious weaknesses over Taxpayer and Bank Secrecy Act data (Report No. GAO-04-482). Washington, D.C. , The GAO web site, Retrieved Feb 02, 2006 at the following URL: http://www.gao.gov/new.items/d05482.pdf
E-commerce tax preparation
A conceptual value chain: considerations of opportunities and implications
Rene Velez, CPA
13020 SW 133rd Court
Miami, FL. 33186
Copyright 2006
All rights reserved
E-commerce Tax Preparation
A conceptual value chain: considerations of opportunities and implications
The advances of information communications technology together with the affordable transactional costs of e-commerce, have created a proliferation of market opportunities for e-commerce applications across the business spectrum. The accounting profession for many years has benefited from the use of technology in creating efficiencies. Today, through e-commerce applications, technology continues to create efficiencies in the processing of information and is also transforming the accounting profession in both, the services it renders to its clients, and in the way those services are performed. The subject matter of this paper has two relevant perspectives, in relation to e-commerce tax preparation. How tax preparation services are evolving, together with issues and concerns during this evolution. This will be accomplished firstly, by examining a possible interpretation of the value chain of tax preparation and make note, of possible and existing market opportunities for e-commerce applications and business process outsourcing. Secondly, by taking into consideration professional, regulatory, legal, and other social and political issues concerning tax preparation in an e-commerce , e-government (Lassman 2002) expansionary era. To summarize, e-commerce is an effective tool that can be utilized for the benefit of society. However, as noted by Lassman (2002) we should be cognizant that e-commerce opportunities, in relation to tax preparation, have a pervasive effect not only the accounting profession, but also on governmental structures, businesses and individuals.
A conceptual value chain: considerations of opportunities and implications
Rene Velez, CPA
13020 SW 133rd Court
Miami, FL. 33186
Copyright 2006
All rights reserved
E-commerce Tax Preparation
A conceptual value chain: considerations of opportunities and implications
The advances of information communications technology together with the affordable transactional costs of e-commerce, have created a proliferation of market opportunities for e-commerce applications across the business spectrum. The accounting profession for many years has benefited from the use of technology in creating efficiencies. Today, through e-commerce applications, technology continues to create efficiencies in the processing of information and is also transforming the accounting profession in both, the services it renders to its clients, and in the way those services are performed. The subject matter of this paper has two relevant perspectives, in relation to e-commerce tax preparation. How tax preparation services are evolving, together with issues and concerns during this evolution. This will be accomplished firstly, by examining a possible interpretation of the value chain of tax preparation and make note, of possible and existing market opportunities for e-commerce applications and business process outsourcing. Secondly, by taking into consideration professional, regulatory, legal, and other social and political issues concerning tax preparation in an e-commerce , e-government (Lassman 2002) expansionary era. To summarize, e-commerce is an effective tool that can be utilized for the benefit of society. However, as noted by Lassman (2002) we should be cognizant that e-commerce opportunities, in relation to tax preparation, have a pervasive effect not only the accounting profession, but also on governmental structures, businesses and individuals.
Prelude to Value Chain Analysis
“the use of electronic transmission mediums (telecommunications) to engage in the exchange of , including buying and selling , of products and services requiring transportation, either physically or digitally, from location to location” (Greenstein, M., Vasarhelyi, M . 2002 Electronic Commerce – Security, Risk Management and Control 2nd Ed., chap. 1)
The term e-commerce as used in this paper is intended to be comprehensive to include e-business which includes other business functions such as the exchange of information, and operations which are performed electronically.
The conceptual model of tax preparation offered here is intended as a model to consider potential and existing e-commerce opportunities. There could be many varying paths to deconstruct (Greenstein, Vasarhelyi 2002) the value chain of tax preparation. The deconstruction or unbundling (Ge, Konana & Tanreverdi 2004) process itself, in the context of tax preparation, may need to consider such issues as what potential market is to be served. For example, government versus private businesses and individuals. Perhaps the type of tax return that is being prepared. Whether or not the components of a deconstructed value chain or unbundling (Ge, et al. 2004) of business processes, are economically viable and sustainable, would take many further explorations to determine. These considerations will not be discussed as part of this paper as these considerations are outside the intended scope. Instead we portray a simple model that will allow the reader to form a thought process in relation to e-commerce applications for tax preparation.
A Theoretical Tax Return Preparation Value Chain
Assuming the following are deconstructed components of the tax preparation value chain, how can e-commerce be used to create new business opportunities?
Value Chain Components
1. Gather taxpayer information.
2. Research and analysis of tax laws.
3. Input of information into correct form(s).
4. Tax return(s) preparation and assembly.
5. Collection, payments or refunds of tax(s).
We should first consider some of the traditional goals or enhancements in the electronization (Greenstein, Vasarhelyi 2002) of business processes. Traditional goals have centered around operational efficiencies. Efficiencies that created savings in labor costs, reduced processing time and higher rates of accuracy (Anderson, Fox & Schwartz 2005). However, bitable (Ge, et al. 2002) information, such as tax return information, lends itself to a host of different management systems. These might include, management information systems, decisions support systems, information storage and retrieval systems, auditing systems, collection and payment systems. Although, this is not intended to be a complete list it is enough to discuss existing and potential market opportunities for tax return preparation via e-commerce.
E-commerce opportunities
Perhaps no business process related to tax preparation lends itself to e-commerce opportunities like data collection. This is represented in our first step of the value chain model above. Aside from leading the way towards paperless systems, it is a vital aspect of tax preparation services. One company, Thompson Creative Solutions, www.creativesolutions.thomson.com/portals/ readily markets web sites to accountants with a client server feature. Via the accountants web site clients can log onto their secure site, and download and upload information. Looking down the evolutionary chain we can see how this e-commerce application can be enhanced to provide for an interactive, tax organizer interview, to gather client information for tax preparation. In other words, the formation of a client oriented extranet. In a recent article that discusses off the shelf tax preparation software (Carey, Yakal 2006, p.45), targeted to self preparers, TurboTax® and TaxCut®, already have interview features. This interactive feature may someday be adapted for a tax organizer, tax data collection system utilized by tax preparers to service clients. Another company Armen Computing at http://www.armencomp.com/ has developed software that is aimed at the retrieval of stock and other security trade transactions (Carey, Yakal 2006 p.46). The software will extract server information, from third parties, and populate Schedule D, in order to calculate gains and losses from securities transactions. As noted in their article, (Carey, Yakal 2006 p.45) many companies today are readily creating extranets that will make information available to their clients. The Internal Revenue Service (Berger 2005) is making attempts to expand its services to authorized third party preparers to promote e-filing. As revealed in a recent report, (Federation of Tax Administrators 2005) this development is usually a direct result of significant cost savings in labor, improved processing, and other increased efficiencies in delivering services to their clients.
E-commerce creates an opportunity for significant savings by providing access to markets, often on the other side of the globe, where the hourly cost of professional tax research and analysis services are a fraction of the rates typically charged domestically (Maher, 2004). A report by The Wall Street Journal, (Maher 2004) describes Mindcrest, Inc. with offices in Chicago. Located on the web http://www.mindcrest.com/ , Mindcrest offers a variety of services typically performed by law firms. Included in their services is research work with a staff of 15 located in Mumbai, India. The global reach of information technology and the application of e-commerce, creates 24 hour operations (Soled 2005), where foreigners, can perform “commodity legal work” (Maher 2004) anywhere in the world. This e-commerce model is likely to include competing alternatives to maintaining a fully staffed tax research department and all the associated functional costs.
Many software applications for tax preparation have been developed for the following business processes. (1) input of information into correct form(s), (2) tax return(s) preparation and assembly. These items are reflected in the proposed value chain as items 3, and 4 above. However, more recently there has been widespread use of business process outsourcing in these two areas. Cheaper labor costs together with advances in information sharing technology are enabling many tax preparers to outsource clerical, input and low level processing of tax return data. The type of work which usually creates seasonal employment opportunities for preparers. Business processes that tend to be more human intensive, (Ge, et al. 2004, p. 2) in nature and require a lower amount professional decision making, have seen a great deal of outsourcing opportunities in the e-commerce market. In their publication, Global Sourcing and Value Chain Unbundling (Ge, et al. 2004) the authors cite four “classification of sourcing mechanisms: domestic insourcing, offshore insourcing, domestic outsourcing, offshore outsourcing” (p. 6). However, a hybrid approach is also possible (Ge, et al. 2004). In their publication (Ge, et al. 2004) “governance”, or who owns and manages the business processes, are described as follows: Insourcing involves the use of a separate entity owned by a firm for the purpose of delivering a product or service. Outsourcing is the use of an unrelated third party firm in delivering a product or service (pp. 7-8). In practice today hybrid combinations are more often utilized for a variety of reasons. Outsourcing provides a means to re-channel, (Greenstein, Vasarhelyi 2002) certain aspects of the value chain.
As late as 2002, the Internal Revenue Service , had taken a position that it would not offer e-file services as it was not in a position to compete with commercial entities that provide those services (Hogan 2002). Today, not only does the Internal Revenue Service offer competitive e-file services, for free, it is also embracing new directives in utilizing e-commerce to provide new levels of services to taxpayers and tax professionals through disintermediation, re-channeling and to some extent cannibalization of existing operations. (Greenstein, Vasarhelyi 2002 chap. 2 ). For example, by means of re-channeling and perhaps a bit of cannibalization, (Greenstein, Vasarhelyi 2002 chap. 2) taxpayers enjoy the benefits of cooperative agreements between the Internal Revenue Service and other tax collection mediums on the internet. Accounting Web, Inc. (2005) reported two web sites: http://www.pay1040.com/ offers the ability for taxpayers to pay tax liabilities via credit card online. Another company Link2Gov located at http://www.officialpayments.com/ offers, an online tax payment portal that allows federal, state and local income tax payment capabilities in various forms, and also performs collection services for a host of different taxes and government collection agencies. In addition, the Internal Revenue Service offers its own Electronic Federal Tax Payment System through, http://www.eftps.com/ as yet another means to pay taxes. In just a few short years, many tax collection agencies are not only competing with the private sector in e-file capabilities but also assisting and welcoming new competitors and offering new mediums to their file and pay functions.
In a recent survey (Anderson, Fox & Schwartz 2005), for tax year 2004 61.5 million 1040 returns where filed electronically. That’s almost 47% of all 1040’s. In addition there is growing momentum by the Internal Revenue Service to make e-filing even more prevalent. Following the Restructuring and Reform act of 1998 (RRA 98), the Internal Revenue Service has had as its goal, 80% of tax returns be filed electronically by 2007 (IRS Oversight Board: Annual Report to Congress 2005). Although, the IRS has fallen short of that goal, advances in information technology together with a growing acceptance trend, would indicate high levels of participation in years to come (IRS Oversight Board: Annual Report to Congress 2005). However, in order to accomplish this the IRS Oversight board is asking for an extension date until 2011 (IRS Oversight Board: Annual Report to Congress 2005). It would stand to say that public private alliances, by re-channeling, deconstruction or unbundling (Ge, et al. 2004) of the tax preparation value chain, will continue to play a major role in achieving those deliverables established by RRA 98.
Implications of e-commerce in relation to tax preparation
Although e-commerce has many benefits for taxpayers as well as for initiatives in efficiency and effectiveness within government there are many different issues that will require resourcefulness if not a delicate balance to over come. Some of these issues are as follows:
Privacy Issues
Two important considerations in furthering e-commerce applications in tax preparation are: (1) Internal control systems in use by firms who process private and confidential taxpayer data and (2) the legal system that prevails when violations in privacy occur. India, a country who has extensive investments in outsourcing business processes, has no extensive legal framework to enforce electronic privacy rights (Dresner 2005). In Dresner’s article (2005), India is caught in a political debate between enacting law to enforce electronic data privacy or allowing companies to make contractual agreements as to how to protect privacy rights under existing laws already afforded under the law. Those who prefer a contractual solution claim it is less costly than compliance costs associated with legislation. In either case, internal control systems will be the key to complying with privacy rights.
Dilution of the Voluntary Tax System
Information Security
In light of today’s war on terrorism, breaches of sensitive taxpayer information could create many challenges for outsourcing to certain countries or even to outsourcing as a whole.
Professional Standards and Concerns
Advances in technology are requiring accountants to rethink risks, exposure and adherence to professional standards. According to an article in the Journal of Accountancy, (Shamis, Green, Sorenson & Kyle 2005) The American Institute of Certified Public Accountants requires under the rules of ethics, that all CPA’s who disclose confidential client information to an outsource provider or an independent contractor, disclose this information to the client preferably in writing. In addition the article points out the number one professional concern to outsourcing is maintaining client information security. In the article, (Shamis et al. 2005) focus groups of clients felt uneasy about their personal financial information being displayed across the globe. Furthermore, there is some doubt as to coverage under liability insurance, for third party vendor employees if they are not accountants.
In an article published by The CPA Journal, (Soled 2005) depending on the extent of involvement by a third party outsource vendor, would the Internal Revenue Service consider an outsourced third party to be a paid tax preparer? The article points out, according to the Internal Revenue Service, certain third parties who prepare tax returns in return for compensation and who engage in acts beyond typing, reproducing or other mechanical systems are liable and subject to liabilities and civil actions under the code.
Other legislation beyond those imposed by the Internal Revenue Service are also affecting how tax preparers practice. According to The CPA Journal (Soled 2005) the Gramm-Leach-Bliley Act of 1999 requires certain privacy disclosures to be made including, the firms information collection and sharing practices. The 1999 Act also requires to give clients an opt-out right.
All indications would lead accounting professionals to develop their own e-commerce strategies for tax preparation as well as for other services rendered. However, acceptance of outsourcing and other e-commerce applications will require evaluation of professional, regulatory and other social political implications before moving forward. Due to significant operational efficiencies and cost savings of e-commerce , e-government is likely to see further development. However, there will likely be privacy and big government issues that will have to be addressed, in order to continue these efforts and protect taxpayer rights and privacy concerns.
References
Accounting Web, Inc. (2005) Online tax-paying options, Accounting Web web site. Retrieved Feb. 02, 2006 at the following URL: http://www.accountingweb.com/cgi-bin/item.cgi?id=101720&d=659&h=660&f=661
Anderson, T., Fox, M. & Schwartz, B.N., (2005, October) History and trends in e-filing: A survey of CPA practitioners, The CPA Journal , The CPA Journal web site, Retrieved Feb. 01, 2006 at the following URL: http://www.nysscpa.org/printversion/cpaj/2005/1005/p66.hm
Berger, S., (2005, January) Federal electronic filing of tax returns and e services, The CPA Journal, The CPA Journal web site, Retrieved Feb. 08, 2006 at the following URL: http://www.nysscpa.org/printversions/cpaj/2005/105/p68.htm
Carey, T. W., Yakal, K., (2006, February 13) Computing your taxes, Barron’s, pp. 45-46
Dresner, S., (2004, March/April) India gives commitment to new privacy initiative, Privacy Laws & Business, 72, 1
Federation of Tax Administrators Washington, D.C. (2005, June) Electronic mandates: Lessons learned, (Preliminary version), publication available at the following URL: http://taxadmin.org/fta/ftapub.html
Ge, L., Konana, P., & Tanreverdi, H. (2004) Global sourcing and value chain
unbundling , Austin, TX: The University of Texas at Austin, Department of MSIS McCombs School of Business
Greenstein, M., Vasarhelyi, M. (2002) Electronic commerce: Security, risk management, and control, (2 Ed.), Overview of electronic commerce, New York, NY: McGraw Hill/Irwin
Hogan, Mike (2002, March 20) Protesting the e-filing penalty, PC World, PC World web site, Retrieved Feb. 02, 2006 at the following URL: http://www.pcworld.com/resource/printable/article/0,aid,90144,00.asp
IRS Oversight Board (2005, December) Annual report to congress: Electronic filing, The IRS Oversight Board website, publication available at the following URL: http://www.treas.gov/irsob/reports/2005_e-Filing_report.pdf
Lassman, Kent (2002, October 15) Thresholds of e-government: How far should government go?, Original publication on: Privatization Watch (Oct. 15, 2002) retrieved on Feb. 02, 2006 on the Reason Public Policy Institute web site at the following URL: http://www.rppi.org/thresholdsofgovernment.html
Long, Morgan (2002, October 15) The digital advance of government, Original publication on: Privatization Watch (Oct. 15, 2002) Retrieved on Feb. 02, 2006 on the Reason Public Policy Institute website at the following URL: http://rppi.org/digitaladvance.html
Maher, Kris, (2004, March 23) More professions feel outsourcing’s impact, The Wall Street Journal, p B1, Retrieved on Feb 01, 2006 from the CollegeJournal web site at the following URL: http://www.collegejournal.com/careerpaths/findcareerpath/20040329-maher.html
Shamis. G. S., Green, C. M., Sorensen, S. M., & Kyle, D. L., (2005, June) Outsourcing, offshoring, nearshoring: What to do?, Journal of Accountancy, AICPA web site. Retrieved on Feb. 01, 2006 at the following URL: http://www.aicpa.org/pubs/jofa/jun2005/shamis.htm
Soled, Jay A., (2005, March) Outsourcing tax return preparation and its implications, The CPA Journal ,The CPA Journal website, Retrieved on Feb 01, 2006 at the following URL: http://www.nyscpa.org/printversions/cpaj/2005/305/p14.htm
United States Government Accountability Office. (2005, April). Information security: Internal Revenue Service needs to remedy serious weaknesses over Taxpayer and Bank Secrecy Act data (Report No. GAO-04-482). Washington, D.C. , The GAO web site, Retrieved Feb 02, 2006 at the following URL: http://www.gao.gov/new.items/d05482.pdf
Tuesday, July 05, 2005
Why Consultants Make a Difference
Consultants Make a Difference
By: Rene Velez
It seems that on any given occasion that I have the opportunity to discuss the business of consulting, few people know exactly what it all entails. Without question the title consultant is used freely to mean anything. Truth be told you can consult on anything. The real question is not what title you hold, or have given yourself, but what you do. Seems to me that could be said of any profession. I've known a few professionals that have left me entirely in doubt if they knew what they were doing.
I confess that often I evade trying to define what I do as a consultant because, its not easy to describe. Firstly, depending on what you are consulting in it could be your practice envolves more of an art than a science. For example if you are an engineering consultant your consulting engagements are often more of a science. Either the bridge you are designing will hold a given weight and load of traffic or it will not. Either it meets the DOT specifications or it does not. However, if you are a business consultant and you are working on how to increase worker satisfaction and productivity, it becomes an art. Why? Because thats they way it works.
All kidding aside, I have come up with this simple laymans way of trying to draw a line between the two. No science here just a little art!
Consulting as a Science:
If given a predetermined goal or outcome you can apply formulas, calculations, laws, procedures and other contrived gyrations, that do not change, and arrive at the solution consistantly, then it's pretty much been studied and done many times over and it is therefore known and it is a science. Another way I say it is that the solution has been bottled. In Management 101 language it is a mechanistic structure.
Consulting as an Art:
If given a predetermined goal or outcome and you can not apply formulas, calculations, laws or procedures without changing them on each attempt, or you can not repeat what someone else has already proven to work, and the outcomes can vary and are anything but consistant then it becomes an Art form. In management 101 language it is dynamic or Organic.
Today's Consulting Environment
Consulting is on the rise today. However, the business has changed from how it was sold in the 1990's. Whereas in the 1990's everyone was looking for the new fangled widget today everyone wants to make sure the widget works. During the 1990's the search was on for those new minted MBA's who had all that knowledge of making the new widget. America was entrenched on computers, high technology. Out with the old and in with the new. Ideas no matter how underanalyzed and researched were sold to the highest bidders. Today, conservatism has set in the corporate board room and MBA's have the added burden to not just come up with the new widget but be ready to almost guarantee that the widget will actually work.
I have always liked that commercial were some crusty old but distinguished Wall Street fellow says, "We make our money the old fashion way, we eeaarned it". It would seem the phrase has caught on in american business. Business no matter how dynamic and cutting edge needs to be tempered by wisdom not raw knowledge. What businesses want today from consultants is not the concept but rather the "results". Personally, I think its justified. Particularly with Sarbanes Oxley management should be held accountable for the decisions that they makes and consultants are feeling that new expectation.
No one should automatically regard business consultants as the experts of business. Companies should understand that good consultants develop a relationship with their clients. Sometimes the best consultant is the one that can not only teach a client how to accomplish a goal but also be humble enough to acknowledge they have learned something from their clients. Without question I have always learned something from my clients, their practices, style, procedures, business. In fact on many engagements without learning first your almost destined to a poor outcome. This is what an evaluation is all about. Depending on the client however, or how good your relationship is there is an "art form" in learning without loosing your position of promenance with the client. Sometimes this is a chicken or egg type situation. Is the consultant too arrogant to admit he has to learn from the client or is the client too arrogant to recognize that even though a consultant is learning their business that does not make them less qualified? I suppose this is argueable to a degrees. They key thing is that both sides recognize the opportunity to learn from one another.
Today's consultants have to be ready make a difference. They have to stand for results. You earn your pay on each task or assignment you able to bring into fruition. If you are new to consulting pick some winners first. Diversify the risks you take as a consultant so you have a good track history. No matter how good you are you will loose some to failure or at best modest performance.
Besides results consultants offer many things they can not often find from within the organization.
Besides the Outcome:
Unbiased Ideas and Conversation:
Perhaps one of the most valuable outcomes of having a relationship with a consultant is the ability to discuss matters in a candid forum. Let's face it, often companies have their own internal politics that prevent new ideas from coming to life. Managers often do not want to undertake risky propositions for feer that they may loose a promotion or risk being dismissed because of a poor outcome. Sometimes management is lacking in creativity to address emerging trends and the company culture is such that there is little or no upward interaction. Consultants can and often facilitate fertile ground for ideas, and bridge communication between management levels. They create a buffer between personalities in a company and can introduce radical ideas and concepts that are untainted by internal politics. Consultants have been known for setting management straight on priorities, identifying critical problems. In essence consultants often are change agents to a company. They do this with a fresh view and without the same level of fear as employees of the company.
An Outsiders View:
The paragraph above brings to mind how important it is to have a consultant come in and look at things as an outsider. Mnay companies and their management suffer from tunnel vision. They see their company and their business as they see it but fail to realize missed opportunity and critcal flaws from the eyes of an outsider or as a customer. Mystery shopper surveys and analysis is an easy tool to use for any company. In fact many companies that are very successful employ this technique almost on a continuous basis in a variety of ways. These companies know that they rely on what their consumers think so they become very consumer centric. Not a bad thing at all as long as the company does not loose focus. Sometimes it is an art form simply to find ways to be consumer centric and yet be cost efficient. It depends on many variables, such as the type of product or service you sell, number of competitors, industry trends etc.
Project Management:
An often overlooked possibility to establish a relationships with consultants of varying degrees and capabilities is project management. It doesn't matter if you are a fortune 500 company or a local distributor of specialty hardware at some point in time you will need a project manager. Someone who in its simplist form can oversee a task thet requires scheduling, coordination, planning and control and see it from concept through completion. An accounting system conversion, marketing campaign, mail order distribution system, website ordering system etc. etc. Having a professional on board with either knowledge, management ability or simply enthusiaam to get the project done can be uplifting to staff, improve efficiency among current workers, relieve management of a tedious burden and simply create acceptance of a project among company employees. The key for management is to be clear on hiring the right project manager for the job.
Management is Responsible:
Yes. Consultants can be a big asset to any company no matter their size. However, management should never allow any consultant to run free. Management should always take the approach they they are responsible for the company. They shoud develop relationships with a variety of consultants in the various disciplines in their company. They should monitor the results and hold the consultants responsible for results. Determination of time budgets and cost caps are becoming more an more common in cunsultant engagements. Corporate management needs to be cognizant that often there are tradeoffs to accomplsihing goals and that the identification of these tradeoff points should be key to coming up with solutions that are practical. Consultants and management alike need to understand that there will always exist grey areas in which neither the consultant or the company management has the right answer and that both should commit together to learn and take on "calculated risk" in order to arrive at success.
Internal Consultants:
Many of the current events that have given rise to Sarbanes Oxley also have management thinking about how best to develop internal consultants. Without a doubt there exists the possibility of identifying and perhaps grooming internal employees to be on demand consultants. This is a good thing. Often this is a very cost effective measure to many business issues. However, it should not be taken to mean that outside consultants will not be needed. Often an internal consultant is a candiate for higher manement positions within the company. In regards to dealing with external consultants these individuals possess a great deal of knowledge about the company in specific areas and become an asset to external consultants as well as to management. It is not uncommon for these individuals to become the hub for large projects were the internal and external consultants work together.
No Expert is an Island:
From the wave of consultants that entered the work force in the 1990's to what the profession is doing today comes one important aspect of managing business. No matter how developed you may have become in your business or how respected you have become as a consultant neither is an island onto themselves. The relationship and interaction between disciplines can be pricesless. In a world that is constantly changing and evolving each learns from one another. The consulting engagements of today that become sucesses or failures become the case material for the MBA's, CPA's , Engineers of tomorrow. And perhaps managemnt who is often encapsulated in company politics, run a ground on fresh ideas or feeling the influenza of the constant battle of business, or simply needs an occasional check up, consultants are still there to help.
On the other side there is the need for seasoned company executives to become consultants. The grass can be greener on the other side. Work less hours than before, put up with less politics, an opportunity to be creative with all that stored knowledge, explore new areas of interest, make new industry contacts, be self employed or be part of a group. With the aging of the baby boomers and many expected to continue working throughout there retirement age, consultants will be more common. This is a good thing for company's with disparity of ages in management positions. Were will they turn if all the seasoned brass retires? All those years of knowledge today are welcomed wisdom. Like fine wines these professionals do improve with age. It's no wonder the founding fathers of the U.S. constitution provided that 1/3rd of the senate come for elections every three years or so. It's the recipe for bringing in new blood but maintaining prudence and stability.
Sunday, April 03, 2005
Miami's Political Scenery and Business
Miami is a fascinating city all it's own. From the time I first arrived in 1976 til now Miami has matured and grown to what is truely an international point of interest and destination. However, we are a city still maturing. One noteable deficiency in a metropolis coming of age is the lack of major corporations. Why is that? How is it possible that a major city with so much promise, resting on the shores to the Caribbean, Central and South America and a gateway to venues of international trade such as the Panama Canal , lacking in fortune 500 companies?
I think there could be numerous debates that could attempt to answer that question. Be it enough, I think, that we ask the question, and then ask again. The answer lies in many facets of our history and in simply the timing of historical events. Few cities have seen the major influx of refugees and immigrants as Miami. Few cities have seen unprecedented growth as Miami. Again few cities have such a multitude of diverse cultures as Miami. In particular even within the hispanic community, we not only have very diversified cultures but, they are republicans. This is unlike other cities with large hispanic populations which tend to be democratic. In this environment politics slow to a crawl, resources get stretched and governess falls way behind.
I think there could be numerous debates that could attempt to answer that question. Be it enough, I think, that we ask the question, and then ask again. The answer lies in many facets of our history and in simply the timing of historical events. Few cities have seen the major influx of refugees and immigrants as Miami. Few cities have seen unprecedented growth as Miami. Again few cities have such a multitude of diverse cultures as Miami. In particular even within the hispanic community, we not only have very diversified cultures but, they are republicans. This is unlike other cities with large hispanic populations which tend to be democratic. In this environment politics slow to a crawl, resources get stretched and governess falls way behind.
Just how much does our diversity affect public services? By way of example Miami has one of the only school boards that monitors country and political risk in the Carribean, Central and South America in order to project census counts and needs in developing its annual budget. We are a model for other cities in this regard. We have contingency plans for the fall of communism in Cuba that affect maritime services, air traffic control, military defense and a host of public services. Miami's politics, its resources and effectiveness are all interconnected with all of its surrounding countries. Not only are we learning and coping but the landscape has changed over time. Therein lies a big reason as to why government and politics has lagged behind in finding solutions. Strange how the very thing that makes this city great also tends to reveal itself as a problem.
The turn around for this city will rest on our ability to govern our city and how we play the game of politics. All the other components for the post coming of age for this city are already present.
Some of the issues we need to be focused on are as follows:
(1) Creating world class international research centers in our universities. Although in my opinion we have a long way to go, the fact is we are already doing this. In fact I am happy to see this happening at our local Florida International University. A public university. Being able to provide human talent and the environment that feeds business and technology will be a very big draw to fortune 500 companies. Besides that universities pump a great deal of money into our economy. Three critical components for any major metropolis, human talent, facility resources and money to drive both.
(2) The expansion of public transportation systems for metropolitan citizens. Having been born and raised in New York City, public transportation is a must. Just a few years ago Miami had one of the highest per capita users of cell phones anywhere in the world. A statistic that has hardly changed. And no wonder considering how much time we all spend in traffic. Truely, Miami has planned poorly for this public need. Then again who would have guessed at our growth rate. Who invisioned that parts of the turnpike in south Florida were built on what was considered to be the fringes of the Everglades, was to become the center of urban sprawl. Truth be told, in hindsight, our government was assleep at the wheel. If you look at statistical trends from 25 years back we could have made some better calculations. We didn't. Worse yet is we have known this for some time and we still have been late in reacting. Yes many emergencies have drained both govermental talent and economic resources. But, ven so gvernment has reacted too slowly, and been undecisive.
(3) The expansion and enhancement of major terminals of transportation. What I mean by this is Miami International Airport, Tamiami and Opalocka Airports, The Port Of Miami. Clearly Our local government has fallen short. Miami International is frought with corruption, mismanagement and a serious lack of leadership. It is my opinion that in time more horrors will surface. I only hope that frustration will lead to alternatives such as Opalocka Airport. Already I see signs of interest from the community in wanting to expand the runway length at Tamiami Airport. Not that it can handle large commercial traffic but it would be a major invitation to corporate business jets and other corporate aircraft. In addition I think it can be a reliever airport for short flights to the Carribean if not the Americas. The fastest growing segment of air travel in the world is fractional corporate jets. A recent statistic I saw said commercial jet travel has grown by an average of 18% per year, where as corporate and fractional business jet travel has grown by 140%. If that doesn't catch your eye nothing will. We must be aware of how this stimulates economic growth, and make our city corporate freindly, if we are to attract fortune 500 businesses to the area. I would recommend that anyone look at the flight line at Homestead General Airport, Tamiami and even Homestead Airforce Base on holidays of Race Car activity. What you will find is hundreds of millions of dollars in aircraft and millions more spent here in our local economy. Just as to emphasize the point we are the gateway to the Americas! Already we do very brisk business in aircraft repairs, and parts distribution to Central and South America. In addition we do a great deal of flight training. Seems to me we are again politically behind the curve. We need to build a better infrastructure in every mode of transportation. Why we fuss over having water taxies, creating private transportation systems and other mass transit alternatives is beyond me. We should welcome any improvement over what we have. To this regard we need to tell goverment to start acting like a business.
(4) Controlling Urban Sprawl. Again our local government has done a poor job at controlling Urban Sprawl. Urban Sprawl creates huge inefficiencies in operating a city government. Just think of how many more hospitals, ambulances, police cars, fire engines, road maintenance crews, buses, libraries you need as you spread out over miles and miles of city streets. Do you get the picture? We as citizens pay for this! Building up is more efficient use of limited land, government funds and resources. If done properly controlling urban sprawl can improve quality of life through less travel times to and from work and more and better resources for our community. I should mention this takes public transportation to make it all work well. Take an aireal view of SOFLO and you quickly realize we are nothing more than a strip of land that borders on our famous river of grass, the Everglades, on the west and the Atlantic Ocean on the east. Not only is this land limited it is a very fragile ecosystem. Protecting the environment and the conservation of limited resoures such as potable water and electric power are issues that go hand in hand with urban sprawl issues. In addition we need a comprehensive plan for code enforcement. Not popular with voters but Miami is becoming less and less homogenius. It seems like shoping for a good neighborhood is not a matter of finding an incorporated city or area but finding remote pockets of neighborhoods. Urban sprawl has created what I have called pocket neighborhood syndrome. An aggregation of similar homes with neighbors of similar demographic qualities amongst dissimilar surrounding neighborhoods. It's a double edge sword towards home values and how goverment resources are allocated to wide areas.
So why is all this important towards attracting big business?
Well the easy answer is it brings high paying jobs! The reality is it doesn't stop there. Big businesses also spend heavily in investment items, demand many services, donate towards hospitals, schools, universities, chambers of commerce and all kinds of non profit organizations. They become a source for fresh leadership in city and local governments and in many organizations. They become a magnet for other investments from the outside to our area. They contribute towards the arts and culture of our community and attend the major sport franchises in the area. Big business brings Miami closer to the rest of the world.
At the beggining of all this I mentioned that our government is key to turning this all around. One look at the above points and you can find plenty of critisism about how poorly government has been carried out. However, I should also say we as citizens are also to blame. We simply are too disinterested, disconnected and perhaps too passive. We too need to take some of the blame and be more critical of our leadership and demand more. That fact is that although we have many temporary residents, those of us who make Miami our perminant home need to say more, and do more.
I think the tied is turning and there is a new generation at hand. Despite our troubles Miami is still a great place.
Some of the issues we need to be focused on are as follows:
(1) Creating world class international research centers in our universities. Although in my opinion we have a long way to go, the fact is we are already doing this. In fact I am happy to see this happening at our local Florida International University. A public university. Being able to provide human talent and the environment that feeds business and technology will be a very big draw to fortune 500 companies. Besides that universities pump a great deal of money into our economy. Three critical components for any major metropolis, human talent, facility resources and money to drive both.
(2) The expansion of public transportation systems for metropolitan citizens. Having been born and raised in New York City, public transportation is a must. Just a few years ago Miami had one of the highest per capita users of cell phones anywhere in the world. A statistic that has hardly changed. And no wonder considering how much time we all spend in traffic. Truely, Miami has planned poorly for this public need. Then again who would have guessed at our growth rate. Who invisioned that parts of the turnpike in south Florida were built on what was considered to be the fringes of the Everglades, was to become the center of urban sprawl. Truth be told, in hindsight, our government was assleep at the wheel. If you look at statistical trends from 25 years back we could have made some better calculations. We didn't. Worse yet is we have known this for some time and we still have been late in reacting. Yes many emergencies have drained both govermental talent and economic resources. But, ven so gvernment has reacted too slowly, and been undecisive.
(3) The expansion and enhancement of major terminals of transportation. What I mean by this is Miami International Airport, Tamiami and Opalocka Airports, The Port Of Miami. Clearly Our local government has fallen short. Miami International is frought with corruption, mismanagement and a serious lack of leadership. It is my opinion that in time more horrors will surface. I only hope that frustration will lead to alternatives such as Opalocka Airport. Already I see signs of interest from the community in wanting to expand the runway length at Tamiami Airport. Not that it can handle large commercial traffic but it would be a major invitation to corporate business jets and other corporate aircraft. In addition I think it can be a reliever airport for short flights to the Carribean if not the Americas. The fastest growing segment of air travel in the world is fractional corporate jets. A recent statistic I saw said commercial jet travel has grown by an average of 18% per year, where as corporate and fractional business jet travel has grown by 140%. If that doesn't catch your eye nothing will. We must be aware of how this stimulates economic growth, and make our city corporate freindly, if we are to attract fortune 500 businesses to the area. I would recommend that anyone look at the flight line at Homestead General Airport, Tamiami and even Homestead Airforce Base on holidays of Race Car activity. What you will find is hundreds of millions of dollars in aircraft and millions more spent here in our local economy. Just as to emphasize the point we are the gateway to the Americas! Already we do very brisk business in aircraft repairs, and parts distribution to Central and South America. In addition we do a great deal of flight training. Seems to me we are again politically behind the curve. We need to build a better infrastructure in every mode of transportation. Why we fuss over having water taxies, creating private transportation systems and other mass transit alternatives is beyond me. We should welcome any improvement over what we have. To this regard we need to tell goverment to start acting like a business.
(4) Controlling Urban Sprawl. Again our local government has done a poor job at controlling Urban Sprawl. Urban Sprawl creates huge inefficiencies in operating a city government. Just think of how many more hospitals, ambulances, police cars, fire engines, road maintenance crews, buses, libraries you need as you spread out over miles and miles of city streets. Do you get the picture? We as citizens pay for this! Building up is more efficient use of limited land, government funds and resources. If done properly controlling urban sprawl can improve quality of life through less travel times to and from work and more and better resources for our community. I should mention this takes public transportation to make it all work well. Take an aireal view of SOFLO and you quickly realize we are nothing more than a strip of land that borders on our famous river of grass, the Everglades, on the west and the Atlantic Ocean on the east. Not only is this land limited it is a very fragile ecosystem. Protecting the environment and the conservation of limited resoures such as potable water and electric power are issues that go hand in hand with urban sprawl issues. In addition we need a comprehensive plan for code enforcement. Not popular with voters but Miami is becoming less and less homogenius. It seems like shoping for a good neighborhood is not a matter of finding an incorporated city or area but finding remote pockets of neighborhoods. Urban sprawl has created what I have called pocket neighborhood syndrome. An aggregation of similar homes with neighbors of similar demographic qualities amongst dissimilar surrounding neighborhoods. It's a double edge sword towards home values and how goverment resources are allocated to wide areas.
So why is all this important towards attracting big business?
Well the easy answer is it brings high paying jobs! The reality is it doesn't stop there. Big businesses also spend heavily in investment items, demand many services, donate towards hospitals, schools, universities, chambers of commerce and all kinds of non profit organizations. They become a source for fresh leadership in city and local governments and in many organizations. They become a magnet for other investments from the outside to our area. They contribute towards the arts and culture of our community and attend the major sport franchises in the area. Big business brings Miami closer to the rest of the world.
At the beggining of all this I mentioned that our government is key to turning this all around. One look at the above points and you can find plenty of critisism about how poorly government has been carried out. However, I should also say we as citizens are also to blame. We simply are too disinterested, disconnected and perhaps too passive. We too need to take some of the blame and be more critical of our leadership and demand more. That fact is that although we have many temporary residents, those of us who make Miami our perminant home need to say more, and do more.
I think the tied is turning and there is a new generation at hand. Despite our troubles Miami is still a great place.
Tuesday, March 29, 2005
Non Profits and Quality of Life - Responsibility
Presentation on Non Profits - Responsibility
C-One Center for Non Profit Effectiveness (United Way , Miami)
Seminar Feb 26th, 2004
and Florida Department of Revenue
(Introduction by: Rene Velez)
Seminar Feb 26th, 2004
and Florida Department of Revenue
(Introduction by: Rene Velez)
Non Profits and Quality of Life
For many years Non Profit organizations have contributed to the quality of human life both here in the United States and throughout the world. Their causes range from the arts, healthcare, homelessness and world hunger to offering comfort and support to AIDS victims, single mothers, the elderly and caring for our young through education and early childhood development, just to name a few causes. It would truly be difficult to think of a major metropolitan city like Miami not having the services available through non profits. It’s something to think about as it affects all of our lives.
Comparison of For Profit vs. Non Profits
Financial and Management Responsibility
However, running a non profit is a sizeable undertaking. You have to be business oriented, work within budgets, hire personnel, establish a marketing strategy deal with human resource issues, keep track of your accounting, develop a business plan and secure funding and deliver your product, just to name a few of the major functional areas. In fact there is a great deal of comparison between running a small non profit and starting a small business. In reality the pressure could well be greater for those who decide to undertake this role because often they have a great deal of passion invested in their cause. Managing a non profit requires a great deal of management resourcefulness. Above and beyond that, you should be aware that if you mismanage a non profit it may not be as simple as going out of business. Even though you are tax exempt you could owe taxes, you may have filing penalties and you could be in violation of the special tax exemption you have been given. Your organization could be penalized and those officers and directors could also face fines and penalties personally. In some cases grants may be recalled for lack of proper accounting or for incorrect use of funds. Just as for profits have a responsibility to shareholders and to the investing public at large, non profits have a financial and management responsibility to their donors and to the public. Think your plan through carefully not only because you are liable but also because when a non profit fails, it affects how the public will give and support the next non profit start-up. (EXAMPLES OF PENALTIES)
Non Profit Image, Marketing, Awareness, Professionalism, Balance
In raising donor funds as well as in attracting volunteers and professionals it is important to develop the right image, understand the value of developing marketing tools. A very important function of your organization is to create awareness for your cause. People have to understand what you do. The service you offer. Why it’s important. You have to develop a level of professionalism to gain people’s trust. To get them to donate time and money and to support your cause along with you. You have to set standards for answering the phone, providing the right donor receipts, thanking donors and recognizing them in your literature. Of course you have to create a balance when trying to address image, marketing, awareness and professionalism. You have to strike a critical balance between doing a great job but not looking like you spent all your donations on a fancy business card and brochures.
Your money is better spent creating a statistical sheet of your accomplishments. How many patients did you serve? How many man hours of volunteers did you have? How many meals did you serve? What is your average cost of service per beneficiary?
What percentage of the target market did you reach? Yes. You have to be a statistician also!
Start out on the right foot
The biggest piece of advice I can offer to anyone starting a non profit is, do your homework and prepare for a major commitment. Then “write down” (at minimum) a simple business plan in draft. You have to address these simple questions just to start:
(1) Who or what will you serve?
(2) What service or product will you provide? Is there anyone else doing this?
(3) How much will it cost to provide that product or service per month for 1 year? (budget)
(4) What am I good at and what will I need help to do?
(5) What/who do I need to start out?
Be very realistic! Don’t lie to yourself! If anything can go wrong it will! There are many resources out on the internet you can look into. You have to be willing to do a lot of homework. Also there is C-One (United Way , Miami) which has an extensive library and also UM (University of Miami) Center for Non Profit Management. Seek out guidance from other non profit founders and managers. Don’t overlook for profit owners and managers that can guide you in your business plan.
Non Profits are a Regulated Industry
I have not heard this phrase often since becoming involved in non profits however, I am starting to use it more and more. “Non Profits are a Regulated Business”. My hopes is to keep non profits from committing errors that can get them into serious trouble. In addition there seems to be a trend that has been going on for some time now both by taxing authorities and homeland security to take a closer look at Tax Exempt organizations. My suspicion is this scrutiny will continue over time.
In the past year we have all heard of the scandals in the business sector. Fraud, mismanagement, corruption. These scandals have created a new era in accounting, financial reporting and business administration. As such there is an emphasis on holding managements feet to the fire when they are entrusted by the public with money. It is already being felt in the non profit sector and it’s only a matter of time before we see more rules and legislation to make sure charitable organizations are measured with more accuracy than ever before.
Taxation:
Internal Revenue Service (http://www.irs.gov/)
Florida Department of Revenue ( http://www.state.fl.us/dor/)
Florida Department of Agriculture and Consumer Affairs ( http://www.800helpfla.com/ )
Finance and Accounting:
Financial Accounting Standards Board ( www.fasb.org/ )
American Institute of Certified Public Accountants (http://www.aicpa.org/index.htm )
Office of Management and Budget ( http://www.whitehouse.gov/omb/ )
For many years Non Profit organizations have contributed to the quality of human life both here in the United States and throughout the world. Their causes range from the arts, healthcare, homelessness and world hunger to offering comfort and support to AIDS victims, single mothers, the elderly and caring for our young through education and early childhood development, just to name a few causes. It would truly be difficult to think of a major metropolitan city like Miami not having the services available through non profits. It’s something to think about as it affects all of our lives.
Comparison of For Profit vs. Non Profits
Financial and Management Responsibility
However, running a non profit is a sizeable undertaking. You have to be business oriented, work within budgets, hire personnel, establish a marketing strategy deal with human resource issues, keep track of your accounting, develop a business plan and secure funding and deliver your product, just to name a few of the major functional areas. In fact there is a great deal of comparison between running a small non profit and starting a small business. In reality the pressure could well be greater for those who decide to undertake this role because often they have a great deal of passion invested in their cause. Managing a non profit requires a great deal of management resourcefulness. Above and beyond that, you should be aware that if you mismanage a non profit it may not be as simple as going out of business. Even though you are tax exempt you could owe taxes, you may have filing penalties and you could be in violation of the special tax exemption you have been given. Your organization could be penalized and those officers and directors could also face fines and penalties personally. In some cases grants may be recalled for lack of proper accounting or for incorrect use of funds. Just as for profits have a responsibility to shareholders and to the investing public at large, non profits have a financial and management responsibility to their donors and to the public. Think your plan through carefully not only because you are liable but also because when a non profit fails, it affects how the public will give and support the next non profit start-up. (EXAMPLES OF PENALTIES)
Non Profit Image, Marketing, Awareness, Professionalism, Balance
In raising donor funds as well as in attracting volunteers and professionals it is important to develop the right image, understand the value of developing marketing tools. A very important function of your organization is to create awareness for your cause. People have to understand what you do. The service you offer. Why it’s important. You have to develop a level of professionalism to gain people’s trust. To get them to donate time and money and to support your cause along with you. You have to set standards for answering the phone, providing the right donor receipts, thanking donors and recognizing them in your literature. Of course you have to create a balance when trying to address image, marketing, awareness and professionalism. You have to strike a critical balance between doing a great job but not looking like you spent all your donations on a fancy business card and brochures.
Your money is better spent creating a statistical sheet of your accomplishments. How many patients did you serve? How many man hours of volunteers did you have? How many meals did you serve? What is your average cost of service per beneficiary?
What percentage of the target market did you reach? Yes. You have to be a statistician also!
Start out on the right foot
The biggest piece of advice I can offer to anyone starting a non profit is, do your homework and prepare for a major commitment. Then “write down” (at minimum) a simple business plan in draft. You have to address these simple questions just to start:
(1) Who or what will you serve?
(2) What service or product will you provide? Is there anyone else doing this?
(3) How much will it cost to provide that product or service per month for 1 year? (budget)
(4) What am I good at and what will I need help to do?
(5) What/who do I need to start out?
Be very realistic! Don’t lie to yourself! If anything can go wrong it will! There are many resources out on the internet you can look into. You have to be willing to do a lot of homework. Also there is C-One (United Way , Miami) which has an extensive library and also UM (University of Miami) Center for Non Profit Management. Seek out guidance from other non profit founders and managers. Don’t overlook for profit owners and managers that can guide you in your business plan.
Non Profits are a Regulated Industry
I have not heard this phrase often since becoming involved in non profits however, I am starting to use it more and more. “Non Profits are a Regulated Business”. My hopes is to keep non profits from committing errors that can get them into serious trouble. In addition there seems to be a trend that has been going on for some time now both by taxing authorities and homeland security to take a closer look at Tax Exempt organizations. My suspicion is this scrutiny will continue over time.
In the past year we have all heard of the scandals in the business sector. Fraud, mismanagement, corruption. These scandals have created a new era in accounting, financial reporting and business administration. As such there is an emphasis on holding managements feet to the fire when they are entrusted by the public with money. It is already being felt in the non profit sector and it’s only a matter of time before we see more rules and legislation to make sure charitable organizations are measured with more accuracy than ever before.
Taxation:
Internal Revenue Service (http://www.irs.gov/)
Florida Department of Revenue ( http://www.state.fl.us/dor/)
Florida Department of Agriculture and Consumer Affairs ( http://www.800helpfla.com/ )
Finance and Accounting:
Financial Accounting Standards Board ( www.fasb.org/ )
American Institute of Certified Public Accountants (http://www.aicpa.org/index.htm )
Office of Management and Budget ( http://www.whitehouse.gov/omb/ )
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