Wednesday, January 09, 2008

Earthquake Prediction

Actually two earthquake predictions. First a real earthquake. There's been a bunch of quiet and a bunch of microswarms and it has been too long.

Second and this one is not a "prediction" so much as a certainty and the real point of this post. The major municipal bond rating agencies are very soon now going to place the entirety of California on a ratings watch with strong guidance indicating that most will get downgraded. The news is coming in so fast it is hard to keep organized. The City of Santa Barbara discovered a $3.4m shortfall in their public safety budget. Some ($700k) was overtime from the Zacca Fire but most was Prop 172 money. Prop 172 was one of those bad ideas that arise with an open initiative process. Story and ubiquicerpt:
“We didn't think there would be any reason for sales tax to decline in any great way” this fiscal year, Brown noted in explaining why the projections were originally higher. “This (drop-off) may be a corollary affect of the decline in the housing market.”
Gee Mr. Brown ya think? Really bad news about this? Prop 172 is a statewide funding mechanism. EVERY single public safety agency has this same problem and hardly any even ksuspect they have a problem. Now for the tie in. Watch the COPs. No, not police officers, certificates of participation. It is possible that when these agencies go to the muni markets they will be denied. They don't have the resources to repay more debt and they can't afford performance insurance.

27 comments:

Ogg the Caveman said...

Why yes, I will Murst! twice in a row.

Rob Dawg said...

You still got it Ogg.

chickenlittle said...

To the many in CA who feel justified in "opting out" of social insurance, i.e. older owners paying ridiculously inequitable property taxes, I would support a higher deductable approach to the whole thing, i.e., you insist on higher deductable rates, settle for more user fees. Your neighborhood has fire? Guess what, you need to be assessed a much high rate. You have a flood? No free FEMA for you too. fee for services type approach. This clear some large swaths of real estate.

Rob Dawg said...

Chicken,
That won't work. Taken to the extreme you'd charge the family for the cost of the bullet the State used to execute your relative. Sound familiar?

"Sorry Robert, we need to charge you so much property tax that you are forced out of your home because David Crisp in Bakersfield caused a budget crisis for their wastewater plant. "

The problem with fee for service is that the biggest consumers don't have the money. Let's start with a simple microcosm. Let us quadruple transit fares everywhere in the nation. That is still a subsidy. What's the problem? You said you wanted fee for service.

chickenlittle said...

Sorry, but I both know and know of too many older people who simply pay incredibly low RE taxes who could pay much more. Their only justification is that they got here first (they feel so lucky!). Take that logic to its extreme and we should cede CA back to Mexico or better yet, the tribes.

Edgar said...

They don't have the resources to repay more debt and they can't afford performance insurance.

Q: Hey, are you going to pay for that?

A: "Talk to the hand."

Rob Dawg said...

Chicken,
What is wrong with a few still paying FAIR taxes just because the rest of us pay too much? You have your threshold set incorrectly.

Winston said...

"The problem with fee for service is that the biggest consumers don't have the money."

You could always bring back debtors prisons...

chickenlittle said...

"What is wrong with a few still paying FAIR taxes just because the rest of us pay too much?"

isn't that logic akin to arguements supporting say rent control in NYC? A few pay fair rents while the majority pay too much?

Another problem from my perspective is the myth of the little old couple. Instead, in all of the instances which really irk me, the property in question is some how or another a rental unit

w said...

Are you people crazy? Looking at some house bought in the 70's the owners already paid to build schools, build roads, fund pensions etc. My kids go to a school built generations ago. The owner of the house I rent paid property taxes that probably paid for the pensions of teachers who already retired from that school.

If we cut tax rates on newly purchased homes by having everyone pay taxes at an equivalent rate it will just push the purchase price of homes up. People don't care about taxes and the purchase price of the home, just the monthly nut.

simi.uber.alles said...

Why should someone who bought 20 years ago face unpredictable tax increases just because their once quiet neighborhood is now popular? Or just because some idiot/fraudster overpaid for the house next door, because he thought he could make a bundle flipping it? And why should these tax increases all accrue to the benefit of the state, rather than the community where the property is?

Property taxes growing at 2%/year really ought to be enough for the basics. There are plenty of other taxes out there to fund everything else, not to mention Mello Roos. "Prop 13 prevents us from raising enough taxes" is a canard that really means "We the legislature want to buy all this stuff but that pesky law is in our way."

I do agree with you on rental units, though. There's no reason for landlords to skate on these taxes while they increase rents at market rates. I'd change Prop 13 into a deduction against property taxes that would only be issued to owner-occupied. For anyone with a mortgage, that's easy to do; just get a copy of their 1040 showing the mortgage deduction.

simi.uber.alles said...

I'm sure I don't have to point out the absurdity of state spending to this crowd, but I saw this gem in the LA Times yesterday:

"The governor said he will submit a budget in two days that deals with the potential $14-billion deficit by cutting spending across the board."

Later in the same article:

"The governor's speech today is likely to hail the Assembly vote last month to approve the first phase of a $14.4-billion plan to extend medical insurance to nearly all residents."

Gee, Guvnah, you think there might be some connection there?

chickenlittle said...

"I'd change Prop 13 into a deduction against property taxes that would only be issued to owner-occupied."

That would shut me up.

Rob Dawg said...

"The governor ...l $14-billion deficit by cutting spending across the board."

Later in the same article:

"...approve the first phase of a $14.4-billion plan to extend medical insurance to nearly all residents."

Gee, Guvnah, you think there might be some connection there?


No connection. Honest. The medical coverage is supposed to be covered by new taxes. All it needs is a taxpayer vote. Complete bullshit but it has worked in the past.

Akubi said...

The Guvnah is an idiot.

Akubi said...

His "speech" made absolutely no logical sense whatsoever.

Akubi said...

In other news, today I registered as a Democrat to cancel my stepdad's vote for Hillary in the California primary.

Akubi said...

This guy I'm currently watching on Nightly Business Report looks like a large koi with a lazy eye.

serinitis said...

@Akubi

Did you expect the Governor to make sense?

Since I really expect a Democrat to be the next president, switching parties, for this election, is not a bad idea.

Edgar said...

Sell New Hampshire to the Chinese!

Lou Minatti said...

Earthquakes in California? Real estate meltdown? It's like deja vu or something.

Akubi said...

@Serinitis,
No I didn't, but it is pretty depressing when neither your state or federal "leaders" make sense - and have continued the pattern for _so_ long.

@Edgar,
Let’s sell Safeway.com to the Chinese too!

In absurd real estate gold nuggets in my inbox I encountered this $710K 1 bedroom cottage on a hill in an undesirable location. Zestimate is $610K. Apparently some sellers are still drinking the Kool-Aid.

Edgar said...
This comment has been removed by the author.
Edgar said...

Let’s sell Safeway.com to the Chinese too!

Let's sell a 1/1 cottage in an undesirable location to the chinese for $710k too! Muahaha!!

Akubi said...

Nietzsche '08 - fishnets to follow.
Woohoo! I'm a registered member of the Democratic Party for the first time in my life. In fact, I feel as though I'm really participating in democracy now.

H Simpson said...

In New Hampshire, the majority of taxes are on property since we have no income or sales tax. The rate is made up by a percentage that goes to the state (most of which comes right back) plus whatever the town needs. This is broken up into 2 sections. Schools and everything else.

The original premise is that land was how owners used to make a living, so that is where you tax. It does not work as well with most people working outside the home, but we refuse to go to an income tax.
Why? It would need a central govt to coordinate it and that would only grow.

People need to spend only their money and not magic money or someone elses money. It eliminates the excesses.

We have many of the issues you mention. in past 10 years So NH has come into its own and is not as beholding to Boston though we still have a lot of commuters.

We have built schools, roads etc to support this growth. The costs can be hard on the retirees who bought homes 50 years ago and now their taxes are half their income. We get around this by having forgiveness rebates provided you can show you cannot afford the taxes. This keeps the elders from getting screwed.

So it can be done. In a place like Ca, can you think of getting rid of all the state functions except the highway dept and a high level school administration that sets standards? IF you could do it, then you could go from near the top of the heap for taxes to the bottom.

Tax locally and lots of government issues disappear.

"live free or die"

h.

Property Flopper said...

Simi.uber.alles:

> just get a copy of their 1040 showing
> the mortgage deduction.

I'm owner occupied but also AMT. No mortgage deduction on the 1040. :(

What they need to do to correct prop 13 is to remove corporate property. There are major corps paying 1970's taxes on property. They will continue to do so as they never turn over the prop. Housing eventually turns over...