To the Editor:
I read, with interest, your article in the October 2000 issue of
fedgazette concerning payday
loans. The State Bank of Eagle Butte has operated a commercial
bank on the Cheyenne River Indian Reservation for 40 years. A great
number of our customers have incomes below the median family income
level and a great number are below the poverty level. As some in
your article stated, these persons cannot weather even minor financial
Without spending a lot of time defending the pros and cons of
the situation outlined in the article, I can comment on a few issues
raised in the article. From my standpoint, it appears very true
that most customers do not care about the cost of credit. When you
are in danger of having your utilities cut off or putting food on
the table, obtaining the credit is the important issue, not what
it costs. In today's economy, trying to raise a family on even $40,000
in income is a struggle. I do not have any firm evidence, but my
experience indicates that most lower-middle- and low-income borrowers
are not seeking small-dollar loans for discretionary purchasesthey
are mainly for basic needs such as heat, food, clothing, etc.
While it is true that the "fringe banking" businesses provide
services not readily obtainable through traditional banking channels,
I question the need for the outrageous fees charged. I think we
have our share of collection problems. We also have the additional
problems of dealing with a tribal justice system, which many times
is somewhat difficult to navigate.
The bank makes a lot of low-dollar loans, $25 and up. We charge
a minimum finance fee to help cover our paperwork expenses and interest
rates comparable to the national credit card rates. Our delinquency
rates are probably higher than most banks would accept. Our loan
losses are also probably higher. Overall, repayment is not as bad
as one might expect; although, we might work a little harder to
get repayment. The bottom line is that this particular segment of
our portfolio is profitable without resorting to "legalized loan-sharking."
My concern is that I fail to see the net benefit to the customer
if one has added one more burden to deal with for persons who already
suffer from inadequate incomes to provide even a small financial
cushion to deal with even relatively minor, unexpected expenses.
We can't help everyone, but I don't believe the "fringe banking"
providers do either. I am not one that believes in much government
regulation, but when something is so wrong and so unconscionable
as the rates charged on these services, some regulation must be
put in. In South Dakota, which has no usury rate, I don't believe
the Legislature ever envisioned this type of abuse. I was somewhat
amused at the comments by Mr. Busse of Advantage Loans in Rapid
City. While I did not quite understand how he arrived at the repayment
amounts he used, by my calculations, given the information presented,
he still generated at least $725 in interest on an initial loan
My observations and thoughts are my own and do not necessarily
reflect the position of the State Bank of Eagle Butte.
Martin G. Hersrud
State Bank of Eagle Butte (S.D.)
To the Editor:
Thanks for the interesting article in the October 2000 fedgazette
regarding regional airports.
I happen to have both feet in this one!
As a tourism specialist in a tourism community, I maintain an
ongoing interest in the role regional airports play in serving outstate
areas for the delivery of visitors to local communities. In fact,
we at the University of Minnesota's Tourism Center are currently
completing a study on barriers to increasing international visitation
to Minnesota and the role airports play in that regard.
I also happen to be a commissioner of the Grand Rapids/Itasca
County regional airport. We've been fortunate to see enough growth
in enplanements to put us over the 10,000 level, thereby giving
us access to federal dollars for airport improvements. We have a
new terminal, new ILS landing system (thanks to Rep. Oberstar, of
course) and a significant pent-up demand for hangar space from our
I will be very interested to see the January
issue where you explore, among other things, the role of government
subsidies. We have access to excellent federal and state (MNDOT)
grant programs offering capital improvement project assistance in
a 90/10 (fed/local) split or, in the case of Minnesota, 60/40 (MNDOT/local)
cost-sharing arrangement. These are very attractive incentives to
move ahead and either (1) take care of the ever-increasing requirements
being placed on airports by the FAA or (2) anticipate and make site
improvements driven by the competitive marketplace. As an example
of the latter, we are in need of a 1,000-foot runway extension to
accommodate the regional jets that are expected to eventually replace
the smaller Saab 340 prop-jets currently being flown into Grand
Rapids by Mesaba/Northwest Airlink.
As a commission, the dilemma we are increasingly seeing, however,
is the rising operations and maintenance costs associated with these
needed "assisted" system upgrades. The grant program monies generally
can only be used for capital expenditures. O&M increases must
come from increased revenue streams or local support (county and
city). Mesaba, as you implied in your report, has cut back service
here by one flight a day, so revenues aren't jumping ahead to keep
up with higher budget needs associated with the capital improvements.
Further, local support is always a hard sell. It is usually a lack-of-awareness
issue in elected leaders understanding the economic role a regional
airport plays and stepping up to the plate financially.
Enough said. I look forward to your upcoming coverage. If I can
be of any assistance, let me know.
Associate Director, Tourism Center
Extension Educator & Associate Professor
University of Minnesota Extension Service
Grand Rapids, Minn.
To the Editor:
I read your editorial
opinion concerning tax abatements in the July 2000 edition of
fedgazette and felt a need to respond.
As the former president/CEO of the nation's largest statewide
association of economic developers here in Texas and now in a small
town practicing what I used to preach, I can tell you that tax abatements
are sometimes a necessary tool in attracting good companies to Bastrop,
First, we need to call industrial tax abatements what they really
aretax phase-ins. An industry must eventually pay its full
share of taxes. In Texas, taxes can't be abated more than 10 years.
Usually they are phased-in much sooner. This is an excellent economic
development tool when used properly.
True tax abatements are items such as: homestead exemptions, agriculture
exemptions and property tax freezes for persons over 65 years of
age. Those are real tax abatements. They go on forever. I'm certainly
not for eliminating those "tax abatements" and I would hope others
Remember, farmers and ranchers are business owners. If they had
to pay the full assessed value of their land, it would put them
out of business. For instance, agriculture-exempt land in our area
is on the tax rolls for $15 to $70 per acre! None of this land could
be purchased today for less than $1,000 per acre. However, if we
do away with "tax abatements" for companies, wouldn't it be correct
to eliminate this exemption also?
Recently a large electric power company asked for a 50 percent
tax abatement for the first couple of years on their new gas-fired
power plant they have planned for our area. They won't be employing
many people, so the impact to schools will be minimal and our schools
do not abate taxes anyway. This is a win-win situation for the county.
They get an additional $500 million added value to the tax rolls
and the company gets a small tax break until they can start selling
In reality, property taxes are a poor way of taxing our citizens,
but it is the best system that is available currently in Texas.
We don't have personal or corporate income taxes, and sales taxes
can't provide enough revenue stream to support government. Besides,
sales taxes are a regressive tax that hurts poorer people much more
Thanks for the opportunity to "vent." I wish the nation had a
better system for economic development incentives, but doing away
with tax abatements is not the answer at this time. We also need
to completely restructure the federal income tax system, but that
probably won't happen either.
Joe D. Newman
Bastrop Economic Development. Corp.
To the Editor:
I suppose it is a bit unusual for a professor of engineering to
be a frequent reader of the fedgazette, but I find
the paper to be both very useful and quite stimulating. I would
like to add a couple of additional considerations to Art
Rolnick's comments on development subsidies that appeared in
the July issue. I agree with Dr. Rolnick's conclusions, in part
because of his own arguments but also because of two point that
were not directly mentioned:
A big problem with development subsidies is that they frequently
go to the wrong companiesoften to companies short of money in
part due to their own ineptitude. Northwest Airlines is a case in
point. It has been nearly 10 years since the leveraged buyout and
the company still has a tangible net deficit of nearly $1.3 billion.
What probably should have happened is that Minnesota should have let
the company succumb to the natural consequences of inept, irresponsible
management and then work out a more cooperative program with some
qualified strategic partner. As it turned out, Minnesota provided
a mechanism to salvage the investment of short-term opportunistic
and not very capable investors while the citizens of the state were
rewarded with some of the highest ticket prices in the nation.
Rural communities will be at no disadvantage if developmental subsidies
are constrained. Our family just returned from a visit to 11 Eastern
states from New Hampshire through Virginia. We visited New York, Boston,
Baltimore, New Haven, Philadelphia and Providence. There is no natural
tendency for industry to relocate to any of these places. Manufacturing
employment is declining at roughly 20 percent per decade in most of
them. At the same time, what manufacturing employment gains that we
have are primarily in rural, or semi-rural, communities. I do wonder
what will happen to large core cities as their industrial employment
wanes even further, but I do not worry about rural communities being
at a disadvantage if developmental subsidies are curtailed.
Thank you for your time. The fedgazette is a great
Frederick M. Zimmerman
Professor of Engineering
University of St. Thomas
St. Paul, Minn.