Navigating the Gulf Coast Economy: Supply Chain Implications

The Mobile Association of

Purchasing Management

bySemoon Chang

semoonchang.comOctober 6, 2015

Seven Supply Chain Trends to Watch by Adam Robinson I of II

1) Customer-driven supply chains adapt to the changing demands of end

customers. 2) Connected supply chains

“Internet of Things” to monitor products and delivery

3) Risk Management Reduce dependence on sole supplier

Seven Supply Chain Trends to Watch by Adam Robinson II of II

4) Management of Complexity Supply chains evolve into networked

economies, impacting procurement proc. 5) Technology Matters: “IoT” 6) Rethinking Workforce

data-driven decision makers 7) Total Cost Perspective

data-driven optimization on inventory, transportation, handling, etc.

Order of Presentation(Data-Driven)

The U.S. Economy Population increases by county Mobile County

Key supply chain: retail sector Baldwin County

Key supply chain: public school system Cruise Ship Quality of life through pictures

Growth Rate of Real GDP (%)Annual<3%; 2015: 0.6%/3.9%

2QTR GDP (Sept. 25)Likely Impact?

Projection of the U.S. Economy by the Federal Reserve in %

Why slow growth?Too much regulationToo many depending on

governmentEconomy needs to be

flexibleToo much debt >>>

Public Debt How much?

$18,000,000,000,000 total ($60,000/person) $450,000,000,000 annual interest $1,500/per person per year

Long-term impact? What if no one is willing to lend Higher interest rates (Why Not?) Slowing economy & loss of jobs Limit what gov’t can do during

emergency (big recession or war)

Stock Market, Anyone?

Old Times Low price earnings ratio Expected capital gains

Today Rising income Rising demand unrelated to P/E

Wider/wilder fluctuations Index funds with low expense ratios

2015: Year of Retail Boom Retail

McGowin Park Westwood Plaza Pinebrook Shopping Center, & more!

Non-Retail Airbus Return of Carnival Austal expansion

Interaction to Tax Revenues?

Sales Tax Revenue by Month: Mobile Co: Jan 2005 to July 2015

Mobile Co. Sales Tax Revenue by Month (Jan 2012 – July 2015)

Sales Tax in Mobile:What are the problems?

Problem #1Many different rates within an area

City: 4%+1%+4%+1%

PJ: 4%+1%+2%+0.5%+0.5%

County: 4%+1%+0.5%

PJ/County 0.5% - MCPSS;Mobile/Prichard: property tax

Problem #2 Exemptions - too many & varying among jurisdictions TNSTFL: Others pay more for

exempted groups (at least 25) Hawaii & LA do not exempt schools,

churches & nonprofits Tax forms complicated Why problem?

Leads to noncompliance & higher rate Difficulty in pursuing online taxation What do others say?

http://mercatus.org/print/1393402?utm_source=Twitter&utm_medium=research&utm_campaign=MercatusTweets&91814622=

http://mercatus.org/print/1393402?utm_source=Twitter&utm_medium=research&utm_campaign=MercatusTweets&91814622=

Problem #3Tax rates too high

Leads to lower retail sales and thus tax revenues

How? (A) Out of town purchases (B) Non-local on-line purchases (C) More non-compliance (D) Impact of retail boom

Let us review one by one: A>B>C>D

(Non-Indian) Cities with 200,000+State, County and City Sales Tax Rates in Cities with Population Over 200,000, Ranked by Combined Sales Tax Rate (Rates as of July 1, 2010) ________________________________________________________________ Locality State State County City Total Rank _______________ _______ _______ _______ _______ ____ Birmingham AL 4.000% 2.000% 4.000% 10.000% 1 Montgomery AL 4.000% 2.500% 3.500% 10.000% 1 Long Beach CA 7.250% 2.000% 0.500% 9.750% 3 Los Angeles CA 7.250% 2.000% 0.500% 9.750% 3 Oakland CA 7.250% 2.500% 0.000% 9.750% 3 Fremont CA 7.250% 2.500% 0.000% 9.750% 3 Chicago IL 6.250% 2.250% 1.250% 9.750% 3 Glendale AZ 6.600% 0.800% 2.200% 9.600% 8 Seattle WA 6.500% 3.000% 0.000% 9.500% 9 San Francisco CA 7.250% 2.250% 0.000% 9.500% 9 St. Louis MO 4.225% 0.000% 5.266% 9.491% 11 Phoenix AZ 6.600% 0.800% 2.000% 9.400% 12 Memphis TN 7.000% 0.000% 2.250% 9.250% 13 Nashville TN 7.000% 0.000% 2.250% 9.250% 13 San Jose CA 7.250% 2.000% 0.000% 9.250% 13 Tucson AZ 6.600% 0.600% 2.000% 9.200% 16 Mesa AZ 6.600% 0.800% 1.750% 9.150% 17 Scottsdale AZ 6.600% 0.800% 1.650% 9.050% 18 Stockton CA 7.250% 1.500% 0.250% 9.000% 19 New Orleans LA 4.000% 5.000% 0.000% 9.000% 19 Baton Rouge LA 4.000% 5.000% 0.000% 9.000% 19 Fresno CA 7.250% 1.725% 0.000% 8.975% 22 Chandler AZ 6.600% 0.800% 1.500% 8.900% 23 Gilbert AZ 6.600% 0.800% 1.500% 8.900% 23 New York City NY 4.000% 0.000% 4.875% 8.875% 25 ________________________________________________________________ Source: Sales Tax Clearinghouse, Census Bureau, and Tax Foundation

(A) Out-of-town purchases Where in out-of-town?

Eastern Shore Mississippi Groceries in Florida Other cities & unicorp areas in Mobile Co.

Chain effects Shopping > movies > restaurants >

Habit-forming: making it difficult to bring shoppers back with lower rates

(B) On-line purchases

Currently: Only if your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers.

Marketplace Fairness Act of 2013 provides states with ability to collect sales tax on online purchases made by state residents from 2014.

Applies to online sellers that have sales of at least $1 million in states where they do not have physical operations

SSUTA Section 302: STATE AND LOCAL TAX BASES

SSUTA (Streamlined Sales and Use Tax Agreement) adopted Nov. 12, 2002; amended May 24, 2012

“The tax base for local jurisdictions shall be identical to the state tax base unless otherwise prohibited by federal law.”

As of Sept. 2014, 44 states and DC passed law to conform SSTA: ALA?

(C) Non-compliance - for instance Small stores may collect sales tax

but not submit or under-report Large stores may find ways to avoid

collecting and submitting sales tax Stores may ship products to out of

state addresses for customers to pick up later

Although legal, rising food stamp uses lower tax revenues!

P. Cary Christian, “Why Evasion Under a National Sales Tax Would Explode the Tax Gap: Lessons Learned from the States,” IRS-TPC Research Conference, June 20, 2013

Direct quotations on non-compliance “the real issue is not sales tax evasion; it is

sales tax theft by the parties who collect the tax as an agent of the state” (p. 143)

“Sales tax theft is primarily a small business problem” (p. 145)

“Larger businesses tend to rely instead on exploitation of the ‘gray areas’ of the law to reduce liabilities, which may in some cases rise to the level of evasion” (p. 145)

Continuing… “it was not uncommon to find individual

businesses stealing 90 percent or more of all sales tax collected” (p. 146)

“Many states boast of voluntary sales tax compliance rates of 95 to 99 percent, but … these quoted rates are generally based on delinquent returns” (p. 147)

[excluded from 95-99 are] “taxpayers who collect taxes and report smaller amounts of tax to the state” (p. 147)

“those always file returns on time”(p 147)

Tallahassee Democrattallahassee.com, Oct. 14, 2014

“Florida Department of Revenue investigators determined that Tallahassee business owner Rodney W. Watts took more than $7,300 in sales tax he collected [March 09 to July 14] and never remitted to the state. Watts, 57, was arrested Tuesday on felony charges related to the theft of state funds and the failure to file six consecutive sales tax returns, according to DOR. Watts owns Southeast Digital Networks Inc., which sells office equipment and located on Capital Circle NE.”

(D) Impact of Retail Boom?

Sales tax revenues will increase above the trend in recent years..

The rising trend in sales tax will make leaders to proclaim that “we are doing a good job!” and

Hide all the problems of current sales taxation with no attempt made to solve them!!!

How is local support for BCPSS?

National perspective

Alabama ranks 44th in local revenues per ADM, 43rd in local expenditures per ADM. (Source: U.S. Department of Education, National Center for Education Statistics, Common Core of Data, "National Public Education Financial Survey," 2010-11, v.1a)

If BCPSS is not ranked high within Alabama, the current low ranking of BCPSS indicates a near bottom ranking when compared to school systems for the rest of the country.

Let me introduce:Property tax equivalent (PTE)

Hypothetical property tax rate based on the assumption that the amount derived from property tax and all other tax sources (e.g. penny tax) is ALL coming from property tax:

 PTE = (RPT + ROS)/AV

Property Tax Rate

Property Tax Equivalent

High School Graduates

College Graduates

Per Capita Income

Unemployment Rate

0 10 20 30 40 50 60 70 80 90 100

87

50

3

6

5

7

Rankings of Baldwin County (67) and Baldwin County Public School System (135)

Now, let me introduceFoundation (Equity) Program

Equity collect 10-mill in local property tax distribute to all school systems solely

based on ADM BCPSS FY 2014 (applies to 10 mills)

$127.23 per ADM (6th highest out of 134 reporting systems)

received only $64.18 per ADM

Property Tax Rate

Property Tax Equivalent

High School Graduates

College Graduates

Per Capita Income

Unemployment Rate

0 10 20 30 40 50 60 70 80 90 100

87

50

3

6

5

7

When adjusted for equity funding, the 50th and 87th Rankings should be LOWER!

To summarize rankings of local support for BCPSS

Pre-referendum without equity funding Property tax 87th

Property tax equivalent 50th

Pre-referendum with equity funding Property tax below 87th

Property tax equivalent below 50th

Post-referendum rankings I do not believe you want to know!

When County-Wide Public Schools Are Under-Funded…

Two possible developments Multiple public school

systems within a county More private schools

Jefferson County?

Is it bad to have multiple school systems? Advantages (1)

Some systems in wealthy neighborhoods will have greater local support

Disadvantages (3) Some systems in poor

neighborhoods suffer lower support! Costly due to diseconomies of scale Foundation program will take a

greater bite out of local taxes! …

10-0

4

02-0

5

06-0

5

10-0

5

02-0

6

06-0

6

10-0

6

02-0

7

06-0

7

10-0

7

02-0

8

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8

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8

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9

06-0

9

10-0

9

02-1

0

06-1

0

10-1

0

02-1

10

500

1,000

1,500

2,000

2,500

3,000

Passengers per Cruise by Month(October 2004-March 2011)

Capacity: 1452 till 2009 to 2052 in 2010

Katrina shelter

Section IV

Survey of 2,546Cruise Passengers in Mobile

June 2008 to February 2011

Alabama; 16.3

Georgia; 13.0

Tennessee; 12.5

Mississippi; 7.6 Florida; 7.3

Arkansas; 5.6

Kentucky; 4.3

Louisiana; 4.3

Missouri; 3.9

Illinois; 3.6

Ohio; 3.5

Indiana; 3.5

All Other; 14.6

Top 12 States in Percent

AlabamaGeorgiaTennesseeMississippiFloridaArkansasKentuckyLouisianaMissouriIllinoisOhioIndianaAll Other

*Alabama excludes Mobile & Baldwin Co.

Escambia (FL)17%

Jeffeson (AL)16%

Madison (AL)13%

Okaloosa (FL)10%

Shelby (TN)9%

Cobb (GA)8%

Davidson (TN)8%

Shelby (AL)7%

Gwinnett (GA)7%

Knox (TN)6%

Top Counties of Passenger Origin

Escambia (FL)Jeffeson (AL)Madison (AL)Okaloosa (FL)Shelby (TN)Cobb (GA)Davidson (TN)Shelby (AL)Gwinnett (GA)Knox (TN)

*Mobile & Baldwin Co. excluded.

fam/friends

trevel agent

welcome c.

web/internet

brochure

newsp/mag

TV ad

billboard

0 200 400 600 800 1000 1200 1400 1600

903

696

24

1467

95

17

33

13

Sources of Information used by Passengers of Cruise

Quality of Life

Internet of Things (IoT)

Network of physical objects or "things" embedded with electronics, software, sensors, and network connectivity, which enables these objects to collect and exchange data.

Allows objects to be controlled remotely across existing network infrastructure, creating opportunities for improved efficiency and economic benefit.

Valuable Source of Local Data: ALL FREE Semoonchang.com – Just Click!

Key data for Mobile (& Baldwin) Counties Shows contact information to semoon

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