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Wednesday, Jul 24, 2024

No on Prop. J; Yes on Prop. A

In a presidential election year that’s predicted to draw a record number of voters both here and across the nation, there are several ballot measures that directly affect the local business community.

In keeping with our longstanding policy, the San Diego Business Journal does not endorse specific candidates. However, we believe in offering perspective on measures that have an impact on business locally and across the state.

As the Nov. 2 election draws near, here are two issues important to local business.

Proposition J, which will appear before voters within the San Diego city limits, seeks to raise the city’s transient occupancy tax by 2.5 percent. The tax on each occupied hotel room in the city would climb from 10.5 percent to 13 percent if Proposition J is approved.

Increasing the hotel room tax presents several problems , most importantly that the money is not designated for any specific use. An estimated $28 million annually would be left to the San Diego City Council to spend at its discretion.

A similar measure was shot down during the March primaries, although that proposition at least designated the funding for specific uses fire and police protection and promoting tourism in San Diego. If Proposition J passes, there’s no certainty that the money tourists pay to stay in the city’s hotel rooms would be put back into promoting the city as a destination. And that’s what the tax was created for in the mid-1960s. We have a real problem with that. It’s especially important to vote against Proposition J, since a simple majority , 50 percent plus one vote , is all that is needed to pass this tax increase.

Vote “No” on Proposition J.

– – –

Proposition A, which appears before all voters countywide, is an extension of the half-cent sales tax to fund road construction and mass transit.

TransNet, as it is popularly known, extends the tax for 40 years. Without TransNet’s extension, San Diego’s No. 1 issue , traffic , will rapidly worsen. With its approval, major freeway projects will continue to be funded. Though this is very much a quality of life issue, it is also one that directly affects business.

It is no secret that San Diego’s work force continues to move farther away in search of more affordable housing. It’s crucial that employees arrive at work in a reasonable amount of time, and TransNet goes a long way to assure the county’s roads can adequately handle the region’s growing work force.

Quality of life is a vital issue when businesses consider moving operations to San Diego. The sunshine and beaches are all well and good, but when it comes to the bottom line, the reality soon becomes as basic as getting employees to work safely and on time.

TransNet has plenty of safeguards assuring 99 percent of all money goes to building roads and providing mass transit. An oversight committee holds elected officials accountable for spending transportation funding efficiently.

Every employer and employee has a stake in making our commutes safe and

reasonable. Vote “Yes” on Proposition A.

Time to Put

Global Out

Of Its Misery

Why on earth is Global Crossing still in business?

Andersen is gone, Enron has been minimized to a shell of its former self and Adelphia is being sold off in bits and pieces. But Global Crossing, which was started by Los Angeles financier Gary Winnick, can still be traded on Nasdaq every day, and it’s still losing big-time money, with zero relief in sight.

Just recently, Global lost nearly 20 percent of its market value when the company announced a loss of $225 million for the first six months of the year, almost double the loss for the like period a year earlier. It recently cut 15 percent of its work force. It has drawn down a $100 million bridge loan from its largest shareholder, Singapore Technologies Telemedia, and will need at least $40 million to keep operating until the end of the year , “substantially” more in 2005.

And guess what , government-controlled Singapore Technologies, which owns 61.5 percent, appears willing to hand over the cash to keep Global afloat.

The question is why. Could this massive conglomerate be waiting for a turnaround in the telecom networking business, which remains a joke of an industry because of overcapacity? Does it hope to eventually sell off Global’s assets for any more than pennies on the dollar?

Perhaps the explanation is more straightforward: that Singapore Technologies made a horrible mistake when it acquired a majority stake in Global after the company filed for bankruptcy protection , and now it’s desperately trying to shore up its investment. Good money chasing bad.

JPMorgan Chase can speak to that. The U.S. banking giant led a group that loaned Global $1.7 billion in August and September 2001 , money that was lost in the midst of the telecom freefall.

And now JPMorgan has gone to court claiming that Winnick & Co. not only realized the company was imploding, but finagled the financials in what’s described as a “massive scam” to make the numbers appear much better than they actually were. Winnick denies he did anything wrong and said the banks should have been aware of how the company counted its beans.

So far, the claims and counterclaims have been woefully inconclusive (the feds dropped a criminal investigation about a year ago) because it’s been nearly impossible to figure out what Winnick knew about the accounting shenanigans and when he knew it. In March, Winnick, Global Crossing and some former executives agreed to shell out $325 million to settle several lawsuits from investors and employees claiming that Winnick inflated revenue numbers (and cashed out millions of dollars in stock before the bad news hit). All told, the bankruptcy wiped out $40 billion in stock value.

The bankers appear less willing to settle and U.S. District Court Judge Gerald Lynch refused to throw out the suit, which means it’s possible Winnick might have to stand trial before a jury. In an early court hearing, Lynch offered this delicious , if somewhat prejudicial , assessment of the matter: “I am prepared to look at this case as, with all respect to the people involved, a bunch of crooks getting sued by a bunch of bankers who are too dumb to stop throwing money down the toilet.”

Yet here it’s 2004 and nothing has really changed except now, the dummies are from Singapore and the business is arguably in worse shape than when Winnick ran things. And all that money billions of dollars poured into an enterprise that was built more on gullibility than good sense.

Mark Lacter is the editor of the Los Angeles Business Journal.


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