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updated 2:54 PM CDT, Jul 28, 2018

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Hara takes taxpayer anger over property taxes as opportunity to deliver several messages

Meetings with property owners angry about their taxes might usually be viewed as an intimidating experience for the elected official responsible for determining the taxes, but King County Assessor Lloyd Hara sees such contacts as merely an opportunity to educate his "customers."  

Hara, who will be running for re-election next November though he hasn't formally announced, says he generally finds that the taxpayer anger or apprehension is the result of misunderstanding of how property taxes are determined. So in addition to correcting misperceptions, he looks forward to such sessions as an opportunity for him to offer a couple of key messages that he's been delivering for years.

Lloyd Hara 

The first of those messages for such audiences is an attention getter: if you think your property taxes are too high it may be your own fault.  

Hara doesn't actually tell taxpayers that if they think their property taxes are too high they may have themselves to blame. But he does routinely tell groups he speaks before that a third to a half of property taxes are from special levies, taxes approved by voters to impose additional taxes on themselves to pay for everything from parks to schools to emergency medical services.

"People have more control over their tax bill than they often realize," says Hara.

Hara, who was first elected assessor in 2009 to fill the unexpired term of the previous assessor, has held more appointive and elective offices locally over a longer period of time than likely anyone. He was first appointed King County Auditor in 1969 at the age of 29, youngest person ever to hold that post. In that role he achieved national recognition for his work on performance auditing of government agencies.

He was elected four times between 1980 and 1992 as Seattle City Treasurer, honored with national awards for his performance in that role.  

Then he was appointed head of the regional office of the Federal Emergency Management Agency and, in 2005, was elected a commissioner of the Port of Seattle.

In his assessor role, Hara's department appraises all property in the county then places a value on each parcel and determines a tax per thousand dollars of value.

The information is then passed to the county treasurer, who proceeds to send out the tax bills to each property owner for the coming year.

Hara this month had a typical meeting with Bellevue residents who were upset because the values of their property had gone up dramatically and they were concerned about taxes going up in relation to value.

Hara explained that wasn't going to happen, noting that under state law, the total tax take in the county can't increase by more than 1 percent, although some individual property owners may, for several reasons, see their taxes go up more than others. And one of those reasons is special levies.

The average impact of special levies in Seattle is about 30 percent, Hara said, while in Bellevue special levies account for about 50 percent of the average residential property-tax tab. It's clear at some of Hara's taxpayer "customer" gatherings that the levy total is a shock to some listeners.

"Proposition 1, the ballot measure on parks, was a good example," Hara said. "Everyone loves parks. So do I. But they need to be looked at in terms of relative priority, as compared, for example, with public safety."

"Unfortunately, the capacity isn't there to do all things and if we just put up a single issue that's a high-visibility one, it can get approved by a big margin, as happened with the parks measure this summer," he added. "But if the voters had a package to choose from, that single issue might suddenly be less logical when viewed holistically."

"It' possible for something to be a good thing but yet not pass muster when looked at holistically," he said, praising the League of Women Voters for taking the broader view in opposing the parks measure, which will add as much as $148 per year for the average home in the county.

The second message Hara takes the opportunity to discuss with audiences, that government consolidation may reduce your tax bill, sparks little more than a yawn. But government reorganization needs to attract more attention from elected officials, and Hara's focus on the topic by discussing the issue with taxpayer audiences may help lead toward that greater legislative interest.

Hara has been a proponent of reorganizing government to create efficiency for taxpayers since, while working in the state budget office in the late 60s, he was involved in the effort to reorganize state government into what were characterized as "super agencies" that tried to consolidate agencies by program functions.

He's been a constant advocate since then of consolidating taxing districts, taking the view that regionalization, consolidating functions of various elective offices across local or even county boundaries, may be a way that taxpayers in smaller districts or counties may be better served.

Hara wonders "how many jurisdictions should there be that taxpayers are helping support? Could some services be merged into regional units? Can some be privatized?"

It's out of such discussions that new ways of doing things at the local-government level may emerge as lawmakers and policymakers cope with new funding realities.

The website for the Assessor's office has received recognition and it may include an unusual addition next year, for which Hara has passed the first hurdle, the funds being included King County executive Dow Constantine's budget. Now the King County Council must go along.

Hara, who says Chicago was the first city to put advertising on its property tax website, admits "certain officials thought it might look a bit cheesy," but he says "it doesn't make sense to overlook possible new sources of money," which he is initially estimating at a conservative $35,000 a year.

He's also seeking legislative approval again this coming session for the right to impose a fee on appeals of assessments by commercial property tax payers, which would help defray appeal costs for other taxpayers, who must foot the bill if they wish commence a challenge to their taxes.

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State crowdfunding legislation moves toward the implementation date despite SEC uncertainties

As criticism of the Securities and Exchange Commission's dawdling with its charge from Congress to implement crowdfunding through the federal JOBS Act grows to a chorus, there's now criticism emerging that the agency is seeking to disrupt the process for states like Washington that are creating intrastate crowdfunding.

The SEC critics, with increasing plausibility, contend that the agency has done its best to ensure that the federal JOBS Act won't come about as Congress intended.

And now that some states have given up waiting for SEC action, it seems that the federal agency is trying to put roadblocks in the way of frustrated state legislatures that have sought to find ways to have crowdfunding for startups work at the state level through selling shares to large numbers of people, typically via the Internet.

Washington is one of a dozen states that have decided nothing meaningful will come out of SEC machinations, prompting the Legislature last spring, after a year of preparation, to pass a bill that will permit entrepreneurs who are state residents to raise up to $1 million a year in small amounts from in-state investors.

The Legislature gave the State Department of Financial Institutions (DFI) until October 1 to put in place the rules and the process under which crowdfunding can be carried out and Bill Beatty, Director of Securities for DFI, says the agency "remains on track" to meet that deadline.

 

The department will have a hearing Thursday on the proposed rules and "will proceed to adopt the rules shortly after that unless we determine we need to make significant changes to the rules as currently proposed," Beatty said.

 

Joe Wallin, an attorney for Seattle-based law firm Davis Wright, predicts that entrepreneurs who are state residents will be able to begin selling shares to large numbers of Washington resident by the end of the year.

 

The legislation in this state and others was in reaction to what has transpired, or failed to transpire, at the federal level after Congress,

with an election-year flourish in the spring of 2012, passed the so-called JOBS Act, officially the Jumpstart Our Business Startups Act.

 

Then Congress turned it over to the SEC to enact rules to implement the law and gave the agency 180 days to put together the process for how entrepreneurs could fund their start-up companies, primarily via the internet, by selling equity to large numbers of average investors.

 

 

It soon became obvious to all but the most myopic, with one delay following another, that SEC Chairman Mary Schapiro had little interest in seeing the law come about, possibly because she was more concerned about protecting average investors than following the law's guidance toward funding entrepreneurs.

 

Now the SEC has a new chairman but there is a growing sense that the details of compliance, if and when the SEC finally acts, will be so onerous on entrepreneurs that the costs of starting to raise capital on the Internet will deter many if not most would-be entrepreneurs. Indeed the latest deadline for the rules to be established has passed and the regulators have not provided a new timeframe, now almost two years after the launch date Congress intended.

And now there is also a sense on the part of many crowdfunding supporters, including Wallin, that Congress, unless it has lost interest, may have to intervene to keep the SEC from removing or changing a number of securities rules that stand to burden in-state entrepreneurs who hope to raise funds in their states to launch businesses.

Wallin, who proposed the wording of the original state legislation and whose blog is viewed by many as the final word on what's happening with federal as well as state crowdfunding, worries that the SEC is trying to make it harder for states to do what Congress intended the federal government to do.

 

 

An example is in the fact that the state laws are not subject to the federal crowdfunding law because the companies raising the money are incorporated in those states and raising money solely from investors in those states. Congress created that specific exemption from federal law for intrastate offerings when it enacted the Securities Act of 1933.

However, the SEC has recently issued interpretive guidance on the intrastate exemption that says that if the company uses the internet to promote or discuss its offering then the offering is not an intrastate offering even if a company is incorporated in a particular state and all investors are in that state.

"This is nonsense and it needs to be corrected," says Wallin, who is seeking to stir an outcry from start-up supporters to demand that Congress get involved. "It's nearly impossible not 

 to use the internet to communicate any fundraising or community organizing event that involves these start-up businesses."

"Section 201 of the JOBS Act was a big help to entrepreneurs in that it allowed startups to talk publicly about their efforts to raise money, a process known as General Solicitation," Wallin notes."Unfortunately, the SEC put rules in place that discourage most companies from taking advantage of this new opportunity and Congress needs to restore the intent of its own legislation."

Wallin offers the following suggestion that can be forwarded to members of Congress by those seeking to use the Internet for crowdfunding of their startup:

"Please either pass a simple piece of legislation to fix this or direct the SEC to clarify or fix its intrastate crowdfunding decisions. Otherwise, by prohibiting the use of the internet in intrastate crowdfunding, the SEC is tamping down a nascent but important opportunity to cultivate local funding and entrepreneurship ecosystems before they even have an opportunity to develop."

It may well be time, in these final weeks of an election season in which most members of Congress are on the November ballot, to send a message that indifference and ineptitude on the issues of innovation and job creation won't be taken well by those who understand the role entrepreneurs play in economic health.

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Angel-investor group fears SEC will change accreditation rules and shrink angel ranks

Although the Securities and Exchange Commission (SEC) hasn't yet proposed an increase in the financial resources required for an individual investor to be accredited, the Angel Capital Association (ACA) fears such a move may loom ahead and has been pressing its members to collectively protest such a step.

The ACA sees the issue as having the potential to dramatically deplete the ranks of what are officially called accredited investors, individuals who are free to make the kind of high-risk investments that fuel the funding of financially risky early stage companies that are key contributors to job creation. All angels are accredited investors

Dan Rosen

The issue is front and center right now because when Congress passed the Dodd-Frank Act four years ago, it retained the long-time "accredited investor" threshold of $1 million net worth and $200,000 of annual income but ordered the SEC to do a quadrennial review of the qualifications. The first of those four-year reviews is to be due to conclude next month.

Angel-investor groups successfully overcame an attempt to include in Dodd-Frank a change that would have basically disqualified what by some estimates would have been up to 50 percent of angel investors by boosting the accredited minimums to $2.5 million net worth and annual individual income of $400,000.

But Congress did include in what is officially the Dodd-Frank Wall Street Reform and Consumer Protection Act a change to preclude primary residences from the $1 million-net-worth calculation.

The ACA website plays the job-creation card in preparing for a possible campaign by urging members: "Do you believe in preserving the health of early stage companies and their role in job creation? Then join the Angel Capital Association campaign to 'protect angel funding.'"

Dan Rosen, chairman of the Seattle-based Alliance of Angels and a longtime leader in ACA, says "a change to make the accredited investor definition more restrictive is exceedingly bad public policy."

"This is a time when America needs to unleash innovation and create exactly the kind of jobs that high-growth startups provide," argues Rosen, who until a few months ago chaired the ACA public policy committtee . "Angels fund most of these high-growth startups, investing well over $20-billion per year." 

"We are not financial institutions in New York or Boston, we are individuals in every major city and town in the U.S. who invest not only our money, but also our knowledge and experience, to help these high-growth startups get off the ground and flourish," wrote Rosen, who is CEO and president of Dan Rosen & Associates, a technology investment and advisory firm

Although the multi-part mission of the SEC includes helping facilitate capital formation, the agency makes clear its "investor protection mission" has become most compelling, particularly after the excesses that led up to the "Great Recession."

Thus there is an amusing bit of irony as the SEC may move to "protect" a major segment of the high-net-worth angel-investor category by removing their "accredited" status while preparing to remove protections for scores or "unaccredited" investors by opening the door for them to do crowd-funding investment in startups.

Crowd funding is a concept spawned by legislation known as the JOBS Act, passed by Congress four years ago to permit entrepreneurs or a start-up business to raise up to a $1million a year by selling equity on the internet to up to 500 "unaccredited" investors. Some described passage of the bill and its signing by the president as a "democratization of investments." In essence, Congress felt those across the financial spectrum should all have a chance to own a piece of a company.

The ACA says a survey of its 12,000 members, who are the most active angel investors in the country, found that if the definition of accredited investor was changed to add an inflation factor, which is the standard being urged by those pressing for a change, more than 25 percent of its members would fall below the new threshold. The inflation factor would relate to the inflation that has occurred since 1972, when the accredited regulation first came about.

ACA, whose campaign to bring pressure against the change includes form letter and email template on its website, says such a change would be "devastating," particularly outside the angel-heavy population centers of New York, California and Boston. It claims the number of angel investors across the country outside those three areas would fall by one third.

Even so, not all angels oppose raising the bar for individuals to quality as accredited investors.

Steven J. Schueth, president of First Affirmative Financial Network in Colorado Springs, who has been a leader in the sustainable and responsible investment industry for more than 20 years and created the prominent SRI Conference that rotates annually around the West, is one who isn't sure a change would be bad.

"With my fiduciary duty hat on, I could make the argument that an investor with only $1 million in liquid, investable net worth is probably too small to be investing in private deals," Scheuth said in an email exchange. "I don't think someone with only $1 million has any business playing in this game."

I have assumed that increasing the qualification for accredited investor might have a large impact on sustainable and renewable startups seeking investment and asked Schueth if there might be less S-R investing.

"Perhaps there would be, but would that be bad?  Maybe for entrepreneurs who are looking for capital from less-than-the-most savvy investors," he said. "But would it be bad for investors who now only meet the minimum accredited investor threshold?  Not in most cases.  There's a reason those rules were promulgated in 1972-to protect some people from themselves."

There are some investors who with some portion of their portfolio seek higher positive impact and care less about risk adjusted returns," Schueth added. "When I talk with these people, I try to help them think about making these kinds of investments out of their philanthropy budget; or at least know that the likelihood of making little or no financial return is a high probability."

I asked Schueth, whom I had quoted in previous columns because of his reputation in the sustainable and renewable investments arena, whether he thought it was interesting that while Congressional direction may guide a boost in what it takes to be qualified investor, crowd-funding is opening the door, also at congressional direction, to let everyone in.

"I don't believe I have ever heard anyone claim that Congress is a rational beast," he replied. 

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Oregonians find little they'd like to emulate in Washington's liquor-privatization initiative

There won't be a liquor-privatization initiative on the ballot in Oregon this fall and there seems to be a growing sense that Oregonians have decided Washington voters signed off on a bad deal when they passed Initiative 1183 in the fall of 2011, taking their state out of the liquor business.

Officially, the Oregon-ballot effort died last week because major grocery chains that wanted the opportunity to sell liquor said they were giving up on any hope of collecting the necessary signatures to out the initiative before voters this fall. Those proponents of the Oregon initiative said they will continue seeking privatization of liquor sales through the Legislature or by putting a measure on the 2016 ballot.

But as Oregonians look north across the Columbia River, they apparently perceive that what Washington voters bought themselves was dramatically higher liquor taxes, a dramatic rise in alcohol-related emergency-room visits and small businesses being squeezed out of business.

When Washington voters approved the privatization of liquor sales, they did so with the promise of lower prices. Instead, they got sticker shock at the checkout counter while the state got a $200 million windfall.

Meanwhile, many of Washington's independent spirits retailers and craft distilleries, viewed as important economic engines in many local communities, were being squeezed out of the market.

And perhaps significantly, Costco, which put enough money behind the effort to pass the Washington initiative that some media stories referred to the ballot measure as "the Costco initiative," decided not to participate in the funding for an Oregon initiative campaign.

One aspect of the fallout in Oregon from passage of the Washington initiative has apparently been some change in the approach of the Oregon liquor control agency, which some have described as "loosening a bit" in its relations with private liquor sellers. Some of those retailers contacted in one survey said the agency was "doing a good job."

Plus, the agency has made friends, in part, by leaving the distinct impression that it views part of its mission as an economic development role with small businesses involved in producing or selling liquor, in marked contrast to the fact the new world liquor order in Washington has made clear that basically there are two distributors that control the flow of liquor nationally.

That prompted one Oregon observer to remark "who is likely to do a better job for consumers, the state or two big national companies?"

Meanwhile, a recent study noted just what Washington residents bought themselves by passing the initiative.

The most striking part of the study focused on the increase in alcohol-related emergency room visits in King County, which was chosen because it had the most available data. In the 16 months following liquor privatization, more than 5,500 alcohol-related visits were made to emergency rooms, 50 percent more than they expected, and an increase most significant among teens and young adults.

Plus there are now four times as many liquor outlets in Washington state as there were before the initiative's passage.

I am not really an objective observer in this discussion since I voted against the initiative, solely because I vote "no" on any complex initiative, as this one was. I have voted for only one initiative, a measure years ago that rolled back a sales-tax increase that the legislature had approved. It was a simple question: should the sales tax be rolled back.

My argument about initiatives has always been: measures that become law should emerge from the give and take of the legislative process, whereas most initiatives are basically written at a kitchen table by a half dozen people who have a cause, and a contrary voice is never permitted at the table. So a ballot measure emerges that represents only one side of an issue, And frequently hidden within its provisions is the excess that comes from single-sided discussion.

Welcome to a review of what happened with Initiative 1183.

And with respect to the view of Oregonians about what they see happening north of the Columbia River, there seems to be a growing sense that Washington residents screwed up in passing the initiative. And with that comes a satisfied sense that those Washington voters have no one to blame but themselves.

As I've noted in previous columns, the idea of writing the power of citizens to initiate legislation was considered for possible inclusions in the U.S. Constitution.

But Thomas Jefferson turned back the effort with the simple admonition that if the people had the power to legislate, governmental chaos would result.

Those who provided for the initiative process, primarily western states, weren't listening.

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State crowd-funding legislation to ease raising money for startups gets early legislative focus

A proposal that would permit entrepreneurs to raise up to $1 million a year from small investors through what's known as crowd funding, which is seen as a tool to both facilitate the launch new companies and create jobs, will get its initial hearing before the Washington Legislature the end of this week.

 

Washington is among a handful of states where lawmakers have decided that no matter what finally happens with long-awaited implementation of a federal crowd-funding law, they want to move ahead at the state level to open new funding doors for entrepreneurs and startups. And the scheduled hearing Friday may suggest there's some momentum to get the bill passed soon.


The bill (HB2023) is viewed by legislative supporters, and there is no visible opposition, as "a tool for small-business growth all around the state" as well as a potential lure to attract would-be entrepreneurs in other states to move here to launch their business. Only state residents could raise equity under the proposed law and only state residents could buy shares in the companies.

 

Rep.  Cyrus Habib

The federal crowd-funding legislation was passed by Congress in the spring of 2012 as the JOBS Act and directed the Securities and Exchange Commission to come up with the rules that would allow entrepreneurs to begin raising funds under the act. The SEC has moved at a glacial pace in implementing the rules and may still be as much as a year away from final approval to allow crowd funding to begin.

 

If supporters of the bill in the Washington Legislature are successful, the state measure will become law and create the opportunity for entrepreneurs in this state to begin using crowd-funding to raise money from large groups of small investors, primarily on the Internet, before the federal legislation even becomes operative.

 

The fact that Washington and a handful of other states are pressing ahead without regard to what happens in Washington, D.C., is an example of a growing realization that it has become more workable for legislation and regulation to be done at the state level. The reason for that emerging sentiment isn't just the gridlock that allows little to get done in Washington, but also the brainlock that occurs when something does get approved in Congress and is then turned over to the bureaucracy and regulators to implement.

 

Rep. Jeff Morris

HB2023, sponsored by Rep. Cyrus Habib, whose 48th District spans Redmond, Bellevue and Kirkland, would like the federal act allow companies to raise up to $1 million a year from small investors. The Internet is viewed as the most likely vehicle to reach large numbers of those small investors, who would be permitted to invest a maximum of $2,000.

 

Rep. Jeff Morris, D-Mount Vernon, a key supporter of the state legislative proposal, is one who thinks state legislation will serve the needs of both start-up entrepreneurs and small investors who would like to have equity in such companies better than the eventual federal act.


"The federal crowd-funding law, even once rules are in place, is going to require companies to work through an intermediary and is likely to have compliance expenses that will be cost-prohibitive for many start-ups," said Morris.


Morris, who is a co-founder of the Northwest Energy Angels and former director of the Northwest Energy Technology Collaborative (NWETC) at the Washington Technology Center (WTC), is an angel investor far more knowledgeable on the topic of funding start-ups than might be expected of legislators.


The SEC has produced more than 500 pages of proposed rules as it nears the point, more than 18 months after the legislation was approved by Congress, of clearing the way for entrepreneurs to actually begin raising money under the act. But observers think the

90-day comment period will likely produce voluminous comments that will cause the SEC to extend the time when the rules actually go into effect until late this year or early next.

 

Habib says flatly it would be "highly undesirable" for entrepreneurs to have only the federal legislation to deal with in seeking to employ the crowd-funding concept of raising money and selling equity.

 

"I think it will be far easier for start-up entrepreneurs to deal with local regulators who, can design rules that fit our culture, that are less burdensome to issuers, and give us the opportunity to create our own fund-raising product," said Habib, a Seattle attorney who works with many small firms.

 

Habib's first attempt at the bill last session would have imposed an excise tax of 3 to 5 percent, a tax of up to $50,000 on a $1 million fund raise, with the explanation that it was necessary to cover costs the state would incur in things like more consumer protection for investors and added costs for state oversight of the crowd-funding activity.

 

But he has backed off of that in the current version, saying thatrather than imposing an excise tax, "we will give authority to regulators to decide what kind of a fee to impose on the entrepreneurs. The program has to pay for itself, but we decided it's best to leave that to the Department of Financial Institutions to determine what's necessary to achieve that."

 

It was Habib who made the observation that the bill would be a tool for economic development for all parts of the state.

"Using equity crowd funding for those who can't just start a business without money and don't happen to know a friendly millionaire will be a way to raise capital for small businesses anywhere in the state," Habib said.

 

And he and Morris both suggested that small economic development organizations or chambers of commerce could serve the role of gatekeeper, meaning someone to fill the legally required role of an entity to sign off on the legitimacy of the fund-raising effort, to say it wasn't a scam or fraud. Otherwise the gatekeepers would be attorneys, accountants or similar professionals who would be involved in reviewing the legitimacy of would-be entrepreneurs.

 

Scott Jarvis, director of the state Department of Financial Institutions, which has been working closely with lawmakers as the legislation has taken shape, says it is "closely monitoring the SEC's final action to be sure the state legislation avoids conflict with it or sends confusing messages."

 

He said lawmakers and his department must also provide some sort of cost benefit analysis to ensure that any costs incurred by the state or the agency must be provided for and that will depend, in part, on the size of the group of entrepreneurs seeking to raise money through crowd funding.

 

"To steal liberally from 'Field of Dreams,' there is a question as to'If we build it, will they come in sufficient numbers as to justify the costs,'" Jarvis quipped.

 

Among angel investors in favor of the proposed state legislation is Tom Simpson, longtime venture capitalist now head of the Spokane Angel Alliance, who suggests "it will broaden the capital-formation alternatives for certain unique, early-stage enterprises not otherwise candidates for traditional angel or v.c. funding."

 

 

In fact, Simpson shares the view of many angel investors that traditional funding won't likely follow crowd-funded businesses but adds "as long as everyone knows the pros and cons, I expect this form of fund raising to stimulate the growth of new, innovative businesses in this state."

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Long wait for SEC's crowd-funding rules stirs legislature to consider state-level measures

It's now been a year since Congress, with a bipartisan display remarkable for this politically dysfunctional era, passed the JOBS Act that was touted as a breakthrough for funding entrepreneurial start-ups and thus eventually creating jobs.

 

Well, the entrepreneurs are still waiting for the rules that would let them proceed to launch businesses by using internet websites to gather small amounts of money from large numbers of people online.

 

 The rules are to be written by the Securities and Exchange Commission where, despite repeated pressure from some members of Congress who really care about the issue rather than merely having voted for a JOBS bill in an election year, there's been no action.

 

But some states, including Washington, have decided they're tired of waiting and are seeking to proceed on their own. In fact, two bills that would allow Washington entrepreneurs to raise up to $1 million a year from Washington residents on the Internet have been filed in the state House of Representatives, one of the measure described as "democratizing venture capital."
  
And sponsors of the measures filed in this state say they are needed regardless of what kind of rules the SEC finally brings forth. The key sponsor of one of the bills, Rep. Cyrus Habib, D-Bellevue, frankly makes clear details of his bill (HB2023) are being worked on to groom the measure for serious consideration in the 2014 session.
Rep. cyrus habib
Rep. Cyrus Habib

 

The measure Congress passed last May was officially called the Jumpstart Our Business Startups (JOBS) Act by the clever bill drafters who attach can't-oppose names and acronyms to legislation to help ensure that balky lawmakers will find it difficult to vote against. Few lawmakers wanted to vote against JOBS in an election year.

 

Despite the congressionally mandated 180-day timeframe to the SEC, whose then-chair had large misgivings about the legislation, that time passed, as did a promised end-of-year date. Now the SEC has a new chairman, Mary Jo White, who has promised Congress she will make issuing the rules a priority.

 

If there's any doubt that there's a queuing up of entrepreneurs and those who would be involved in crowd funding, consider that the LinkedIn group "CrowdSourcing and CrowdFunding" has over 19,000 members.

 

Both supporters, who view the legislation as a major breakthrough for funding startups, and critics, who are convinced it's a funding disaster in the making, are awaiting the opportunity to be proven right once the rules allow the process to begin.

Tom simpson

Tom Simpson,

angel supporter

 

Tom Simpson, the long-time venture capitalist who now runs the Spokane Angel Alliance, thinks if the rules are "effectively drafted and supported, we would see large amounts of liquid capital flowing into emerging companies, in amounts even greater than during the pre-Sarbanes-Oxley, IPO glory days."

 

"Current regulations are chocking our nation's entrepreneurial fuel tanks," he added.

 

Bill Payne, generally regarded as the Dean of Angel Investors because of the role he plays in providing guidance to angel groups both in this country and internationally, sees a possibility that the regulations to be issues by the SEC "will be so restrictive that crowd funding will be viewed as not worth the effort."  

 

Bill Payne

   Bill Payne,

not a fan

 

Payne, who summers in Montana and winters in the Las Vegas area and who has launched four angel-investor groups around the West, has been a critic of the crowd-funding legislation from the outlet and says "I am less excited about crowd funding now than I was when it was passed."

 

"My guess is that entrepreneurs' advisors have suggested they seek angel capital instead of crowd funding," added Payne, who told me for a column I did a year ago that he viewed crowd funding "as a trainwreck waiting to happen" because he felt "a lot of investors will get scammed."

 

An issue that may further delay SEC action, and provide an added challenge for the internet masses to begin buying shares in companies via the Internet, is the potential sales tax liability in a crowd-funding project.

 

The U.S. Senate this week approved giving the 45 states that currently charge sales taxes the right to require large online retailers to collect tax on purchases made by their residents. The legislation must still clear the House, but political observers give it a good chance for passage and while it would only apply to online sellers that have sales of at least $1 million in states where they don't have physical operations, the SEC may decide to wait final determination on the bill.

 

Habib's bill would impose an excise tax of somewhere between 3 and 5 percent on investors, which Habib explains as necessary to cover costs the state would incur in things like more consumer protection for investors and added costs for state oversight of the crowd-funding activity.

  

"We can't go to the legislature in this financial environment ask for legislation to try something new and not cover the fiscal impact," habib added.

  

Rep. Frank Morris, D-Mount Vernon, who filed the other Washington state bill (HB2054)also a Democrat, said the state proposal is important regardless of SEC rules.

Rep. Frank Morris
Rep. Frank Morris

 

"The federal crowdfunding law, even once rules are in place, is going to require companies to work through an intermediary and is likely to have compliance costs that are cost-prohibitive for many start-ups," Morris said.

 

"The intent of the state legislation is to facilitate crowdfunding for Washington investors in Washington companies, with regulation that is protective of consumers, but less cost-prohibitive."

  

Bill Beatty, Securities Administrator for the state Department of Financial Institutions, points out that any offerings under state legislation would be "intrastate only, that is, limited to Washington Companies offering to Washington investors," adding such legislation at the state level doesn't require SEC approval.

 

Meanwhile, interest on the part of entrepreneurs and businesses that hope to be a part of the process continues to grow.

 

A business called Crowdfund Productions LLC is putting on Pro and Contra Conferences around the West, including one last week and Denver.

 

 

A Pro and Contra Conference is schedule for Seattle in September, by which time the SEC rules may be out, opening the door for a lot more pros and cons to be aimed by entrepreneurs and support groups.

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Legislation would get tough on illegal use of disabled parking permits

Proposed legislation that would set the stage for imposing tough new penalties on those who "steal" city parking spots by illegally using parking permits issued to disabled drivers is increasingly likely to be approved by the 2013 Legislature.

 

The bill, HB1946, would create a "work group" composed of representatives of the State Department of Health, local governments and disabled-citizen advocacy groups to produce a strategy designed to curb the "tremendous amount of abuse" of the disabled- parking placards.

 

 

Disabled citizens are entitled to park at not only parking spaces reserved for the handicapped, but also in city-operated paid-parking spaces without charge. Seattle officials estimated, for a column I did on this topic two years ago, that 40 percent of downtown and First Hill parking spaces are occupied by vehicles displaying handicapped-parking placards.

 

Seattle City Councilman Tim Burgess, now a mayoral candidate, told me for that 2011 column that the city's police department and state transportation people "estimate that as many as 50 percent of the placards are being illegally used," representing 20 percent of the parking spots in the downtown area.

 

The measure before the 2013 Legislature made it out of the House Transportation Committee last Friday and now awaits referral to the full House for a vote and, if approved by the representatives, will then go to the State Senate.

 

Toby Olson, executive secretary of the Governor's Committee on Disability Issues and Employment, says the filing of the bill, sponsored by Olympia's two house members, both Democrats, followed nearly a year of meetings with Seattle officials. The goal was to find solutions to reduce the abuse of disability parking placards while strengthening enforcement for violations.

 

Once approved by both houses and signed by the governor, the bill would immediately require handicapped parking placards to prominently display an expiration date. Using an expired permit would result in a $250 fine.

 

The second phase of the bill would establish the work group, whose goal would be to add more far-reaching provisions. That group would begin meeting in August and deliver its final strategic plan to the 2014 Legislature.

 

"There is no shortage of ideas for the work group to consider," says Olson "But there are consequences to some of the ideas. They'll need to come up with ideas that are actually workable and take cognizance of state budget constraints."

 

The bill makes some specific recommendations to the work group and an interesting one is to explore the extent to which medical professionals, who must certify the disability of those seeking a permit card and auto placard, are aiding the abuse.

 

The bill would require that the strategic plan include "oversight measures" to ensure that parking placards and special license plates for the disabled are being properly issued.

 

The strategic plan would provide for a random review by a volunteer panel of medical professionals of placard issuance and possible sanctions against medical professionals for repeated improper issuance of disabled parking placards

 

The Seattle Police Department says that many physicians distribute parking placards "for reasons that may not comply with state criteria" and a key suggestion is adding the name of the issuing physician on each placard.

 

A Seattle resident who ran across my previous column on the Internet sent me an email some months ago saying he did a test with his own doctor following knee surgery from which he explained he was "now walking without discomfort."

 

"I asked my doctor if I could get one of those permits for disability parking. She smiled wryly and said 'well..hmmmm...I suppose you qualify'. WHAT! I can walk without trouble and it is that easy to get a permit for phantom knee pain that was corrected months ago?"

 

Of course, blaming the disabled-parking abuses mostly on doctors would be unfair in an environment where use of other people's permits or using the placards of those who are now deceased is suspected of being rampant, driven in part probably from the ever-increasing cost of parking.

 

And while the City of Seattle is looking to the legislature to devise ways to address the abuse, which also brings lost revenue for the cities, some tools are already available.

 

One is the use of trained volunteers authorized to issue citations for infractions, which was approved by previous legislation in this state some years ago.

 

In cities elsewhere in the country, trained volunteers are authorized to issue citations for infractions. The Seattle Commission for People With Disabilities, in a report
 on the problem a year ago, suggested the volunteers could record the license plate numbers of cars displaying expired placards, or operated by drivers who didn't appear to be disabled.

 

Some Seattle officials expressed concern that such use of volunteers might lead to confrontations with offending parkers.

 

To which I suggested to one such concerned official that use of volunteers who were large as well as intimidating in appearance would likely take care of the concern.

 

For sure the representatives of the disabled and the city agree increased enforcement and imposition of harsher penalties are essential, particularly for those caught using a placard issued to someone who has since died.

 

 

The issue of stealing handicapped-parking spots, which is of course what cheaters are doing since they are depriving cities of revenue in addition to depriving handicapped drivers of parking places, deserves the attention it's apparently finally going to get from the Legislature.

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Business use of independent contractors coming under fire in legislative proposal

A legislative proposal that is the outgrowth of state and federal agencies targeting what they perceive as a growing abuse by business of misclassifying workers as independent contractors is stirring the concern of businesses who view the bill as an excessive reaction.

 

In fact, one Seattle-area attorney long involved in independent-contractor legal issues, says an attitude "inhospitable to the independent-contractor business model" has become evident at both the state and federal levels.

 

Employing independent contractors has long been an essential practice in some industries, as with newspapers' use of freelance writers or real estate firms and their independent agents. But the pressures on business during the economic downturn from which some are still just emerging has made the strategy of using independent contractors rather than hiring employees more common, and with that has come some abuse.

 

State and federal agencies, upset by what they view as millions in lost tax revenue, aided by labor leaders' targeting House Bill 1414 as one of their top priorities this legislative session, have tagged misclassification abuses as part of the "underground economy."

 

Calling it part of the "underground economy," which is generally defined as money-making activities, frequently illegal, that aren't reported to the government, is itself viewed by business interests as part of the overreach by proponents. .

 

There are several things about the bill, titled "The Employee Fair Classification Act," that business views as a reach too far by those proponents. The first is that the bill would establish the premise that "an employer-employee relationship is presumed to exist" for anyone who performs service for pay." What follows is a series of exemptions to that blanket assumption.

 

Some besides business may find it a cause for concern that the measure would create a new provision making it a crime to retaliate against those who complain to authorities about a misclassification by the employer, with an assumption of guilt. The measure would make violations of the retaliation provision a gross misdemeanor and, in a Napoleonic-law twist, assume the business is guilty of the crime unless it can prove its innocence.

 

Kris Tefft
Kris Tefft

Kris Tefft, chief legal counsel for the Association of Washington Business, has led the effort to lobby lawmakers and alert businesses about the bill's problems. He says his priority in seeking to raise concerns about the bill "is to convince legislators that this is too much of a regulation step to impose on legitimate businesses."

 

The bill has made it out of one committee and has until Friday to be cleared by the finance committee for an eventual vote in the House, where passage would be likely since this bill is a top labor priority this session and the House is controlled by Democrats. A companion bill filed in the more moderate Senate has languished in committee so business is hoping that means the measure won't clear the Legislature this session.

 

In fact, Tefft's goal is to keep the measure from even reaching a vote in the House.

 

"While it is a top labor priority, it has drawn fire from a broad and deep coalition of various industry groups who are all working on keeping the bill from the House floor," he said. The goal is to "get legislators to go back to the drawing board in terms of addressing identifiable problems with the 'underground economy.'"

 

Nigel
Nigel Aviles

Nigel Avilez, an attorney on Mercer Island who has been involved with the legal issues surrounding independent contractors since before it became a hot issue, suggests government has created "a climate that is intolerant of independent contract misclassifications."

 

Avilez, whose Mercer Law specializes in independent-contractor and worker-classification law, describes the current attitude of both state and federal agencies as "inhospitable to the independent-contractor business model."  

 

The bill, despite its potential major impact on businesses, is only now starting to gain some visibility outside the legislative halls and raising the eyebrows of business owners as they learn of it..

 

None of the opponents of the measure deny that some businesses, particularly many whose fortunes have suffered a serious downturn in the recent financial turmoil, have become scofflaws, basically trying to be creative in worker relations, and thus creating a problem for legitimate businesses.

 

And that, according to Avilez, has created "an inflexibility" on the part of agencies toward working with businesses who have merely made a mistake in classification of independent contractors, rather than being guilty of cheating. "Some agencies feel people are cheating the system so they don't want to cut any slack for any business."

 

Avilez did a public-records request and searched the documents to conclude "there is an apparent coordination between the U.S. Department of Labor and state agencies."

 

"For example, between 2010 and 2012, public records show that the Washington Employment Security Department (ESD) audited close to 140 nail salons, and assessed substantial taxes in many of those," Avilez said. "The quantity of these audits was far and above most other industry audits, clearly suggesting that the nail industry was being targeted by ESD."

 

Five hair salons were found to owe taxes of more than $20,000, not including penalties, with three dozen hit with taxes of $5,000 or more, plus penalties.

 

 

As an indication of the historic role of independent contractors for some industries, Tefft noted that "a lot of industries are coming forward with bills that would exempt them from the provisions of the bill should it become law."

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SEC's struggle with rules for start-up fundraising troubles some angel investors

The federal JOBS Act aimed at opening the door for entrepreneurs to reach out to crowds of potential investors on the internet appears, ironically, to be hung up at the Securities and Exchange Commission (SEC) on the issue of tighter restrictions on entrepreneurs who seek more sophisticated investors.

 

In fact, angel-investor leaders are concerned that the SEC's deliberations may produce rules that make it harder for entrepreneurs to raise money from those wealthier individuals, referred to as "accredited" investors. 

 

Liz Marchi
Liz Marchi

The reason is that Congress decided that entrepreneurs would have to validate investor accreditation, rather than being able to take the word of investors that they were "accredited," as has been the case until now. But the lawmakers left it to the SEC to figure out how to impose rules for such "validation."

 

"I don't think anyone in Congress was thinking about the actual impact the change would have on accredited-investor rules," said Liz Marchi, whose Frontier Angel Fund, Montana's first angel fund, has become one of the nation's most successful angel-investor groups. "That's why I think you see basically nothing being done at the SEC."

 

The legislation, officially the Jumpstart Our Business Startups Act, was passed by Congress in April and was designed to be a job creator by making it easier for entrepreneurs to raise capital and thus launch companies and create jobs. The first part of the bill would ease raising start-up capital through "crowdfunding" on the Internet and the second part to eliminate the prohibition against advertising and soliciting traditional "accredited" investors.

 

The SEC was given until yearend to determine the rules that would govern operation of crowd-funding efforts. But the portion dealing with accredited investors called for the SEC to figure out by July 4 how to implement rules to eliminate the prohibition against general solicitation and advertising in securities offerings.

 

The regulatory body missed that deadline but SEC chairman Mary Shapiro told Congress the agency would have the rules in place by end of summer. That target has now become year end, and the betting is that it'll be sometime in the new year before the rules are put forth.

 

The Angel Capital Association and angel investors like Seattle's Dan Rosen, who are closely involved in following the SEC deliberations and seeking to influence them, are hoping to get final SEC rules simple enough that entrepreneurs "don't have to jump through enormous hoops to prove investor accreditation."

 

The phrase angel leaders are using to indicate what's needed for those entrepreneurs seeking accredited investors is "safe harbor," meaning a safeguard for entrepreneurs that they have actually done some due diligence on the investors.

 

Rosen, a leader of Seattle's Alliance of Angels, says "we've been working with the SEC to come up with a compromise that will ensure there is a safe harbor. But if they come out with a rule that is not acceptable, we will go back to Congress and seek changes there."

 

What's causing much of the teeth-gnashing for entrepreneurs and those like ACA and Rosen looking out for their interests is the apparent difficulty the SEC is having figuring out just what are the "reasonable steps," that will be required of entrepreneurs.

 

The irony of, in essence, tightening the screws on entrepreneurs seeking funds from qualified investors is that those entrepreneurs, rather than the ones seeking limited amounts of money from crowds of small investors, are the ones most likely to be job creators.

 

Bill Payne, viewed by many as the dean of angel investors and a member of Marchi's Kalispell-based Frontier Angels, is critical of how Congress packaged the JOBS Act.

 

"The legislation does not appear to have been well thought-out and seems to be our Congress simply finding something upon which they could agree," said Payne, who was Entrepreneur in Residence at the Kauffman Foundation and was named angel investor of the year in both the U.S. and New Zealand.

 

In fact, the JOBS Act brought the best example of bipartisan support evidenced by Congress in the past four years.

 

"Congress was motivated on this legislation because the lawmakers finally figured out that entrepreneurs are at the heart of this country's future and there were few tools by which Congress could feel like it was playing a role in the country's economic future," said Marchi.

 

Marchi's angel fund has been proving recently that angel investing can be profitable for the angels as well as important for jobs and the economy.

 

Two of the fund's investments, Coeur d'Alene-based Pacinian, a maker of wafer-thin keyboards, and Bozeman-based LigoCyte Pharmateuticals Inc., were acquired by major companies in the past few months. Frontier had substantial stakes in both and thus got substantial rewards.

 

Pacinian, which represented 10 percent of Frontier's total fund, was sold to Silicon Valley tech firm Synaptics this summer for an initial $15 million plus a substantial additional amount in the future based on various factors.

 

And a substantial bridge-round investment Frontier made about four years ago in LigoCyte Pharmateuticals Inc. paid off big last month with the announcement that Japan's Takeda Pharmaceuticals' wholly-owned U. S. subsidiary was buying the Montana vaccine maker. The agreement provided for an upfront payment of $60 million and "future contingent considerations" for LigoCyte, whose lead product, a vaccine to prevent norovirus gastroenteritis, is in clinical development.

 

Marchi declined to discuss specifics of Frontier's multiples from the two sales. But she noted that the two exits will have returned the original investment capital to her members, "and perhaps even some profit. So every one of our other 10 investments can produce profits."

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Washington lieutenant governor post once seen as an easy road into statewide office

The fact that the role of lieutenant governor in Washington was basically envisioned in the state constitution as a part-time position made it historically a job coveted by those who first made a name outside of politics, then sought an easy road into statewide office.

 

William Jennings (Wee) Coyle, a former football star and decorated war hero, started it all in 1920 when he parlayed his name familiarity into a landslide victory in the race for the state's second-highest elective office, hoping to become governor four years later.

 

Coyle was only 32, a handsome former UW star quarterback just back from the World War I battlefields when he strategized to use the lieutenant governor role to position himself to run for governor, a race he ran in 1924, but lost.

 

For most of the next seven decades, the office was held by those who had first risen to prominence beyond the political sphere.

 

That's now merely a part of political history in Washington since current Lt. Gov. Brad Owen, a Democrat and former state legislator from Shelton, has brought importance to the position beyond the constitutional ones of filling in for the governor and serving as presiding officer of the State Senate.

 

During the four terms since he was elected in 1996, Owen, who is running for re-election this year, has created for the office the role of a goodwill ambassador for the state in international trade and promotion of Washington products overseas. Plus he has led trade missions in parts of the world where the title "lieutenant governor" opens doors.

 

But the history of the position, next in line for the state's top elective office if anything happens to the governor, has provided some interesting political lore.

 

The fact the lieutenant governor is often described as "a heartbeat away from the governor's chair" has seemed to hold little importance for Washington voters, despite the fact that three of the first six lieutenant governors rose to the top state office because of the deaths of the governors.

 

Colorful Victor A. Meyers, a mustachioed maestro who earned a reputation as a big-name band leader, decided to seek the office as a Democrat in 1932. He won and was re-elected four times before being defeated in 1952 by Emmett Anderson, who had gained fame as the "Grand Exalted Ruler" of the Elks.

 

But Anderson made an unsuccessful run for governor in 1956 and John A. Cherberg, a failed football coach at the University of Washington, ran for the job as a Democrat and won, commencing a 32-year stand in the job that made him the longest tenured lieutenant governor ever in the nation.

 

The most interesting effort to boost a non-politician into the job came in 1968 when then-Gov. Dan Evans and his state Republican chairman, C. Montgomery (Gummie) Johnson, hatched a plan to oust Cherberg from the office, which by then he had held for 12 years.

 

They were seeking to boost the fortunes of Art Fletcher, a black city councilman from Pasco who had gathered some national prominence for development of a self-help program in the East Pasco ghetto.

 

Johnson knew that if a candidate like Fletcher, the state's first African-American to be touted for statewide office, was to have a chance, he had to first prove that he could beat a name candidate.

 

So Johnson talked popular and prominent hydroplane driver Bill Muncey into running for the post, once confiding off the record that Muncey had wanted to know what a lieutenant governor did. "Not a lot," Johnson had replied, with some honesty.

 

The political ploy worked to the extent that Fletcher, who a year later would earn a position in the Nixon Administration, won the GOP primary, but failed to dislodge Cherberg in the general election.

 

By the time he retired in 1988, Cherberg had built a reputation for integrity and even-handedness in his role as the State Senate's presiding officer. And with the election of Joel Pritchard, a respected Republican congressman and former legislator, the job took on a legitimacy and importance that Owen has continued to build on during his 16 years in the office.

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While Dems have had lock on governor's office, GOP has longer hold on Sec. of State

The GOP lament in Washington State about the fact it's been 32 years since a Republican was elected governor pales somewhat compared to how long Democrats in the state have watched a string of Republicans hold the post of secretary of state.

 

For Rob McKenna, the two-term state attorney general who is the Republican nominee in the governor's race, the long Democratic tenure in the governor's mansion, longest rule in the nation by either party, has provided the opportunity to tell voters "we haven't refreshed this place in a generation." 

 

sam reed
Sam Reed

But in the race for secretary of state, the post from which Sam Reed is retiring after three terms, Democrats will be seeking to reverse their almost half-century absence from the office that oversees state and local elections, corporate and non-profit filings and records and is supervisor of the State Archives.

 

A Republican has held the post since A. Ludlow Kramer, a young Seattle city councilman, ousted incumbent Victor A. Meyers in 1964. So it's been 52 years since Meyer's 1960 victory as the last Democrat elected to the position. The secretary of state is second, behind the lieutenant governor, in the line of succession to the office of governor.

 

It was in 1964 that Dan Evans defeated Democratic incumbent Albert D. Rosellini, who was seeking a third term. The two Seattle Republicans, Evans and Kramer, thus both beat incumbent Democrats despite the fact that Lyndon Johnson carried the state overwhelmingly in the presidential vote, suggesting that Washington voters can sometimes make independent judgements about state and national races.

 

Washington's history with secretaries of state is in marked contrast to the background of the office in Oregon, where it has long been viewed as a stepping stone to the governor's office.

 

In Washington State, it's been the office of attorney general that has been seen as the stepping stone, with the last three, including outgoing Gov. Christine Gregoire and now-GOP candidate McKenna, looking to occupy the governor's mansion.

 

Two of Oregon's best-known and respected political figures made stops at the secretary of state post en route to larger roles. Mark Hatfield was elected to the position in 1956 and two years later won the governor's race while Tom McCall was elected in 1964 and two years later won the first of his two terms as governor. Hatfield went on to the U.S. Senate, where he served for 30 years and was even briefly considered for the vice presidential spot with Richard Nixon in 1968.

 

If the Democrats in Washington think they've been shut out of the secretary of state post for a long time, consider that Barbara Roberts, in 1991, became not only the first woman to hold the position in Oregon but also the first Democrat elected to the post in more than 100 years.

 

Six of the last eight Oregon secretaries of state ran for governor, with Hatfield, McCall and Roberts being elected and three others losing in the general election.

 

I asked Reed why he thought the Washington secretary of state position hadn't also produced gubernatorial aspirants.

 

He admitted that he had been urged to run for governor in 2004 as the GOP sought a candidate to oppose then-Atty. Gen. Christine Gregoire in seeking the position being vacated by Gary Locke, who decided against seeking a third term. State Sen. Dino Rossi eventually was the GOP candidate, losing by a handful of votes.

 

"I thought seriously about it but decided that I enjoyed the responsibilities of secretary of state, so I passed," he said. "It was a matter of thinking, 'why let the ego trip of running for governor interfere with doing what you like to do.'"

 

So he ran and was re-elected twice more to the office he had actually prepped for over a period of decades, working first with Kramer in the late '60s and with Bruce Chapman, who held the office in the late '70s. Then he spent 20 years as Thurston County auditor, a local-level version of the responsibilities handled by the secretary of state at the state level. He was elected to the county post in1980 and re-elected four times.

 

And Ralph Munro, Reed's predecessor who served five terms as secretary of state, said having worked in the governor's office for a number of years under Evans left him with "no desire to be governor."

 

He admitted to me that he had been lobbied to run but that "I never saw the office as a stepping stone. I really enjoyed being secretary of state."

 

Republican candidate Kim Wyman, who followed Reed into the Thurston County auditor's office in 2000, faces former state Sen. Kathleen Drew, a Democrat to see who replaces Reed. Thus no matter which one wins next month, the next secretary of state will be a woman.

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Confederates' "dixie" transplant in Brazil is lost chapter in the saga of the Civil War

The least-known yet most compelling chapter of the Civil War saga may well be the story of the thousands of Confederates who refused to come back into the Union after 1865, opting instead to create a new "Dixie" in Brazil.

 

That portion of American history and the stories of the "Confederadoes" who carved out new colonies in Brazil "are lost in a linguistic tomb because Portuguese is a barrier to entry for those seeking to explore history," explains Gary Neeleman.

 

He and his wife, Rose, have completed the most thorough history of that story and turned it over to a Brazilian publisher. His hope is that "Stars and Bars Under the Southern Cross: Confederate Migration to Brazil" will soon be published in English as well and be available for U.S. distribution.

 

I write about Neeleman, 78, and his book because, as a 40-year friend and a colleague at United Press International for half of those years, I've been struck by his perpetual zeal to evangelize on what he describes as "the spiritual link between the United States and Brazil, the two giants of the Western Hemisphere."

 

"It's even called the United States of Brazil and the whole constitutional structure of the nation is intentionally patterned after the U.S.," says Neeleman of his love affair with two countries. "And the Brazilian people have always viewed themselves as friends of America."

 

It's a spiritual cause, second only to his Mormon faith, that began when he was UPI's manager in Brazil, a country where three of his seven children were born and where one of those Brazilian born, David, has started his third airline, Azul, the fastest-growing carrier in Brazil.

 

The fact he had learned Portuguese as a youthful Mormon missionary prompted UPI to pluck Neeleman from Salt Lake City in the early '60s and send him to Brazil. It was there, almost 50 years ago, that he met a blond-haired blue-eyed young Brazilian woman with a soft southern accent. She was on an LDS mission at the time.

 

"I was sure she was probably from Georgia, but asked her where in the South she was from," Neeleman recalls. "The southern accent came through even in Portuguese and when she told me she had never been to the South, I was blown away."

 

Through her he learned about the Confederates in Brazil, including the Fraternity of Confederate Descendants, whose annual picnic at Campo Cemetery, between the Confederate-established towns of Americano and Santa Barbara, draws up to 1,500 people. The cemetery, which has about 1,000 Confederates graves, has a 25-foot granite obelisk, emblazoned with a Confederate flag, that lists names from Ayees to Yancee. And Americana's city crest incorporates the Confederate battle flag.

 

Neeleman, whose consulting clients include media companies in Brazil, Sweden and Japan, as well as the Washington Post, will be attending next month's gathering of the Confederate descendants at the cemetery.

 

When he's not traveling with Rose on personal oir client business, he's doing Brazil' business as honorary counsel in Salt Lake City, as with his current effort helping the Utah Governor's office with a trade mission to Brazil.

 

After years of gathering historical data and personal recollections, Neeleman wrote his first book in 1985, a fictional account of the Brazilian Confederates titled "Farewell my South." 

 

"But more than 25 years since then, having more accumulated data than any living person, I realized that if something happened to me, all my research would go with me, so Rose and I said to each other: 'let's get it done,'" Neeleman said.

 

The book about the Confederates is one of three he has written about Brazil and its ties to the U.S. A soon-to-be-published one deals with the ties that allowed the U.S. and its allies to tap the Amazon rubber trees as the only rubber not controlled by Japan.

 

"If it hadn't been for Brazilian rubber in World War II, we would not have been able to wage the war and would have lost," Neeleman said.

 

He recalls the year he was asked to help arrange for former President Jimmy Carter and his wife, Rosalynn, as well as aide Jody Powell to attend the Confederate picnic and how "they sat at the cemetery, sang Dixie and all three had tears streaming down their faces."

 

Neeleman explained to me, "Brazil's Emperor Dom Pedro II set out to convince the Confederates to move to his country in the hope they would help establish a cotton industry in Brazil, which the Southerners proceeded to do."

 

Dom Pedro had offered subsidized passage and land with rich, red soil like Georgia's for 22 cents an acre. He was intent on making Brazil a major player in world agriculture, and his investment paid off.

 

The Confederates employed their technology and established the cotton industry, but also brought a focus on education, with the major law school and the hospital where the Neelemans' children were born established by a grandson of one of the Confederates.

 

"Although Brazil was a Catholic country, and Dom Pedro was Catholic, he was also a Mason and the Confederates set up Masonic lodges under his direction," Neeleman noted. "They thus legitimized the Masonic movement in Brazil."

 

As Neeleman wrote in the prologue to his book, "The young emperor correctly reasoned that these talented, but shattered people could rise again in a new land - his land - and while doing so, provide Brazil with much-needed technology and cultural development."

 

"The results of his efforts produced the only reverse migration in American history, and established a spiritual link between the two young hemispheric giants that only a very few today know exists."

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Reading an old Dan Evans speech stirs a sense that change isn't always improvement

Occasionally we run across something from yesterday that causes a sense that change isn't necessarily always for the better. And perhaps nowhere is that more true than in the political realm.

 

That thought occurred to me a few days ago when I had the opportunity to read a speech by former Governor and U.S. Senator Dan Evans to the January 1995 Economic Forecast conference in Seattle.

 

It was the day after Republicans, as a result of the transformational election of 1994, assumed control of both houses of Congress for the first time in 40 years and, with three dozen new GOP legislators, the state House in Olympia.

 

Evans, who himself had bucked a Democratic landslide in 1964 to win the first of his three terms as governor, referred, at the opening of that speech, to "day two of a new era," then joked, "Or is it the Newt era?" That was a reference, of course, to the new House Speaker Newt Gingrich, who had orchestrated the overwhelming takeover of the House of Representatives by Republicans.

 

I got a copy of the speech from Neil McReynolds, then a top executive at the old Puget Sound Power & Light Co., and chair of the board of the Economic Development Council of Seattle and King County, which put on the event at which Evans was keynoter.

 

McReynolds, who had been Evans' press secretary in Olympia when he and I met in the late '60s, is constantly running across decades-old documents in his files and, finding this one while we were visiting, he thought I might find the speech interesting.

 

Politics has provided several swings since that Evans' speech when Republicans were coming to power halfway through Bill Clinton's first term. But maybe the swings, either to the left or right, haven't always made things better.

 

What I found most interesting in reading Evans' talk was the reminder of him as an elected official who was impossible to pigeonhole ideologically. As governor and later as U.S. senator, he avoided ideological rigidity and found good ideas might sometimes spring from the Democrat side of the political aisle. And that dumb ideas could sometimes be offered by his fellow Republicans.

 

Thus at a time when polarized political positions characterize decision-making, reflecting on Evans, and actually many who were like him, including Washington's late Democratic Sen. Henry M. Jackson, make it obvious that politics doesn't have to require ideological polarization.

 

Before outlining in that speech a series of ideas "to propel Seattle and King County into world-class economic status," Evans blasted "talk show hosts screeching about waste in government," proponents of term limits and a balanced-budget amendment, environmental extremists, and excessive regulations that stymie growth.

 

And he also took to task the nature of campaigning. So in what could be a comment about the unfolding 2012 election rather than a reflection on 1994, Evans noted "We have just concluded the nastiest election in my memory. Virtually all campaign advertising was enormously distorted and negative."

 

"By constantly trashing our political leaders, we also breed disrespect for our own system, of government," Evans said. "The result is a new political landscape dotted with constitutional amendments and initiatives designed to protect citizens from 'evil' politicians."

 

Of two ideas whose proponents have continued to seek traction since that "new era" that Evans referred to as dawning, he told that 1995 business audience: "The balanced budget amendment is a loony idea that is meaningless until we decide how to keep a national standard set of books so we can measure balance."

 

And of the idea of term limits, Evans offered: "As a voter I am outraged by those sanctimonious term limiters who would steal from me the freedom of my vote."

 

But in addition to hitting "those talk show hosts who cater to the base emotion of people," he took to task "the politicians who blithely promise what they know they cannot deliver," and "those rigid environmentalists who will see you in court if they don't get all they seek."

 

Thus he has always been a leader in what I and many feel is an unfortunately disappearing breed, those who view ideas on their merits rather than insisting that any new idea must be vetted based on where it fits ideologically.

 

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For Egil Krogh, memory of Watergate break-in is a reminder of integrity lost

Reflections on the 40th anniversary of Watergate will, for many, merely be a pause to recall a bungled break-in that began the most tragic chapter in the history of the presidency. But for Egil (Bud) Krogh, an up-and-coming young Seattle attorney who became a key part of Richard Nixon's White House team, the lessons from the fall of a president echo down the years less as a bitter memory than as a reminder of integrity lost.

 
 

To Krogh, it's important that the events of 1972 that led inexorably to the resignation of Richard Nixon two years later be kept ever in the minds of elected officials and those who work for them. Thus he maintains a busy speaking schedule sharing his thoughts on integrity and the perspective of power before corporate and legal groups, academic assemblies and gatherings of young people on the importance of integrity-based decision making.

 

His 2007 book, "Integrity: Good People, Bad Choices and Life Lessons from the White House," had a second run last month, Krogh told me as I caught up with him by phone as he was en route toward a Pennsylvania speaking engagement. "It's selling better now than at the beginning. The issue of government integrity seems more relevant to people today."

 

He's also developed and is sharing a decision-making model he calls The Integrity Zone, which is designed to help people make integrity-based choices in their professional and personal lives. He suggests that the lessons from Watergate and its aftermath have become more relevant to people because of recent political and business scandals.

 

Krogh recalls that even though he had moved from the White House to be Undersecretary of Transportation by then, when he picked up the Washington Post that June morning in 1972 to read of the arrest of those who had been caught breaking into Democratic headquarters at the Watergate, he recalls one thought: "My God, that's my fault."

 

The reason for that reaction was that as co-director of the White House special investigations unit called the "Plumbers," Krogh had a year earlier approved a covert operation as part of a national security investigation into the leak of the Top Secret Pentagon Papers to the New York Times.

 

The covert operation was a break-in at the office of Lewis Fielding, the psychiatrist for Daniel Ellsburg, who had released the Pentagon Papers. Krogh hired G. Gordon Liddy and H. Howard Hunt to do that break-in, the same men who were arrested at the Watergate break-in.

 

Krogh assumed the blame for it all because he was convinced that the break-in at Fielding's office had created the sense that breaking the law on behalf of the president was acceptable, thus setting the stage for Watergate.

 

It's that conviction about his personal responsibility for what became Watergate, even though he knew nothing about the break-in before reading about it that morning, that has guided his thinking and involvements through the four decades as a sort of personal quest for redemption.

 

The dedication in his book, written with the help of his son, is a telling reflection of that lifelong campaign: "To those who deserved better, this book is offered as an apology, an explanation, and a way to keep integrity in the forefront of decision-making."

 

.The book itself details the lessons of Krogh's lifelong effort to make amends for what he describes as a "meltdown of personal integrity" in the face of issues of loyalty to the president and to the power of the office.

 

Krogh eventually went to prison for almost five months after pleading guilty to criminal conspiracy for engineering the break-in at Fielding's office.

 

Krogh has recalled in several of our discussions over the years how, after Nixon's resignation, his personal path toward reconciliation involved a visit with Fielding to apologize to him for what Krogh told him was "an unacceptable violation of the rights of a genuinely decent human being."

 

Then followed a visit with Nixon in California in which Krogh recalls basically saying: "Mr. President, I apologize to you because everything that's happened was really my fault."

 

Krogh and Ellsburg subsequently became friends with Ellsburg writing the forward comments for Krogh's book.

 

In our recent telephone conversation, Krogh noted that even the famous meeting between Nixon and Elvis Presley, who wanted to help the President tackle the nation's drug problem, had an outcome that simply lacked integrity.

 

"Elvis asked if the president could get him a special badge from the bureau of narcotics and, even though he wasn't entitled to that kind of a badge, I told the president I'd get one," recalls Krogh, who had actually arranged the Elvis meeting. "Elvis not only got a badge, but he carried it for seven years and he simply shouldn't have had that badge."

 

A historical note is that of all the requests made each year to the National Archives for reproductions of photographs and documents, the one that is requested more than any other is the photograph of Elvis and Nixon shaking hands at that December, 1970, visit. More requests than for copies of the Constitution or the Bill of Rights.

 

Krogh left Seattle and his law practice three years ago to join the Center for the Study of the Presidency and Congress as a Senior Fellow on Leadership, Ethics, and Integrity.

 

His current focus, however, is zeroing in on the School for Ethics and Global Leadership, which attracts high school students, and it's in that environment of sharing his philosophy with young people that he is honing his Integrity Zone concept.

 

And he is increasingly seeking to promote the concept of the Integrity Zone, which is based on a couple of fundamental considerations. The first challenges the process of thinking that precedes decisions, basically: "have I thought through all the implications?" while the second part is ethical considerations: "Is it right? Is this decision in alignment with basic values like fairness and respect?"

 

"We never asked any of those questions in the Nixon White House," Krogh said. "And most of what we see in Congress today fails those tests. Instead we see a focus on loyalty and feilty to party. You simply can't check your personal integrity at the door."

    

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Legislature ensures that charter schools will be governor's-race issue

The Washington Legislature ensured that the controversy over charter schools will become a focus in the state's gubernatorial campaign by specifically rejecting charters as part of any education-reform efforts in a bill that creates a handful of what will be called "collaborative schools."

 

The manner in which the legislation was conceived and approved, at the request of Gov. Christine Gregoire after she specifically warned that she would veto any bill authorizing charter schools, has "controversy" written all over it.

 

Passed in the midst of an extended session aimed at resolving the state's budget crisis, the bill is titled "collaborative schools for innovation and success pilot program." It calls for a five-year program involving six elementary schools, each of which will be operated by pairing to-be-determined school districts with colleges of education in the state.

 

The bill basically does two things that, for sure, won't make proponents of dramatic change in the state's education system very happy. It requires, basically, that all parts of the current schools infrastructure -- administrators, teachers unions and what's called "the professional education standards board" - must sign off on any innovative programs conceived for the handful of schools permitted to participate. And it ensures that no wholesale changes would be possible until the five years of testing for those few schools provided for in the bill have been fulfilled and evaluated.

 

One of those left unhappy is Rep. Eric Pettigrew, the respected African-American Democrat whose House district includes some of Seattle's at-risk neighborhoods and who had co-sponsored a bill to permit charter schools in Washington State.

 

"This bill isn't even close," Pettigrew told me in a telephone interview. "We have been doing things the same way for too long and accepting a certain failure rate and I don't think that's acceptable."

 

"Charter schools provide the flexibility to be nimble in seeking education changes," he added. "Probably the most frustrating thing about the entire experience is that discussion of what's best for the kids never seems to really conclude before it trails off into organizations that will need to be involved."

 

The comment frames the reason for controversy over charter schools in this state, one of the last nine in which charters are prohibited. Whether what's best for the kids is the unquestioned number one issue inevitably collides with many teachers and teacher advocates who will insist that even if kids' needs are the priority, what's good for teachers is also an issue. The stronger the teachers union in a state, the more that conflict comes into play.

 

The Seattle Times, in a January editorial on the bill proposed by Pettigrew and Sen. Steve Litzow, a Republican from Mercer Island, said: "Political courage is often lacking in Olympia, making Pettigrew's willingness to buck the Democratic Party's usual fidelity to the Washington Education Association all the more striking."

 

"Expect contentious debate," The Times editorial continued. "In particular, the teachers union sees charter schools as a threat. Yes, Washington state voters rejected charter-school proposals three times. But we know a lot more about these innovative public schools since the last failed measure in 2004."

 

Indicating that his "courage" isn't likely to wane in the coming months as likely Democratic gubernatorial standard-bearer Jay Inslee picks up the education ball his party has crafted for him and runs with it, Pettigrew said "if the unions or even my fellow Democrats want to come after me, fine."

 

Atty. Gen. Rob McKenna, the presumptive Republican gubernatorial nominee who has promised to make education reform and funding a focal point of his campaign, says of the collaborative-schools idea "There is no evidence that they will actually work. Moreover, it will take years before we know if they do."

 

"I support trying new approaches to improve education for our children right now," he added. "And a smarter approach would be to adopt models that have a proven track record of success, like high-performing public charter schools that are working in 41 other states." 

 

McKenna says both collaborative schools and charter schools should be "tools in the toolkit" for those seeking a new education model.

 

Inslee, in a wide-ranging blueprint for education reform to create "An innovative, accountable education system: building a better future for every child and a stronger economy for Washington," called for change in most aspects of the economy that might impact education funding.

 

Thus his plan for educational reform and adequate funding calls for "reinvigorating the economy..." "Reverse the trend of healthcare inflation eating into education spending..." "Sunset corporate tax loopholes that have outlived their purpose..." and "Expand a system of quality improvement to all government agencies..."

 

Inslee says his "vision for an education system by 2020" includes that "achievement and opportunity gaps among students are eliminated."

 

An ongoing challenge for Inslee and Democrats in rejecting the idea of even having charter schools on the education-reform table is that some prominent, long-time Democrat supporters appear reluctant to get aboard.

           

Perhaps most challenging for them is Nick Hanauer, the venture capitalist and avowed "lifelong Democrat and committed progressive," who views Republican positions on social issues and taxation as "misguided," but says "McKenna is on the right track and we are not" on school reform.

 

"We may be headed in the right direction, but we aren't in the right lane," Hanauer told the head of the state teachers' union in a February e-mail exchange. "It is not classroom teachers who are afraid of change and innovation, it is their union." 

 

While charter schools are anathema to teachers' unions, they have gathered supporters from among some of those who toil in the classrooms, including Erin Gustafson, who grew up on Mercer Island but began her teaching career in one of California's poverty pockets.

 

"My path to supporting charters began 16 years ago when I taught fifth grade at a high-poverty school in Vallejo," Gustason told me. "I became disillusioned with the poor teaching, union rules that protected that, and the restrictions of operating in a large system."

 

Gustafson, now married and the mother of children 9 and 7 and a substitute teacher, became involved in a new teacher-created education-reform non-profit called Teachers United, born a year ago with the goal of "giving teachers a voice in policy debates."

 

 She is now policy director for the group, which advocated last session for charter schools as one of the choices that need to be available in Washington State. She was among teachers from the organization who testified before the legislature's education committees on behalf of charter schools.

 

"After doing a lot of research and visiting several public charter schools in California, I have come to believe that successful public charters are an effective way of closing the achievement gap," she said. "We took teachers who were interested to visit high-performance charters across the country and, for those teachers, seeing was believing so they decided to advocate for charters."

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Supporters of crowd funding for startups must await SEC rule-making process

Now that the so-called crowd-funding measure has whipped through Congress with a speed and level of bipartisan support unheard of in recent years, the effort to make it fulfill its promise of creating new companies and jobs begins. And that may prove more challenging than its passage.

 

Before any entrepreneur with a can't-fail idea rushes to the Internet in hope of attracting a crowd of investors, the Securities and Exchange Commission must first set the rules on how provisions of the law will be permitted to play out. The agency has 180 days to fulfill those duties.

 

The legislation, called the Jumpstart Our Business Startups Act (JOBS) will dramatically expand the way new companies can raise money and the reduce the oversight for smaller companies doing initial public offerings.

  

After quick congressional approval last week, President Obama, who admits he first learned about the proposal in early March, will be signing the bill Thursday.  

 

Supporters view it as a major breakthrough for funding entrepreneurial startups and thus eventually creating jobs. Critics are convinced it is a funding disaster in the making. Both will have to wait to see what the SEC comes up with.

 
 

That process that will draw its own critics as it unfolds and the fact it's now in the SEC's hands will likely create some apprehension for friends and opponents alike.

 

More than a few cynics have suggested that the bill's acronym, JOBS,  is a key reason few in Congress dared oppose it despite a lot of whispered reservations.

 

What the bill seeks to achieve is the opportunity for people (crowds) to organize via internet websites to fund companies. Using the internet to raise money is a process that's long been utilized for charitable and entertainment purposes.

 

 The crowd funding approach would open the way for people to invest as little as $500 and up to $10,000 in startups, eliminating the long-time steep financial requirement for investors, other than what's known as "friends and family" investors.

 

The kind of hype that has marked the rapid progress of this legislation through Congress is nowhere better displayed than on the website of Crowdfunding Offerings, which pitches its ability to provide an investment platform for "the crowd."

 

So here's the firm's pitch:

"Crowdfunding investing will allow start-ups and existing businesses to raise funds for their companies directly from the public who will invest small amounts of money in return for shares in the company. Americans will finally have the opportunity to invest in ways that have historically been reserved only for the wealthy. Together, America's entrepreneurs and investors will launch the next great ideas of our time!"

 

When I write occasionally about angel-investing issues, I turn to friends from Montana to California who are leaders among angel investors, with an occasional venture capitalist thrown in. Their collective insights inevitably create a better understanding of the issues, but disagreements among them frequently abound. And so it was with the crowd-funding measure.

 

The most vocal and opinionated among my angel friends on this issue is Bill Payne, who summers in the Flathead Valley of Montana and winters in the Las Vegas area. Payne, who gets to a conviction about his views because of the respect he receives from angel investors across the West and beyond, describes the bill as "a train wreck waiting to happen."

 

"Lots of investors will get scammed," Payne suggests. "Just give it a couple of years and Congress will be asking the SEC how they ever let this happen!".

 

Mike Elconin, San Diego-based leader of the major Southern California angel-investor organization Tech Coast Angels, sums up a concern that even some proponents share.

 

"The danger is that this new law will engender an expansion of boiler rooms in which slick sales people convince unsophisticated investors to put money into companies at highly inflated valuations," says Elconin. "Whether you think this is a problem for government to prevent, or a matter of buyer beware, depends on your political philosophy."

 

Dan Rosen, a respected Seattle attorney-investor and a policy director for the Angel Capital Association (ACA), is among those who supported the legislation and helped author an ACA internet post to help inform angels on the bill

 

Rosen, at the invitation of the White House, will be on hand at the bill signing Thursday. 

 

Liz Marchi, who presides over the Kalispell-based Frontier Angel Network, frames why many supporters have looked beyond those concerns at what many perceive as the underlying importance of the legislation.

 

"While there will inevitably be some hiccups in the execution of crowd-funding, I think it's a major breakthrough for early stage seed capital," she said.  "Congress has certainly allowed some risk with this bill, but it drives private capital down the food chain where it is desperately needed to seed innovation."

 

Tom Simpson, former venture-capital leader who now heads the Spokane Angel Alliance, sees the new law as "not perfect, but a step in the right direction."

 

"But I agree with Payne that the more investors a new company has, the more the likelihood for problems," he added.

 

Republican Sen. Scott Brown of Massachusetts, who conceived the measure, offers perhaps the most compelling argument in favor of it.

 

He explained that the long-time practice of people funding their new businesses by mortgaging their homes is basically no longer possible. So a new source of start-up capital was necessary, particularly in the face of the disappearing hope of bank financing.

 

My own sense is that the typical congressional supporters of the bill went through the following conversation with themselves:

 

"Job creation is so politically important today that if it costs investors a few thousand dollars each down the road, it's worth it. Somebody has to pick up the tab for creating jobs and we certainly can't. Poor people buy lottery tickets all the time taking risk far greater than investing in a start-up company. So let's get on with it."

 

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A look back over presidential primaries suggests some benefits in long campaigns

Concern among Republicans that the prolonged battle for their party's presidential nomination could have a lasting negative impact on the eventual nominee is intriguing given how struggles for the nominations of both parties used to unfold.

 

There is some understandable hand-wringing among GOP leaders who would like to see a wrap on the nomination battle so a presumptive nominee can begin to focus on campaigning against the president. But a look back would suggest it's the nature rather than the length of nomination battles in either party that wears on the voters.

 

And a student of history might reflect that something has been missing in recent presidential-election years. The process of presidential-preference primaries, born in Oregon in 1910 and originally viewed as empowering the people to choose their parties' candidates, has become a boring march to the inevitable for the past generation.

 

But 2012 may provide a revisiting of those campaigns in which the trail to the nomination led through Oregon in late May and on to the primaries' climax in California in early June.

 

It's the first time in 20 years that a June date in California and the quest for its huge pot of delegate gold has been possible. In 1996 California decided that its primary had become anti-climactic and moved it ahead to March so it could catch the heat of action.

 

Last summer, pronouncing that the experiment for California to compete for election dollars, high profile candidate appearances and perhaps also an increase in political clout had failed, Gov. Jerry Brown signed legislation to restore the state's primary to June.

 

So ironically, the decision may have put California and its 172 delegates back in the eye of the campaign hurricane, a week after Texas bestows its 155 delegates, and the two, plus Oregon and a handful of other states in late May, could explain why all of the four candidates insist they are staying in the race.

 

An ironic reflection on past presidential-nomination contests is provided by the one in which Mitt Romney's father was a vital early figure. I haven't seen as much recollection as I thought there might be on the fact that Gov. George Romney wasn't only a hopeful for the 1968 GOP nomination, but had been viewed as almost the pre-emptive favorite heading into that year.

 

And had he not made the disastrous slip of explaining his change of heart to become an opponent of the Vietnam War as having been "brainwashed on Vietnam," Mitt Romney might now be running as part of a family political dynasty, ala the names Kennedy or Bush. And it might have been a campaign in which the issue of a Mormon in the White House had long ago been resolved.

 

The '68 campaign was also one in which, as I reflected several years ago, prominent figures from Washington state played key roles, a campaign that, as a young political writer, I had the opportunity to cover.

 

There were still three nomination hopefuls in the Democratic-nomination race by the time of that '68 Oregon Primary. And there would still have been three by the disastrous Democratic convention in Chicago had Robert Kennedy not been assassinated a week after Oregon, moments after acknowledging victory in the California primary.

 

Everest-conqueror Jim Whittaker of Seattle was an ever-present figure by Kennedy's side until the fateful moment in a hallway of the Ambassador Hotel in Los Angeles when Sirhan Sirhan shot Kennedy.

 

Washington's former governor and U.S. Senator Dan Evans still well remembers the GOP convention in Miami and his role as the keynote speaker whose support was sought by both eventual nominee Richard Nixon and New York Gov. Nelson Rockefeller, who still had a chance at convention time. Nixon even suggested the vice presidency might accompany an endorsement from Evans, who chose instead to endorse Rockefeller.

 

The Republican primary effort that year, despite enduring up to the convention, as did the Democrats', was a much more gentlemanly affair than the bitterly divisive, Vietnam-fueled Democratic struggle. And most students of history would suggest that campaign  bitterness had an influence on the fact Richard Nixon won in November.

 

Four years later, the decision about the Democratic nominee also stretched to the Oregon and California primaries. Eventual Democratic nominee Sen. George McGovern beat former Vice President Hubert Humphrey by 44 percent to 39 percent in California to assure himself the nomination.

 

Washington Sen. Henry M. Jackson was a distant third in '72 but didn't drop out until early May. And he was a more serious challenger in'76 in what was still a four-man race for the Democratic nomination when he dropped out May 1 after losing the Pennsylvania primary to eventual nominee, then president, Jimmy Carter.

 

As those and other campaigns make clear, there's nothing inherently undesirable about a prolonged primary campaign that exposes the candidates to an electorate that deserves the opportunity to get to know as much as possible about the person who could wind up as their president.

 

If the candidates' comments and pronouncements make their shortcomings as presidential timber obvious, that's beneficial to the voters, if not necessarily to their party. It's only when the unending barrage of negativity from opponents paints a picture of shortcomings that may not even exist that a prolonged campaign does damage to the political process.

 

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Demise of redevelopment agencies looms in the state of big challenges

There's nothing that could make residents of places like Washington, Oregon or Montana feel better about how their states are being run than to be plunked down for a few weeks in California and get an amusing and bemusing look at the dysfunctional workings of the nation's most populous state.

  

Everything about California is big, and that includes the massive budget deficit that has been the focus of governor-again Jerry Brown since he was sworn in a year ago as the literal political-comeback kid.

  

Now comes what may be the biggest challenge ever faced by local governments and economic-development entities in California. More than 400 redevelopment organizations around the Golden State are scheduled to go out of existence on Feb. 1 and some of their financial obligations will be absorbed into the general funds of local governments in those areas where the EDAs now exist.

  

Part of the predicted fallout will be that states like the aforementioned Northwest ones will be cranking up their California recruitment efforts looking to woo businesses away from a place where they don't seem to be wanted.

  

That would be an unfortunate misimpression about California because local communities and economic-development organizations across the state strive mightily to create jobs in their areas with innovative ideas and initiatives, despite the image the state policies have fostered.

  

Four of the largest redevelopment agencies in California are all in the job-hungry Coachella Valley. Those are La Quinta, Indian Wells, Rancho Mirage and Palm Desert - communities well known to Northwesterners who trek south to the desert each winter in search of sun.

  

Redevelopment agencies provide funding for road, sewer, lighting and affordable-housing projects across the state under a 65-year-old law that allowed a city or county to create a redevelopment area to address urban blight. RDAs receive related property-tax revenue increases, known as tax increments.

  

All this chaos came about because a legislature-approved plan conceived and proposed by Brown sought to coerce the RDAs to give up $1.7 billion in increased property-tax funds if they wanted to continue to exist. It was branded the "pay-ransom-or-die redevelopment system" by the California Redevelopment Association.

  

Part of the reason that the governor and legislature viewed the RDAs as a good place from which to divert revenue is that for all the good works done by the RDAs in creating opportunities for developers to invest in communities and transform downtrodden areas, examples of excess and abuse occurred.

  

To be sure, there have been blatant instances of excess on the part of some RDAs as eminent domain was sometimes used to seize private property that was then transferred to developers along with cash subsidies.

  

But even if sometimes developers seemed to get deals that smacked of favoritism,

many local officials and economic-development leaders would contend that the RDAs usually fulfilled their promise of revitalizing decaying communities and creating jobs.

  

Billions were invested over the decades to dramatically rebuild dilapidated downtowns, creating millions of jobs for Californians and hundreds of thousands of low-income housing units for growing numbers of homeless families.

  

Defenders of the value of redevelopment might logically suggest that killing RDAs is a little like saying examples of Medicare excess or fraud mean that Medicare should be abandoned.

 

During his first stint as California chief executive, Brown's mantra involved a focus on creating lower expectations for his state's citizens. In this new era of spending realities, he's being forced to impose lowered expectations rather than just urge their acceptance.

 

Part of his implementing lower expectations by fiat was to have local development entities settle for less and divert their funds to education, roads and fire departments as he sought to balance priorities while dealing with the $20 billion deficit.

 

The California Supreme Court, in a two-part decision, ruled late last year that the state had the right to kill the agencies. But it didn't have the constitutional right to condition their continued existence on their agreement to pay the state an annual fee based on their portion of property tax revenues.

 

So, unless there's an unlikely 11th-hour reprieve by the legislature, which even the governor's allies say he doesn't seem interested in achieving since it was the RDA organization that took him to court, the RDAs close up next week.

 

So what happens then? The real estate assets of the RDAs need to be sold off. But some obligations of longer-term nature that must be satisfied will become the obligation of city general funds.

 

That's likely to be the start of an extended period of financial uncertainty for cities and counties, as well as for the real estate market that will be flooded with several thousand commercial properties that will need to be sold at fire-sale prices.

 

George Skelton is a Los Angeles Times' political columnist who joined the newspaper the same year Brown was first elected in 1974 and thus has the unusual perspective of having covered both Jerry Browns.  

   

Skelton was a long-ago political-writing colleague at United Press International before he joined The Times so I emailed him last week to ask if we could visit about "the two Jerry Browns."

 

He followed up by writing a column on the subject following Brown's second State of the State address. Skelton recalled Brown's 1976 State of the State as "best remembered for one depressing, if prophetic, line: 'We are entering an era of limits.'

 

The state's current situation is clearly an immersion in an era of limits.

 

The now-73 year old Brown, during his 1974-82 tenure, was tagged as "Governor Moonbeam" for proposing that the state develop its own communications satellite.

 

Skelton says the old "Gov. Moonbeam" still exists. And Brown certainly proved that's true when, despite the financial travails of his state, he made it clear that reduced expectations don't apply to his unwavering support for a $100 billion bullet train from San Francisco to Los Angeles.

 

Brown summed it up with: "government should pursue ambitious ventures even during times of economic strife."

 

Local economic-development leaders might well shake their heads in frustration, agreeing with the premise of a state that needs to be "ambitious" in times like these, but not in pursuit of a bullet train.

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Nickels' likely entry will enliven race for open Secretary of State post

Former Seattle Mayor Greg Nickels' likely decision to seek the Democratic nomination for Washington Secretary of State may represent a sobering reality to the three Democrats already announced and campaigning. But it's also a bit of cold water on the hopes of those who figured he'd seek to regain the city's top elected position next year from "the accidental mayor."

 

While Nickels has given himself until Valentine's Day to make up his mind about a race that he says he didn't really begin to contemplate until "over the Holidays," it was clear during a telephone interview that he's already thinking about what he would seek to accomplish in the office. The chances that he will decide not to run are remote.

 

"I think this office, where all businesses documents have to be filed, can be a place for someone to act as an ombudsman for small businesses all across the state," said Nickels, who would be seeking, along with the other Democrats, to be the first from their party to win the Secretary of State job in this state in 50 years.

 

The other Democrats include Kathleen Drew, a one-time State Senator who now works for Gov. Christine Gregoire and who is the only woman seeking the Democratic nomination. She has already received some important endorsements. Those include former King County executive Ron Sims, who recently returned from a stint in an Obama-Administration post, and King County Assessor Lloyd Hara, who is holding a fund-raiser for her next month.

 

The two Democratic legislators who have filed are Jim Kastama, a state senator from Puyallup who chairs the Economic Development, Trade and Innovation Committee (EDTI), and Rep. Zack Hudgins, a former employee of both Amazon and Microsoft.

 

The lone Republican in the race, and the first of any of the hopefuls to announce, is Kim Wyman, protégé of outgoing Secretary of State Sam Reed for a decade in the Thurston County assessor's office before being elected to replace him eight years ago when Reed decided to seek the state office.

 

Wyman notes that she has "already demonstrated the ability to perform the functions of the Secretary of State's position, like elections supervision and business filings, at the county level." She, of course, has the endorsement from Reed to replace him.

 

If the others of both parties hoping to succeed Reed were taken aback by the prospect of campaigning against Nickels, many Seattleites who were hoping he would seek to reclaim the mayor's job in 2013 were surprised and disappointed.

 

There was a sense on the part of business leaders and others that Nickels, who actually finished third in the 2009 primary, was merely supposed to be getting a signal from many who wished to send him a message about a perceived arrogance, not oust him from the job.

 

For those, who had no interest in having Mike McGinn as mayor but didn't care for businessman Joe Mallahan, it was an interesting lesson in not wasting your vote to send messages. So as McGinn's relations with the City Council, the governor and the business community have soured, many took to referring to him as "the accidental mayor" and were awaiting Nickels' effort to win back the office.

 

Nickels, 56, admitted in our telephone conversation that "in the back of my mind there is a sense of some unfinished business" for the job he held for two terms. "But it's time for me and for the city to move on."

 

Since being rejected by the voters, which Nickels describes as "a very humbling experience that gives you a different perspective on things," he has had a teaching fellowship at Harvard, served as a public delegate to the United Nations and traveled to the Ukraine to advise mayors there.

 

He describes those experiences as "two years of experimenting" to determine what he'd do next. Now, he says, the role of Secretary of State would be "a logical continuation" of his 35-year love affair with public service.

 

Wyman, who says she expects a number of other candidates to emerge before the filing period begins in June, has already visited 15 counties around the state and is "starting to build" a strong campaign team. She has so far raised about $25,000, noting that "as you get into races down the ballot, it's much harder to raise money."

 

Drew became the first Democrat in memory to be elected to her east King County seat in 1992, unseating eventual GOP gubernatorial candidate Dino Rossi before losing to him four years later. She has since been involved in higher education at the UW Bothell campus, wrote the state's ethics law, worked closely with tribes and been involved in governmental reforms efforts.

 

Drew offers frankly: "I think I will have a lot of support from women."

 

The two Democratic legislators, Kastama and Hudgins, would have expected to draw from a traditional base of financial support for Democrats in a down-ballot contest that stands to draw less attention than the high-visibility race for the open gubernatorial seat, for president, U.S. Senate and congressional races.

 

Nickels, whose entry will change that fund-raising dynamic, addresses in advance what's likely to be a key political shot others take at him, saying "I'm not looking at this as a stepping stone to any other office."

 

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Candidates should be pressed to assume responsibility for political attack ads

You didn't need to be a fan of Newt Gingrich to feel bad for the guy because of all the political dirt dumped on him during the Iowa-caucuses campaign. And you didn't need to be a foe of Mitt Romney, who finished at the top in Iowa Tuesday, to find his avoidance of responsibility for the deluge of attack ads aimed at Gingrich distasteful.

 

And you don't need to be a schooled political observer to sense that the Iowa mess was only the undesirable opening salvo of what is likely to be a dirt-encrusted presidential campaign over the coming months, particularly once we enter the general-election phase.

 

So to the electoral masses, Iowa likely brought a new level of disgust with the way politics has come to be defined, and the hunger for something, and someones, different.

 

As far as national-level politics goes, we can't do much other than try to tune out the flood of campaign diatribe. But perhaps influentials of both parties in Washington State, who desire a more refreshing odor from the political campaigns at the state level, can force a cleaner conduct on candidates in the most important Washington State race this year.

 

We're referring, of course, to the race for Washington governor, where Republican Atty. Gen. Rob McKenna and Congressman Jay Inslee, a Democrat, face free rides to their parties' nominations to engage each other in the November General Election. Gov. Chris Gregoire isn't running for re-election and possible competitors for either party's nomination have been dissuaded from fouling the political fray with competition.

 

 So the looming one-on-one battle in this state threatens to unfold as a long and tedious campaign marked by extensive negative messaging. That's an eventuality that none of the many citizens already disgusted with the national political process should need to endure in Washington.

 

The way attack advertising has evolved is that it's carried out by organizations supportive of, but not directly tied to, a candidate. That allows the candidates to vow that they are going to wage a clean campaign knowing that such supporting organizations will carry the trash.

 

And the media outlets have done poorly in pressing candidates to take a position of agreeing with or disavowing negative comments about their opponents. It's not that difficult to say to a candidate at a press conference: "we know this was not a message directly from your campaign organization, but you must agree or disagree with it."

 

Perhaps the simplest expectation is one the iconic William Rucklshaus, in a must-read op-ed piece in Sunday's Seattle Times, listed among the things we need to insist on from our political candidates: "Tell us why we should vote for you, not what's wrong with your opponent."

 

The challenge of asking candidates to step out of the mud hole in which many now operate during campaigns is that people other than the candidates increasingly are the conveyors of negative messages while the candidates themselves pretend they're cloaked in campaign purity.

 

That problem is growing worse as social media becomes more pervasive. And, in fact, with no way to control the over-the-top negativity, frequently false, of bloggers and the like, any idea for positive change in how candidates campaign may be a waste of time.

 

Nevertheless, here's a New Year idea that could at least minimize the negative campaigning that many fear may lie ahead in the Washington governor's race. And it's an idea that only one of the candidates needs to endorse since one doing so would pretty much force the other to also agree to go along.

 

The idea is that the gubernatorial candidates agree that when any negative advertising is aired or disseminated, they will say either that they say either "I agree with that," or "I don't agree with that." No responses like "I don't really have an opinion on that" should be left unchallenged.

 

This isn't to elicit a promise to run a clean campaign. Every candidate promises that now. Rather it's pressing for a promise from each candidate to take responsibility for all messaging on their behalf. 

 

Such a small step could make negative campaigning more uncomfortable for candidates. And that would represent a long step toward Ruckelshaus' vision of candidates spending time talking about themselves rather than their opponents.

 

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