Volume 6 Number 6 February 6, 2009
The sports industry has a significant impact on Florida’s economy, generating $36 billion annually and employing 400,000 Floridians around the state. This week’s Super Bowl XLIII in Tampa was no exception: 100,000 visitors spent approximately $150 million on hospitality and other tourism-related activities.
That figure is actually $30 million less than what it was once predicted to be; more recent estimates were altered based on an overall decline in spending due to the nation’s economy. However, it still provided a significant, much-needed economic boost to the Tampa Bay area, and it reaffirms the importance of our state’s ability to attract such big-ticket events.
As we head into spring, we can also look forward to polo season, NASCAR, PGA tournaments, and spring training to stimulate local economies around the state. Next year, we can celebrate the good fortune of hosting yet another Super Bowl, this time in Miami. In these volatile economic times, it is good to know that Florida will always have one thing – ample sunshine – that continues to draw sporting events, and thus more tourism dollars, into our state.
Florida Chief Financial Officer Alex Sink was honored during the Palm Beach Voters Coalition Annual Dinner at the Marriott West Palm Beach. Fellow Cabinet members Attorney General Bill McCollum and Agriculture Commissioner Charles Bronson were also recognized.
The Voters Coalition is a 26-year-old, non-partisan Palm Beach County citizens organization dedicated to reducing apathy and involving people in the political process. They are respected for their interest in good government and for their objectivity as they strive to make people familiar with their government, the issues and officials.
CFO Sink was presented with a plaque inscribed, “In grateful appreciation for your dedicated and devoted public service to the citizens of Florida. We salute the civic and financial leadership you demonstrate. Your diligence, expertise and integrity as a champion for fiscal responsibility and accountability have earned the respect of your peers.”
On Tuesday, CFO Sink was the featured speaker for the Academy at FSU’s Noon Lecture Series. The Academy is an academic program for mature learners in conjunction with the Osher Lifelong Learning Institute at Florida State University.
Addressing the topic “Financial Challenges Facing Florida and Floridians,” CFO Sink spoke to the crowd of about 70 attendees about the state of the state’s economy. She noted the many challenges and tough decisions by state leaders in the wake of the 8.1 percent unemployment rate and plunging state revenues, and discussed the negative impact of draining trust funds as a means of balancing the budget.
CFO Sink also spoke about many of the consumer outreach programs happening in the Department of Financial Services that are especially important in times of economic downturn, including the Safeguard our Seniors (SOS) Task Force and the Florida Financial Action Team (FACT).
She encouraged attendees to check out www.FLTreasureHunt.org to see if they may have unclaimed property, which prompted one of the audience members to share her success story: after checking the Web site and discovering that she had unclaimed funds, the state mailed the woman a $1,000 check.
In the Q&A portion of the program, many of the attendees showed their concern for State Farm Florida’s recent decision to discontinue writing homeowners policies to Floridians. CFO Sink answered their questions and also referred them to the Department of Financial Services’ Web site for additional information.
State Fire Marshal Alex Sink would like you to know more about smoke alarms. Simply put, smoke alarms save lives and they should be in every home. They are instrumental in preventing injuries and minimizing property damage by detecting and alerting residents to fires early in their development. A person is twice as likely to die in a house fire if the home does not have working smoke alarms.
Here are some important smoke alarm safety measures to protect your home and family:
Recently, there have been questions as to whether ionization or photoelectric smoke alarms are more effective. Here is a list of the pros and cons of owning either type of smoke detector.
It is important to keep in mind that the best evidence has always indicated that either type of smoke alarm will provide sufficient time for escape for most people for most fires of either smoldering or flaming type.
James King, a Sarasota homeowner, is one of more than 26,000 Floridians whose home has been strengthened to better withstand hurricane damage with grant funds through the My Safe Florida Home (MSFH) program. The MSFH program has provided nearly 400,000 free wind inspections and approved nearly 39,000 grants to help homeowners harden their homes against hurricanes.
“We feel fortunate to have this grant and to have established a safer residence which not only benefits us but everyone else living within our community and in the state,” said King in a letter to Florida Chief Financial Officer Alex Sink, whose department oversees the program.
“State lawmakers created the MSFH program to help Floridians better protect their property and families against catastrophic storms and financial devastation,” said CFO Sink. “In two years, we have achieved this goal and more by fostering a culture of mitigation in our state.”
In 2007, the Florida Legislature directed the MSFH program to inspect at least 400,000 site-built, single-family, residential properties and provide grants to at least 35,000 qualified homeowners by June 30, 2009. The first-come, first-serve program received over 425,000 requests for the free wind inspection.
To date, over 391,000 Floridians have received a free wind inspection and report through the MSFH program. The free report suggests ways homeowners can harden their homes against storm damage and details if they are eligible to save money on their wind insurance premiums. Of homes inspected, approximately 56 percent of homeowners were eligible for an average savings of $220 on their hurricane insurance. The MSFH program expects to inspect 400,000 homes by March 1, 2009.
“We knew homeowners would be eligible for insurance discounts on their wind insurance premiums if they took steps to harden their homes,” said CFO Sink. “But we were delighted to find more than $46.9 million in potential insurance savings for Floridians based on the current structure of their homes. During these difficult economic times, an extra $220 in your pocket can go a long way.”
Chris Peeke, who lives in Lakeland, shared this comment about the inspection he received: “As a result of the My Safe Florida Home program, my more than $2,700 insurance premium was reduced . . . which will certainly help in our troubled economic times.”
To date, the MSFH program, with assistance from local governments and non-profits, has approved nearly 39,000 homeowners for mitigation grants. Of those approved, 26,383 homes have been strengthened with grant funds totaling $88 million.
CFO Sink has detailed the results of the MSFH Program in an annual report submitted to the Legislature today. For more information about the program or to obtain a copy of the annual report, log on to www.MySafeFloridaHome.com/education.asp.
With the economy down, staged accidents may be on the rise as some Floridians are tempted by fraud scams promising extra bucks. But Florida Chief Financial Officer Alex Sink, who oversees the Department of Financial Services (DFS) and Division of Insurance Fraud, warns that planning or participating in a staged accident can cost you more than you bargain for-- a minimum two-year prison sentence for starters.
CFO Sink on Friday reminded Floridians that they can actually earn more money reporting these scams than participating in them.
“If you are approached to participate in a staged accident, think before you act, and then call us,” said CFO Sink. “Fraud drives up the cost of insurance for all of us, and Florida’s families don’t need any extra financial burdens. If you provide information that leads to an arrest and conviction, you could make up to $25,000 – a lot more than you could ever make in one of these dangerous schemes.”
The department offers a reward of up $25,000, based on how much was or could have been stolen in a reported scheme, if the information leads directly to an arrest and conviction. Since the inception of the reward program in 1999, $201,000 has been paid in rewards, more than half of that for reported Personal Injury Protection (PIP) fraud schemes involving $10.5 million in potential insurance losses.
A typical scheme involves participants staging an accident to send “patients” to medical clinics in order to collect PIP insurance payments from insurance companies. CFO Sink’s Division of Insurance Fraud, a statewide law enforcement agency, has made nearly 1,500 PIP fraud-related arrests since 2003 and won nearly 1,000 convictions.
In late January, four Palm Beach County men were arrested on eight counts each of Insurance Fraud, eight counts of Third-Degree Grand Theft, and one count of Staging an Accident, a second-degree felony. Nidal Jaber rented a U-Haul and is accused of enlisting three other men to participate in a 2006 staged accident. Jaber was charged on December 12, 2008, at the Dade County Jail, where he was already in custody. DFS Detective Vista Beasley arrested the other participants: Charles Camacho on January 22, 2009, William Resnick on January 26, 2009, and Alexander Garcia on January 27, 2009. More than $38,500 in insurance payments were issued on the fraudulent claims. If convicted on all charges, they each face a minimum of two years and as many as 15 years in prison. The investigation continues into other accidents Jaber allegedly organized.
Also late last month, DFS detectives arrested Gerardo Melenez for his involvement in a 2006 staged accident. Melenez, a paralegal, worked with a clinic owner who recruited participants for a staged accident. Melenez is accused of directing participants on how to discuss their injuries with the insurance company and clinic. More than $298,000 in false claims were filed for PIP, bodily injury and property damage. DFS detectives previously arrested Melenez in June 2007 as part of Operation TGIF, and he is still pending trial on those charges, which included conspiracy to commit racketeering. He now faces a minimum of two years and as many as 25 years in prison if convicted on all charges.
Insurance fraud is estimated to cost the average Florida family as much as $1,400 a year. To report insurance fraud, Florida residents should call 1-800-378-0445, out-of-state residents should call 1-850-413-3261, or log onto https://secure.fldfs.com/fraud/nonIndustryRSF.asp.
DFS investigates various forms of fraud in insurance, including health, life, auto, property and workers' compensation insurance, and according to the Coalition Against Insurance Fraud, leads the nation in the recovery of insurance fraud-related losses through court-ordered restitution. In the fiscal year that ended June 30, 2008, cases presented for prosecution by DFS’ Division of Insurance Fraud resulted in $94 million in court-ordered restitution, more than five times greater than the operating budget allocated for the division.
On January 29, CFO Sink spoke at the Urban land Institute Southwest Florida Chapter’s 12th Annual Winter Institute. Approximately 250 professional and political leaders attended the half-day program, which featured trends and directions in real estate development as explored by experts from around the country.
In tune with the theme “Forward Steps to a Fantastic Future,” CFO Sink suggested ideas including re-thinking land use policies as well as considering new affordable housing options. She also stressed the need for reducing the state’s exposure to risk from the CAT fund and Citizens’ property insurance.
Florida CFO Alex Sink, speaking to the Ft. Myers Chamber of Commerce at Florida Gulf Coast University, encouraged local leaders to continue making diversifying their economy a priority. CFO Sink congratulated Lee County’s leaders for the strides they’ve made in moving away from a real estate and construction economy.
“Your recently announced Financial Incentives for Recruiting Strategic Targets, or FIRST program is evidence of the innovation and entrepreneurial spirit needed to reinvent Florida’s economy and prepare our state for opportunity when the economy turns around, ” CFO Sink told the audience.
The FIRST program is a $25 million investment in bringing high-tech, high wages jobs to Lee County and will complement the work being done at FGCU. The university recently brought online a solar farm large enough to provide nearly all of the electricity needed to run FGCU, a first in Florida’s university system.
CFO Sink also congratulated the group on the news that the Boston Red Sox have selected the area for a summer training facility. “This is good for tourism and that means it’s good for Lee County and good for Florida,” CFO Sink added.
Senate Bill 44A requires the Chief Financial Officer “consider methods to ensure that state agencies receive the maximum amount of federal funds to which the state is entitled based on the services it currently provides” and also requires state agencies to review their operations to ensure that the state maximizes its receipt of federal funding.
An initial report is due to the Legislature by March 3, 2009. Click here to read the attached letter from CFO Sink to Florida’s agency heads, asking for information regarding agency programs receiving federal funding.
Florida CFO Alex Sink joined Miami-Dade Mayor Carlos Alvarez, Miami-Dade County State Attorney Katherine Rundle, leaders of the South Florida Chambers of Commerce and local business leaders for an economic summit on bolstering the area’s sluggish economy in the current economic downturn.
In remarks to the group, CFO Sink reinforced the contributions of entrepreneurs and people with dreams of building their own businesses, in the growth and development of Miami and all of South Florida.
“Miami and South Florida are Florida’s gateway to international trade and investment,” said CFO Sink. “This important part of our state has always drawn people here for its natural beauty, diverse culture and ability to support ‘serial entrepreneurs.’ The key to our recovery is reinventing Florida once again, and Florida’s business leaders are just the folks for the job.”
On left, Miami-Dade County State Attorney Katherine Rundle and CFO Alex Sink.
CFO Sink also told the assembled group that the challenges of the global economic slowdown and its impact on Florida make it imperative for them to work together and communicate with their elected officials at all levels about prioritizing how tax payer dollars are spent to stimulate the economy.
State Farm Florida risks insolvency if it continues writing property insurance here, according to what company executives told the House Insurance, Business & Financial Affairs Policy Committee on Tuesday.
The insurance company told Florida policyholders last month that it planned to leave the property market in Florida, canceling business with some 1.2 million customers over the next two years.
The attached letter from CFO Sink to State Farm Florida urges the company to let its insurance agents have the ability to place policyholders with any licensed property insurance company for which the agent has an appointment.
The Florida Office of Insurance Regulation (Office) today released a report
In its simplest terms, STOLI is a plan to coax or entice someone to apply for a life insurance policy using fraudulent means for the benefit of speculators who seek to profit by purchasing a life insurance policy on a stranger. Most STOLI transactions involve seniors, who can be victimized by participating in these transactions.
“STOLI schemes often rely on misrepresentation, falsification or omission of material facts in the life insurance application,” said Insurance Commissioner Kevin McCarty. “There are undisclosed risks to our seniors who participate in these transactions.”
Three critical ways in which Florida seniors may be adversely impacted include the following:
In a traditional life insurance purchase, an “insurable interest” exists between the policyholder and the policy’s named beneficiaries. For example, an individual has an insurable interest in his own life, in that of his spouse, and in that of his business partner.
To the contrary, in a STOLI transaction, there is no insurable interest. Seniors are induced to purchase the life insurance, usually receiving some incentive, often a cash payment for buying the policy. In most cases, the “stranger” even pays the premium for the policy. Under the STOLI agreement, the policy is later “sold” to the stranger, who is paid the proceeds of the policy upon the death of the insured.
STOLIs often are viewed as being similar to viatical settlements; and in many ways they are, except that in a viatical settlement, the policy is initially purchased in good faith. A legitimate insurable interest existed at the time the policy was purchased.
The Office held a public hearing Aug. 28 to solicit comments that served as an important foundation for this report and the legislative suggestions. A copy of the hearing transcript is included with the report.
For a complete look at the Office’s efforts on the STOLI issue, please visit our Web site at: http://www.floir.com/stoli.aspx.
About the Florida Office of Insurance Regulation
The Florida Office of Insurance Regulation (Office) has primary responsibility for regulation, compliance and enforcement of statutes related to the business of insurance and the monitoring of industry markets. The Office protects Florida consumers through regulatory oversight of: insurance company solvency, policy forms and rates, market conduct performance and new company entrants to the Florida market. For more information about the Office, please visit www.floir.com
Buy your tickets early to save. Book at least two weeks ahead, preferably three, and at least 30 days for international flights.
Be flexible with your travel dates. A day or two leeway on each end of your trip can save you money. Booking services vary in the ability to consider flexible days, so check around.
Mid-week can find a cheaper fare. Weekend flights are usually more expensive because most people are flying on the weekends.
Using a nearby airport sometimes gets you cheaper airfares.
Check the round-trip price even if you're flying one-way. Sometimes it is cheaper to buy a round trip than a one-way. But make sure that the return leg is the one you may not use - your ticket may be cancelled if you no-show for the first flight.
Avoid busy holiday dates. When the most people are traveling, the fares are most expensive.
Web sites search and display in different ways. When the round-trip is bundled, it is more difficult to choose the time of day you would like to travel. Choosing each part of the trip on its own is an easier way to plan.
Look at all of the Web search sites to find your perfect plans. And remember that the airlines' own Web sites are competitive these days, which make frequent flier miles easy.
Last week’s e-tip provided some basics on composting. This week’s article addresses where to locate a pile and how to start a successful pile.
Remember, if you mix the right combination of 25 parts of “brown stuff” to one part of “green stuff” the organic matter will rot. However, a well-chosen and correctly sized site and will speed up the process. The main thing you should consider is finding a level, well-drained area. You want to build the pile over soil or lawn rather than concrete or asphalt . This will give you the advantage of earthworms and beneficial microbes that will migrate up and down the pile, depending on the season. Although most of Florida doesn’t experience freezing temperatures, having a black bin can help trap solar radiation during any cold snap. Keeping your pile higher in the winter also helps retain the heat generated from decomposition.
Composting can range from passive, where you allow the materials to sit and rot on their own, to highly managed, where you intervene in the process to speed up decomposition. An eager gardener may choose to intervene to get good soils for the garden while a family wanting to get rid of kitchen scraps and be environmental may choose the passive approach. The eager gardener will want to turn the pile occasionally to provide air, will want a thermometer to determine whether the pile is too hot or cold, and will want to water the pile to keep the right amount of moisture. Tending to the compost pile in this way as well as adding new shredded organic materials regularly, can produce compost in as little as three to four weeks. On the other hand, a passively maintained compost pile can take between one to two years to create humus. But so long as new material is always being added, even with a passive pile, once you get the pile going you should produce a few cubic feet of compost yearly.
Irrespective of which method of composting is used, the composted material will be available at the bottom of the bin or pile. When it’s ready, shovel the bottom section into a wheelbarrow and add it to your garden beds for a wonderful, free addition to your soil!
Some of America’s most cash-strapped taxpayers – those from low- and moderate-income families – spent about $900 million in the latest year recorded for what is almost always an unnecessary product: the so-called "refund anticipation loan" at income tax time.
With the opening of another tax season, consumer advocates at the National Consumer Law Center (NCLC) and Consumer Federation of America (CFA) are warning taxpayers to steer clear of refund anticipation loans (RALs), one of the most avoidable tax-time expenses.
New figures reveal that RALs drained the refunds of 8.67 million American taxpayers in 2007, costing them $833 million in loan fees, plus over $68 million in other fees. In addition, another 11.2 million taxpayers spent $336 million on related financial products to receive their refunds.
RALs are bank loans secured by the taxpayer’s expected refund -- loans that last about seven to 14 days until the actual IRS refund repays the loan. That’s a good indication of just how needless most RALs are: Most taxpayers could have their refund in two weeks or less without the costly loan.
To get your refund fast, file electronically and have your refund direct deposited to your own bank account, Generally you will receive your refund this way within eight to 15 days.
Using the most recent data available from the IRS, NCLC and CFA calculate that about 8.67 million taxpayers received RALs in the 2007 tax filing season (for tax year 2006). For that year alone, about one in 15 tax returns involved a RAL.
In addition, 11.2 million taxpayers received a refund anticipation check (RAC) in 2007, at a cost of about $336 million. Taxpayers who have a bank account can avoid the expense of a RAC (generally about $30) by having their refunds direct deposited into their account, which is just as fast. H&R Block customers who received the Block Emerald Card in a prior year can have their refunds direct deposited onto those cards, and avoid a RAL or RAC.
With RACs, the bank opens a temporary bank account into which the IRS direct deposits the refund check. After the refund is deposited, the bank issues the consumer a check and closes the temporary account. Also, if a taxpayer’s RAL application is rejected, the taxpayer is automatically given an RAC at a cost of $30 or so, even though the taxpayer may not have asked for it.
How much will taxpayers pay if they get a quickie tax loan? The price of a RAL includes several components –
A loan fee ranging from $34 to $130, which is usually broken down into a "Refund Account" fee and a "Bank Fee." Some tax preparers may charge one or more separate add-on fees, sometimes called "application," "administrative," "e-filing," "service bureau," "transmission," or "processing" fees. Add-on fees can range from $25 to several hundred dollars. Add-on fees are not charged by H&R Block, Jackson Hewitt or Liberty Tax.
In general, the effective annual interest rate (APR) for a RAL can range from about 50 percent to nearly 500 percent. If a $40 add-on fee is charged and included in the calculation, the effective APRs range from about 85 percent to nearly 1,300 percent.
RAL loan fees can vary significantly. H&R Block and JPMorgan Chase generally have lower RAL fees. In fact, they claim that these loans bear an effective APR of 36 percent, which is the traditional small loan rate cap in many states. However, these figures do not include the "Refund Account" fee, which they claim is for the temporary account into which the taxpayer’s refund is later deposited to repay the RAL. If the Refund Account Fee is included, it more than doubles the APR.
Nonetheless, there are some real and significant price differences between various RAL outlets. For example, a RAL in the amount of $3000, which is typical, costs from $62 to $110. Taxpayers should avoid RALs in the first place; but if they insist on getting one, they should shop around for RAL costs before selecting a commercial preparer.
Tax preparers and their bank partners also offer an "instant" same day RAL for an additional fee, from $25 to $55. Some of the APRs for an instant RAL of around $1,500 are 185 percent (Block) and 211 percent (Chase).
Finally, consumers who do not use one of the commercial chains should also ask if the preparer charges any add-on fees. Mystery shopper testing conducted during the 2008 tax season revealed that some independent preparers charge several add-on fees for both RALs and RACs. One preparer charged $324 in add-on fees; several others charged $45.
Last year, we reported the demise of "pay stub" and "holiday" RALs. These were RALs made prior to the tax filing season, before taxpayers received their IRS Form W-2s and could file their returns. Unfortunately, this demise was short-lived. Both H&R Block and Jackson Hewitt are promoting loans made before the tax season based on anticipated refunds.
Jackson Hewitt’s version is called the iPower Line of Credit, up to $500, issued by MetaBank. MetaBank charges a 1.5% fee for the first advance from the line, and a 10 percent charge per advance thereafter, plus 18 percent periodic interest. If a taxpayer borrows the entire $500 in the first advance, she would be charged a $57.65 fee. If the iPower loan is repaid in one month, the total fee would be $65.15. A one month, closed-end loan with the same loan amount and fee would have an APR of 177 percent.
H&R Block’s version uses its Emerald Advance Line of Credit. This is a line of credit that Block had offered previously to its Emerald Card customers, and is available for some customers on a year-round basis, for up to $1,000. This year, however, Block explicitly promoted the Emerald Advance as a tax-related pre-season loan and made it available to new customers. The Emerald Line of Credit carries an interest rate of 36% plus an annual fee of $45. For a $500 advance repaid in one month, the total fee is $60. A one month, closed-end loan with the same loan amount and fee would have an APR of 158%, if the annual fee were to be included in the finance charge (which Truth in Lending does not require). If however, the borrower keeps the line open after tax season, the interest rate is lowered to 9 percent, but requires either payroll direct deposit to Block’s Emerald Card or a savings account linked to the card.
RALs based on pay stubs present risks to taxpayers, because they are based on estimated tax returns before the taxpayer receives final tax information from a W-2. For example, before filing the tax return, the preparer will not have any information if the IRS is planning to seize all or part of the taxpayer’s refund to pay a child support or student loan debt. H&R Block does state that it conducts underwriting for its loans based on considerations other than the estimated refunds.
In addition, Jackson Hewitt in the past appeared to force pay stub RAL borrowers to return to the same office to have their taxes prepared, preventing these taxpayers from going to competitors or seeking free volunteer assistance. The MetaBank agreement appears to assume the taxpayer will return to Jackson Hewitt for tax preparation and requires the borrower to have her RAL, RAC or tax refund loaded onto the iPower card. In addition, Jackson Hewitt may be charging a $25 or $35 "tax planning fee" for iPower loans.
NCLC and CFA issued a report on pay stub RALs in November 2006, entitled Pay Stub and Holiday RALs: Faster, Costlier, Riskier in the Race to the Bottom.
NCLC and CFA will be publishing their annual comprehensive report on the RAL industry, regulation, and litigation later in February 2009. The report will be available on NCLC’s website at www.consumerlaw.org or on CFA’s website at www.consumerfed.org.
National Consumer Law Center® is a non-profit organization specializing in consumer issues on behalf of low-income people. NCLC works with thousands of legal services, government and private attorneys, as well as organizations, who represent low-income and elderly individuals on consumer issues.
CFA is a nonprofit association of some 300 pro-consumer groups, with a combined membership of 50 million people. CFA was founded in 1968 to advance consumers' interests through advocacy and education.