A1 A1
Free
AP
Mnuchin and Powell push differing priorities to aid economy

WASHINGTON

Facing the gravest U.S. economic crisis in decades, Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell offered Congress contrasting views Tuesday of what the government’s most urgent priority should be.

Striking a theme frequently pushed by President Donald Trump, Mnuchin warned that prolonged business shutdowns would pose long-term threats to the economy, from widespread bankruptcies for small businesses to long-term unemployment for millions of Americans.

“There is risk of permanent damage,” Mnuchin said.

Powell, by contrast, stressed, as he has in recent weeks, that the nation is gripped by an economic shock “without modern precedent” and that Congress must consider providing further financial aid soon to support states, localities, businesses and individuals to prevent an even deeper recession.

“What Congress has done to date has been remarkably timely and forceful,” Powell said. “But we need to step back and ask, ‘Is it enough?”

Their points of emphasis reflect the contours of a debate occurring across the country, among individuals, business people and political leaders, about when and under what circumstances the economy should reopen and what further help the government can or should provide.

Mnuchin and Powell offered their views at an oversight hearing of the Senate Banking Committee at which members of both parties questioned them about when their agencies will distribute more of the emergency aid that Congress provided in late March to struggling small businesses and households.

Powell said that a highly anticipated lending program the Fed is creating for small businesses should be operating by the end of the month. And in a turnaround, Mnuchin said the Treasury is now prepared to absorb some losses in that program, which is funded by Treasury. Doing so could enable the Fed to take on further risk with the program and help more struggling companies.

During the hearing, Mnuchin clashed sharply with Democratic Sens. Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts over the administration’s support for a phased reopening of the economy and over its reluctance to require that all companies that receive government aid keep their workers on the payroll.

Brown charged that the Trump administration was risking the lives of lower-income workers by supporting reopening efforts and was doing so simply to boost financial markets. He asserted that the administration hasn’t done enough to protect front-line workers — by, for example, ramping up viral testing — even as most states start allowing restaurants, stores and gyms to reopen.

“The administration wants to put more workers at risk to boost the stock market,” Brown said.

“Your characterization is unfair,” Mnuchin responded.

The hearing was the first in a planned series of quarterly oversight sessions focused on spending programs authorized in the $2 trillion federal relief package that is overseen by the Treasury Department and Fed. They include the $660 billion small business lending facility, known as the Paycheck Protection Program, as well as $46 billion in grants to airlines and $454 billion to support the Fed’s lending.

The Fed announced in March that it would set up the Main Street Lending Program, which will provide up to $600 billion in loans to medium-sized businesses that are too large to participate in the Paycheck Protection Program. The Treasury has provided $75 billion, drawn from the $454 billion set aside by Congress, to cover any losses from the Main Street program.

Mnuchin said that under some scenarios the Treasury could lose some or all of that $75 billion.

“Our intention is that we intend to take some losses,” he said.

The Fed has also said it will buy debt issued by state and local governments, which are facing plummeting revenues as the viral outbreak has eliminated tens of millions of jobs and slashed income tax and sales tax revenue. At the same time, states and cities are facing much higher health care costs.

Yet the Fed’s program will make it easier for governments to borrow in the municipal bond market. Powell, under questioning, said that states might need more direct help from the federal government to avoid laying off workers, with the unemployment rate, at 14.7 percent, already the highest since the Great Depression.

Mnuchin came under sharp questioning from Sen. Elizabeth Warren, who charged that he wasn’t doing enough to force companies that receive aid from the Main Street Lending program, as well as other aid provided by the Fed and Treasury, to keep workers on their payrolls.

The senator pressed Mnuchin to ensure that the loans include that requirement. When Mnuchin declined to commit to that change, Warren said, “You’re boosting your Wall Street buddies.”

Mnuchin told Warren that the legislation providing the funds includes restrictions on top executive pay and on company dividends and stock buybacks.

Mnuchin said in prepared testimony that so far, the paycheck program has processed more than 4.2 million loans for over $530 billion “to keep tens of millions of hardworking Americans on the payroll.” The loans need not be repaid as long as the borrowing business uses 75% of the money to cover workers’ paychecks.

But many small companies say the terms are too onerous. To have the loans forgiven, they must rehire all their employees within eight weeks of receiving the funds, even if they have little business or work for them to do. These companies argue that they might have to lay off their workers again at the end of the eight weeks — and may have little money left to help ramp up when business does return.

Mnuchin, pressed about those issues and about opening the loan program to more nonprofits, said his department was considering making changes.

One frustrated recipient of the small-business lending program, Brooke Sheldon, has so many questions about repaying her loan that she isn’t sure she wants to use the money.

Sheldon, a New York-based event planner whose corporate events this spring and New England weddings this summer have been canceled, is troubled by the rules governing the use of the loan money: In order for the government to forgive their loans, companies must use 75% of it for payroll. The remaining 25% is limited to expenses for rent, mortgage interest and utilities.

If Sheldon has to repay the loan, the first bill would be due in November, and she doesn’t expect her company, Lilybrooke Events, to have generated income by then.

“If I use the money for rent and then have to pay the loan back when I still don’t have income — especially not additional income to pay for back payments — I would rather have closed my office,” she said.


Free
editor's pick centerpiece featured
Apartment complex owners in Galveston County face soaring property tax values amid pandemic

GALVESTON COUNTY

Apartment owners, already struggling with tenants unable to pay their rents in the COVID-19 economy, say they’re also facing astounding increases in their property values, which will mean higher taxes.

It’s a double blow for many apartment complex owners in Galveston County who already are stretching their reserves thin, they said. Some worry increasing taxes combined with lost revenue will lead to foreclosures, they said.

For many multifamily complexes across the county, property valuations went up between 50 percent and 200 percent, according to a letter the Galveston County Apartment Association sent to the Galveston Central Appraisal District, an independent organization that determines the value of taxable property in the county.

“We believe these property value increases, during the worst economic crisis this country has seen since the Great Depression, is unconscionable and without merit,” according to the letter.

The letter, which the association sent last week, asked the appraisal district to reconsider its valuation.

Jerry Smith, managing director of Keener Investments, said the value of the company’s Galveston County properties skyrocketed. The company owns apartment complexes around the county and in Houston.

At The Breakers Luxury Apartment Homes, 8801 Monticello Drive in Texas City, valuation rose this year to $14.6 million from $10.1 million a year ago, a 45 percent increase, according to central appraisal district data.

Valuation of The Shore Apartments, 501 Davis Road in League City, rose to $12.5 million from $6 million, a 108 percent increase, according to data.

That means Smith’s escrow payments — the money he pays his lenders throughout the year to allocate to property taxes — will increase significantly, he said.

Smith has been lucky because many of his tenants have been able to pay rent, he said. In both April and May, he collected 10 percent less rent than in March, Smith said.

“If our economy doesn’t pop back into action by June, we are probably going to be in a rougher spot,” Smith said. “And on top of that, they’re doubling people’s property taxes.”

‘EVERYBODY NEEDS TO PROTEST’

The central appraisal district attributes the higher appraisals for apartment complexes to several factors, said Jeff Faulkner, director of commercial property.

The district appraised complexes too low in 2019 by about 15 percent to 20 percent, Faulkner said.

Last year, 15 apartment complexes sold in the county, and all of them sold for much more than the district had appraised them, Faulkner said.

“We had a couple apartments in League City that were significantly more than what we had them appraised at,” Faulkner said. “We didn’t have any choice but to rework our income model.”

Faulkner understands people are frustrated, especially with the pandemic, he said.

“We couldn’t just pick and choose,” Faulkner said.

For some property owners, high property taxes are even more of a worry than tenants not being able to pay rent, they said.

Richard Denson, vice president of Galveston Bay Properties, has been waiving rent for some of his tenants who lost their jobs and he’s tightening up expenses in response, he said. The company owns and manages about 50 rental homes and small apartment complexes.

“We’re not as worried about the COVID stuff as we are about property taxes,” Denson said.

Apartment owners who don’t agree with their assessed value should protest just like any other property owner in the county, Galveston County Tax Assessor-Collector Cheryl Johnson said.

The values are extremely high this year, and normally most people don’t protest the values, she said.

“Everybody needs to protest this year,” Johnson said.


Free
Explosion rocks Pelican Island tank farm, two injured

GALVESTON

Two people were injured in an explosion and fire Tuesday at a crude-oil tank farm on Pelican Island.

The fire was at the Pelican Island Storage Terminal, a tank farm near Texas Clipper Road, east of the Texas A&M University at Galveston campus, city spokeswoman Marissa Barnett said.

Firefighters from several agencies contained the blaze.

Tanks at the business are used to store a form of crude oil, Barnett said.

The two injured people were transported to the University of Texas Medical Branch for treatment, Barnett said.

Their medical condition could not be determined Tuesday evening.

Pelican Island is on the north side of the Galveston ship channel. It is the location of the Texas A&M University at Galveston campus and multiple industrial businesses.

Texas A&M University at Galveston issued a shelter-in-place order as a precaution because of the fire, school spokeswoman Rebecca Watts said.

The shelter-in-place order was lifted about 4:30 p.m., Watts later said.

Texas A&M University at Galveston has since July of 2013 filed 13 air quality complaints to the Texas Commission on Environmental Quality against the Pelican Island Storage Terminal, 3801 GTI Blvd., with the most recent being Sept. 5, 2019, according to records provided to The Daily News.

Publicly traded World Point Terminals, based in St. Louis, Missouri, owns Pelican Island Storage. The company owns, operates, develops and acquires terminals and other assets relating to the storage of light refined products, heavy refined products and crude oil. It generates revenue primarily from its fee-based storage and terminal services.

Refiners typically use World Point’s terminals because they prefer to subcontract storage services or their facilities don’t have enough storage capacity or dock infrastructure, according to the company.

World Point Terminal President and Chief Operating Officer Ken Fenton didn’t immediately return a phone call late Tuesday afternoon.

Ronnie Steelman, a local representative of the company, “wasn’t giving any comments,” an employee answering the phone said.

The Pelican Island facility has storage capacity of about 2 million barrels of oil and lists vacuum gas oil, bunker fuel and No. 6 oil among the products at the site.


News
Coming Friday

Parents and students share their appreciation for teachers who’ve gone above and beyond during the COVID-19 pandemic.


News
GOP leaders pooh-pooh proposal to freeze property values

GALVESTON

A proposal by Galveston County Judge Mark Henry asking state leaders to stop property value increases this year to help people struggling in the COVID-19 economy is getting little traction among lawmakers.

In some cases, the proposal has even drawn derision from top Republican officials, who say requests for relief should be made to local taxing entities, not the state government.

Henry, meanwhile, stood by his proposal and said he was frustrated that legislators have bragged about tax reform while failing to address quickly increasing property values.

“You say you’re providing tax relief, but not a single property owner in Galveston County believes you at this point,” Henry said. “If you can find anyone who’s happy that their assessment went up, they’ll be the first.”

Henry sent a letter May 5 asking Gov. Greg Abbott to use his emergency powers to freeze Texas property values at 2019 levels. Henry argued the COVID-19 pandemic, and a crash in oil prices, had created an unfair burden on Texas taxpayers.

If Abbott could freeze property values at last year’s levels, taxpayers might keep more money in their own pockets, Henry said.

Property values are half the basic calculation determining how much owners must pay each year in taxes to the county, cities, school and college districts, among others. When values increase, property owners end up paying higher taxes on their homes and commercial holdings even if tax rates remain the same or are cut slightly.

Henry sent the letter amid a burst of concern and anger from county property owners, who in April began receiving 2020 appraisal notices and getting an indication about what their property taxes would be later in the year.

Taxing entities, such as cities and school districts, don’t set their new tax rates until later in the year, as they complete their annual budgeting processes.

Abbott’s office did not respond directly to Henry’s request or to requests for comment this week.

A ‘HORRIBLE IDEA’

Other top Texas Republican leaders, however, have said Henry’s proposal is neither feasible nor in the interest of taxpayers.

Speaking to Edinburg radio show on May 8, outgoing Texas Speaker of the House Dennis Bonnen said Henry’s proposal was a “horrible idea.”

“My valuation doesn’t cost me one penny in property tax, his tax rate does,” Bonnen said. “The reality of it is, I want the value of my real estate to go up, and it’s time we quit playing this game in Texas and acting as if the most significant asset in most people’s lives, your home, becoming more valuable is a bad thing.”

Bonnen accused local officials of hiding behind appraisals to avoid discussions about tax rates.

Henry responded by pointing out that during his tenure as judge, Galveston County has lowered its tax rate every year. Despite that, the county’s tax revenue each year has generally increased because of increased property values and the revenue generated from new construction the county.

Henry accused Bonnen of “hiding behind his keyboard” and said he was glad Bonnen was not running for reelection.

“We have lowered tax rates, but there’s no way we can keep up,” Henry said. “We can’t lower the tax rate proportionate to the increase in the assessment.”

Galveston County’s population has grown from about 292,500 people in 2010 to about 342,000 in 2019, according to the U.S. Census Bureau. With that growing population has come an increase in housing and commercial development.

State Sen. Larry Taylor, a Republican from Friendswood who sits on the powerful Legislative Budget Board, also was skeptical that asking for the legislature’s help would be the fastest way for taxpayers to get relief.

LOOK TO LOCAL TAXING ENTITIES

“The legislature can’t do anything on it until we go back in session,” Taylor said. “The people who can still affect local tax bills are the local taxing entities.

“Some of the appraisals have been ridiculous. But if your appraisal went up 10 percent, the taxing entity can lower the tax rate 10 percent and it ends up being a wash.”

After Henry sent the letter, some local elected officials joined the call, while others have been skeptical of supporting the proposal.

Texas City Mayor Matt Doyle, for instance, said he feared the proposal would cost local school districts funding because of state policies that penalize districts that underestimate property values determined by the state comptroller’s office.

Instead of arguing about property appraisals, Taylor and others said residents’ complaints about property taxes should be focused on local taxing entities, which will set their tax rates later this fall.

State Rep. Mayes Middleton, a Republican who represents Galveston, has called on taxing entities to pledge to raise no new revenues from property taxes in the next fiscal year.

“It is the right thing to do to cut the tax rate to match the decline in the economy and let people keep more of their own money in their own pocket to recover,” Middleton said.

Although Abbott’s office didn’t respond to Henry’s request, it did respond to a similar request to freeze property valuations made by a group of Texas Democrats.

Like Henry did, the Texas Democratic Congressional delegation May 14 sent a request asking Abbott to freeze property values for the year.

In a public statement about the request on Tuesday, Abbott said he was opposed to intervening on property valuations.

“Property owners shouldn’t be saddled with rising property taxes while dealing with a pandemic,” Abbott said. “As a result, local governments, who set property tax rates, should find ways to reduce the tax burden on Texans.

“Whether we’re facing times of challenge or times of prosperity — raising taxes on the people of Texas is never the answer.”


Free
Charges upgraded to murder in cutthroat killing case

A Galveston man is accused of cutting his roommate’s throat and leaving his body on a Texas City sidewalk in January, police said.

Juan Carlos Ramirez-Vargas, 26, was charged Monday with murder in the death of Pablo Padilla, police said.

Blood-covered dollar bills and clothing and a series of incriminating text messages led police to charge Ramirez-Vargas with the murder, according to a criminal complaint released Tuesday.

Ramirez-Vargas previously had been arrested and charged with evidence tampering in connection to Padilla’s death. He has been in custody since January.

Padilla’s body was found on a sidewalk near a muddy field on 6th Street in Texas City at 7:15 a.m. on Jan. 14, according to the Texas City Police Department. He was found lying on the ground with a large wound to his neck, according to the police complaint.

According to the complaint, police identified Padilla by his fingerprints. Public records led them to an address on 52nd Street in Galveston, where he and several other people, including Ramirez-Vargas, rented rooms, according to the complaint.

Ramirez-Vargas was at the apartment when officers arrived to look for evidence, according to police. He told the officers he and Padilla had gone to two bars in Galveston the night before, police said.

Ramirez-Vargas was arrested after police reviewed security camera recordings from the bars and found his description of the night didn’t match what was on video, according to the complaint.

In interviews with police, Ramirez-Vargas denied he and Padilla had left a bar together, according to the complaint. Ramirez-Vargas told one detective he left the bar after Padilla made sexual advances toward him, according the report.

The security video showed the men leaving the bar together, according to the complaint.

After arresting Ramirez-Vargas, officers also found boots and pants hidden in his apartment that appeared to be covered in mud and blood, according to police. They also found blood-covered money in his wallet, according to the complaint.

A DNA test returned to police in April identified blood on a dollar bill and on a boot as Padilla’s, according to the complaint.

When police searched Ramirez-Vargas’ cell phone, they found texts to an unnamed woman in which Ramirez-Vargas said he had “killed someone” and feared going to prison, according to the complaint

Ramirez-Vargas was in custody at the Galveston County Jail on Tuesday afternoon, held on $375,000 bond, according to jail records.

Ramirez-Vargas has been placed on an immigration detainer, according to the records. The hold means that U.S. Immigration and Customs Enforcement had flagged Ramirez-Vargas as a person who might be in the country illegally.

Ramirez-Vargas is from Mexico, according to the Galveston County District Attorney’s Office.

Once the charges against Ramirez-Vargas are resolved and he is eligible to be released from jail, immigration authorities have 48 hours to take him into federal custody for possible deportation proceedings, officials said.

Ramirez-Vargas’ next scheduled court date is June 11, according to court records.


Free
School athletic programs in Galveston County can begin summer workouts June 8

GALVESTON COUNTY

High school sports took a small step toward normal Tuesday when the University Interscholastic League announced when schools could begin summer workouts.

The UIL’s announcement comes a day after Gov. Greg Abbott unveiled a second phase of the reopening of Texas, which included youth sports and summer camps being allowed to open and professional sports leagues hosting events without spectators by the beginning of June.

“UIL is aware of Governor Abbott’s May 18 announcement and is actively working with appropriate state officials to allow schools to begin limited summer strength and conditioning and marching band activities on June 8,” the UIL posted on its social media accounts Tuesday afternoon.

More details regarding guidelines and restrictions are being finalized and will be released to schools, the UIL’s announcement stated.

Dickinson ISD athletic director and head football coach John Snelson said he was surprised the UIL allowed the return of summer workouts this soon but was excited to be able to coach his student athletes once again.

“The kids and the coaches have been apart from each other for so long, and we’ve kind of gotten out of our routine,” Snelson said. “We’re really excited to get back together and get in that routine of getting better every day and building that camaraderie and team chemistry and getting back to work.”

Striking a delicate balance between safety and getting players prepared for their seasons under a hot Texas sun is nothing new to local coaches, but the coronavirus pandemic certainly adds a new wrinkle to the equation. While schools wait for forthcoming guidance from the UIL, athletic departments will be preparing to enact COVID-19 safety measures.

Those measures likely will include screening questions, temperature checks, coaches wearing face masks, daily sanitation of equipment and facilities, student-athletes bringing their own water or sports drink from home, social distancing and limitations on overall group size, as well as a set athlete-to-coach ratio.

“There’s a lot of planning to go through over the next three weeks to get everything ready so everybody knows exactly what needs to happen,” Galveston ISD athletic director Walter Fortune said. “And when that comes, we’re going to have to reteach the kids all of this because it’s not the same as it was before spring break.”

Although programs can be proactive in their preparation for the return of student athletes, there also are multiple questions the UIL will have to address.

“If they are going to let us in our weight rooms, then what are the limitations going to be,” Snelson said. “Are they letting us inside gyms, and if they do, then what are the limitations going to be? If we’re outside, what kind of equipment can we use? Those are just kind of the final touches that we’re working on.”

Once plans for a return to summer workouts are formed, they’ll go before school superintendents for final approval.