California Cities Keep Declaring Fiscal “Emergencies” and Investors Are In On It
bloomberg.com
bloomberg.com
It's hard for me to take anything California government does seriously right now while they're ignoring the 10 ton elephant in the room that's causing almost literally every other problem.
If they don't start addressing this with a significant attack plan extremely soon, their tax base will leave the state in droves, and they will never raise taxes enough to make up the difference. It's an emergency, declare it one and do something real about it.
Because chronic shortage of housing supply is not a problem for local government[0], it's a deliberate and rational response to the demands (including binding constraints like Prop 13) placed on local governments by the citizens of the State.
[0] the institutional government, at least; California is a direct democracy with limited delegation from the citizenry to the institutional government, and this is a problem for the citizenry-as-government, of course.
This is why America is by many people considered fucked.
Are you referring to this specific piece of legislation or the ability for states to regulate local governments?
Man that place is a dump, nobody goes there - it's always too busy.
-so much so that we have lost electoral seats in Congress because of our population shrinkage, while Florida has gained.
New York and New Jersey each recorded their highest population levels ever in the 2010 census.
This isn't due to babies being born in Florida but not New York-- it's due to older, existing humans moving from NY to FL.
https://www.nytimes.com/2010/12/22/nyregion/22nycensus.html
headline: New York will lose 2 of its 29 seats in the House, while New Jersey will lose 1 of its 13 seats, because of population shifts reported by the Census Bureau on Tuesday.
1) Do you believe people are leaving NY/NJ despite overall population rising?
2) Do you believe that of those people who are leaving, they are leaving because it's too expensive and crowded here?
3) Do you believe that of those people who are staying/moving here, do you think they are moving here because it is NOT crowded?
(ninja edit: it looks like me writing this comment overlapped with you writing another one to another comment, I think we agree here)
As someone who has lived in NY, NJ, NC, FL, MA, NH over the past 20 years, and has evaluated job prospects and propety taxes and so on, I can assure you that we have quantitative and qualitative data that NYC, Long Island, Hoboken, Boston, and so on are quite crowded.
They are so crowded, in fact, that there is a material difference between a $60,000 salary in NYC vs New Hampshire. We're talking about $10,000 or so in terms of additional income taxes, property taxes, rent, so on.
The only people who stay in NY and NJ are staying because they have kids in school, an irreplaceable job, or maybe they just don't care.
But the data shows that people are leaving for less dense areas.
But it's not just about staying - it's also about new people moving in, looking for better job opportunities. As was linked elsewhere in this thread, total population for NY and NJ is at an all time high.
"But the data shows that people are leaving for less dense areas."
Maybe where we're talking past each other here is that you're referring to people within states? Because as said, people aren't leaving high-density states. Also (although I don't know details of these specific trends), consider that e.g. population increase in Florida is not wholly because people want to live in less dense areas - other socio-economic drivers (e.g. Florida being attractive to Hispanic immigrants, who then also have higher than average birth rates, and retirees moving to warmer climates) explain just as much or more of the effect. And then there is the difference between 'moving to low density' vs 'moving away from high density', etc. It's too big a topic to hash out here.
My main point is that I don't think the statement 'in the aggregate, people are dispersing' is correct. In fact, all data and reports about it show it's not. But maybe that's not the point you're making anyway, and my whole argument is moot.
And I'm sure that some people do the math and conclude that their purchasing power is greater in less dense areas. But across the world the trend is that people concentrate in ever-denser areas.
Without positive demographics the last round of homebuyers wont make any profit from their purchase, which makes them vulnerbale to changes in economic winds.
If California were run in the 1800's like it is now there'd be one single house and everything else would be zoned to Nevada.
Because a large segment of the population doesn't see it as a problem. Your "chronic housing shortage" is their winning lottery ticket.
People who bought California property in the 70's, 80's, and 90's have a number of options, thanks to the chronic housing shortage. They can: fund a retirement in Arizona by selling the house outright (even with no other retirement savings); rent to newcomers for many times the house's mortgage payment (living quite comfortably off the difference); or simply take out a home equity loan to use the house as an ATM.
Their children and grandchildren can inherit the tax basis for the property, too, so you're actually fighting two or three generations. Would you really vote for zoning & tax reform if it mean that you could no longer enjoy a passive, inherited income capable of fully supporting your family?
If SF stops growing, then the last drove of people will be the bag holders, and it all goes downhill from there.
That doesn't seem like a particularly informative year to use as a cutoff; 2009 would have been the first year of primaries during the recession, so it's not inconceivable that there were a number of municipalities in a financial crisis then.
(Then again, if this loophole didn't exist, perhaps this would encourage them to fix the actual problem with the law.)
Also, isn't that exactly the point of Prop 13? If I bought a house for $500k, and it's worth $5 million tomorrow, I'm liable for the tax increase whether or not the increase is affordable. I thought the point was to allow homeowners the luxury of limiting the insane tax increases to the points of sale, when value was realized.
Taxes arent meerly defered until sale, they are allowed to rise to market value after the sale is complete, but the government never gets those years of back taxes they would have gotten otherwise.
You fail to make an argument for this.
> Teachers and other vital services should come from consumption taxes or other means.
In practice on CA, they are. This doesn't make things better than when they were done by property taxes.
> Owning a home and having it become more unattractive over time while you have paper gains is crazy.
It's a strong incentive for transactions which promote efficiency in the sense of property being in the hands of those who will derive most utility from it. I'm not sure that's crazy, though, especially in the case of non-residential property.
> Esp. when paper losses don't go the other way.
Without Prop 13, paper gains and losses are symmetric with regard to tax effect; with Prop 13 they become asymmetric, as declines in fair market value are immediately and fully reflected while increases are limited.
Strongly disagree here. In CA many people built their houses themselves after the war and don't want to move as an example. You can't argue who would get more utility out of it as a blanket statement. Maybe willing to pay more to live there but not utility.
Property taxes almost never go down. They are not symmetric in practice. It's pulling teeth to get a reassessment in your favor.
Regarding the core issue of property taxes for vital services - one of the flaws is that areas with lower home values have worse services. Nothing will ever change if property taxes is the primary fundraiser for local services.
The other flaw is in practice - budgets don't need to change drastically from year to year but they do. And that's pushed onto homeowners. And what if it needs to change for a valid reason but home values have plummeted? Well that's why they give you problems trying to reassess on a downturn.
https://www.taxpolicycenter.org/statistics/state-and-local-t...
Nope! State and local taxes averaged around 10.08% of personal income in 2015 across the US, and California was sitting at 10.72%, comfortably above the average and at the 15th highest, comfortably above the median.
And if we adjust for cost of living versus wages, California is only midrange: http://time.com/money/5177566/average-income-every-state-rea...
So yes, it costs more to live in California, but wages are higher, and then the state takes an unusually high slice of those wages.
> You can't pay the 1978 cost of living to a new teacher in 2018.
Good thing that the California state and local governments are flush with cash then. (Or would be, absent mismanagement...)
1) If it's not being distributed between the levels in an efficient or fair manner, that seems like a pretty simple fix. There are already mechanisms for intergovernmental transfers from state to city governments; does California need to increase their transfers a bit?
2) California is already a pretty high-tax state. Shifting the burden from income taxes (that flow largely to the state) to property taxes (that flow to cities) might be good, but will simply uncapping the ability of cities to raise money do this?
In short, I think it's a mistake to conflate concerns about "how much tax can California raise" with "is the money flowing to the right level".
Keep in mind, for the US as a whole, the largest source of revenue for local governments (over 1/3) is intergovernmental transfers, overwhelmingly (88%) from state government (https://www.taxpolicycenter.org/briefing-book/what-are-sourc...). There is no expectation that cities can fund their operations purely from property taxes, and this isn't how cities work in the US in any state. All cities rely on transfers from the state government, and the California state government is raising a lot of cash. If it's failing to transfer it to cities the way it should (which remains to be demonstrated!), this has nothing to do with Prop 13.
Anything that has a non-remote labor component, since the people doing work in a region have to pay the local cost of living, including housing costs.
> Also, isn't that exactly the point of Prop 13?
Yes, crippling local government this way is exactly the point of Prop 13.
I dont trust the govt to assess accurately value, thats not their job. The IRS has never done that, they use fair market value determined by actual sales.
To answer your question, one could argue that it’s not the idea of constitutional limits that sounds dangerous, but what this exact law is limiting that feels silly and dangerous.
As a Californian, all of our crazy constitutional limits on taxes are less awesome. After many years of unequal taxation, similar buildings in the same city pay wildly different amounts of tax, and the difference will only grow over time. People are less likely to move for a new job, businesses get less for selling commercial buildings because a tax benefit is lost when a building is sold. It's one of the worst aspects of California's direct democracy system.
If there were an equal number of ballots on lowering as well as raising taxes, sure. But this is a ratchet that goes only one way.
I don’t think most normal adults in a functioning democracy oppose taxes per se. But it is the right and the duty even of every taxpayer-voter to ensure that the common purse is managed efficiently and for the good of the community, and that’s the heart of all of this. The question is “if you can’t spend what we’ve given you already responsibly, why should we give you more?”
All bad laws were started with good intentions. That should never be what defines a law's value, only cause & effect to the best of our current understanding (and hopefully backed by data).
Note: I'm not saying this is a bad law as I'm not familiar with the local political environment which motivated this nor the particular negative consequences it objectively has.
Last time I was there (California DMV) it was to pick up a custom license plate. I made an appointment and was in and out in less than 5 minutes. I spent more time in the parking lot removing my old plates and installing the new ones.
>Social Security Administration?
Had to get my Social Security replaced a few years ago. Was in an out in a reasonable time (comparable to a doctor appointment)
>The Post Office
USPS works fine for me.
Also had no problems getting a business license from either the City of Mountain View, or San Francisco. The staff at Mountain View City Hall were also very helpful in verifying that local zoning permitted me to run my software consultancy out of my home (it does).
The thing is, there are actual parts of government that are terrible. Caltrans (aka California Department of Transportation) is quite incompetent. Apparently, if there's a big transportation project in California, often the first goal is to try to figure out how to get someone other than Caltrans to run it. When that fails, you get messes like the new Bay Bridge.
The VTA (who runs public transportation in Santa Clara County), also seems quite inept, with light rail lines that are little used and obviously dumb ideas like a BRT lane on El Camino Real.
It would be nice if people who are skeptical of government would direct their skepticism at the parts that are the most broken, rather than just pulling out Stereotypical Examples of Government Incompetence (DMV, Post Office) that actually work fairly well most of the time.
And I've used all of them with little or no issues. The DMV being the biggest pain point in one state, but it works quite well in my current state.
It seems to me the onus should be on the government, since they're the ones taking our money. Once they've (1) proven they spend our money wisely, and (2) shown they have real need of more, they should be given more.
The constitutional limits definitely have their drawbacks, but they prevent the frogs (us) from being boiled alive.
BART drivers. Coming in from New York, another high-tax state, the paucity of services in California is surprising.
Surely there are expenditures deemed "being nice" which isn't a real neccessity for the local citizens?
There is strong selection pressure applied to politicians to get re-elected.
There is essentially no selection pressure for them to do a good job (as long as who to blame for the bad job is ambiguous, which it almost always is).
Because the citizenry doesn't want that. Oh, sure, in abstract terms they do, but when it comes to any specific set of concrete cuts, they tend not to.
That's not true, either; plenty of spending programs that directly effect < 50% of the population will face more than 50% opposition if cuts are proposed.