01-30-06 Special Called City Council Retreat Meeting of La Porte City Council

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®Note _a particularly bullish sign in the strong Nov Job report: A clear broadening of hiring to all sectors of the economy, evert manufacturing, which has lagged woefully on employment for years. • The monthly report's diffusion index, a little -watched measurement of the spread of job creation, reached its highest level since May 2004. That points to balanced, sustainable economic growth next year, with the total employment increase matching this year's 2 million or so. The downside for businesses: Continued upward pressure on wages. ®_Factory outsourcing doesn't have to mean sending Jobs overseas. You can also save by using U.S.-based assembly -line specialists. They take over your assembly -line equipment, refurbish.it and use it to manufacture products for up to 40% less. Flinchbaugh Engineering in Pa., for example, makes replacement parts for several manufacturers. The savings are possible because firms that take over the assembly lines are experts in efficiency, have low overhead and are often nonunion. More firms are cutting costs by moving warehousing to China as,well as production. Apple Computer, Ingersoll-Rand, Schneider Electric, Nike and others are saving bucks and speeding distribution by doing so. Goods made there are kept there until the buyers need them, then sent directly to retailers or manufacturers, not to U.S. warehouses. Less -expensive land, buildings and labor in China spell big savings. ®Many mutual fund holders are in for a cheerful holiday surprise: Year-end distributions will be much biggeryear, than last , especially or top -performing funds in the energy, financial service and emerging market sectors. T. Rowe Price's Financial Services Fund, • for -example, is paying out three times as much as it did last year. But the good news now will mean a tax headache later. Distributions from a fund are taxable in the year they are paid out, even when reinvested in the same fund. And because of the rapid turnover of stocks by some managers, many distributions will be short-term gains taxed at regular income rates rather than the 15% capital gains rate. Though avoiding the .tax is hard. there is nnP thina o.,,, ...- a,,. rum vii ouying new snares until after distributions are made. Do -you employ immigrants? The IRS is cracking down on businesses that.are delinquent on their taxes, with help from immigration officials. Nearly 19,000 firms that sponsor foreign workers owe $5 billion in taxes. Under a new pilot project, data from the IRS will be cross-checked against requests from businesses that ask to bring in foreign workers. If enough companies are caught, the IRS will push for legislation requiring firms that sponsor immigrants to be current on their taxes. Businesses won't see much more tort reform from Congress in 2006. Lawmakers did pass two bills this year, , one protecting gun makers and one making it harder to.win class-action lawsuits. But legislation that would shield companies from what they view as excessive litigation will remain snarled in political gridlock for the near future. That means no federal limits on medical malpractice awards. And the end of efforts to impose mandatory sanctions on attorneys who file lawsuits that are eventually deemed frivolous by a court. • One possible exception: A bill protecting fast-food restaurants and distributors from suits blaming them for obesity and health problems. Remember, your subscription includes The Kiplinger Letter online 1 5