Reply
Contributor
terrafirma
Posts: 34
Registered: ‎03-15-2012

The 'state' of California

i am concerned about the long term impact of California's fiscal crisis. i don't see much discussion about it on this forum given that bay area RE is not immune to the effects of this crisis. please do share your thoughts.

Gold Super Contributor
norcalnative
Posts: 3,277
Registered: ‎05-04-2009
0

Re: The 'state' of California

[ Edited ]

CA GOV can flop around for years - it has no bearing on my house or my job or the simple fact that the Silicon Valley is one of the largest econmic power houses the US has.

 

What you will see happen of the next decade or so is voters - voting against any type of tax increases for State Collected taxes given its quite obvious that Sacramento has problems managing its budget. Given the choice between the Governors tax on people making 250+K a year and cutting my local school district a nice check to help keep various programs funded or class sizes down - I would 100% rather personally hand the school district my check than send it to Sacramento and wait to see if my local schools ever get any money sent to them from Sacramento. You see where thats headed?

 

There has already been a big push for keeping money local hence the big run up in Parcel taxes found all across the state which are locally gathered funds which can't be taxed by the state of CA. Meaning all the parcel tax income the local population approves goes directly to the intended need - schools local roads etc.

 

Not to mention going after people who make 250+ a year is simply taxing the primary economic sources in the state to help fund areas which are not economic factors. It should be called the Silicon valley and LA/SD population to pay for inland CA state costs which can't be funded on the current tax revenu generated by those areas. LOL

Contributor
terrafirma
Posts: 34
Registered: ‎03-15-2012

Re: The 'state' of California

in other words, California is too big to fail.

Platinum Trusted Contributor
tjh
Posts: 4,978
Registered: ‎01-09-2010
0

Re: The 'state' of California

If the City of Vallejo's bankruptcy is any indication, there will be some great deals on SFHs when California follows suit.

 

The bright side of it is, bankruptcy provides a nice "do over" and things can be set back on track without political cow towing to all of the various advocacies.

Silver Contributor
kinectimal
Posts: 442
Registered: ‎12-18-2011
0

Re: The 'state' of California

What fiscal crisis?
Platinum Trusted Contributor
tjh
Posts: 4,978
Registered: ‎01-09-2010
0

Re: The 'state' of California


sakidd12 wrote:
What fiscal crisis?

The one where the state legislature can't balance expenditures with revenues. 

 

In the private sector, where I spent the first seventeen years of my post college career, this is addressed by cutting costs and redirecting resources to better match revenues. No stone is left unturned in seeking reductions in the costs from any and all sectors of the business.  This often results in resentment and bitterness by current employees but saves the business and benefits customers and shareholders.....as well as savvy employees who understand the concept and move forward with the organization.

 

In the public sector, where I have been employed for the past sixteen years, there is no understanding of the concept of cost reductions and euphemisms like "budgetary shortfall" and other forms of governmental double speak are bandied about and a call for "increasing revenue" goes out.   Continuing the enterprise in it's present form is the primary goal with future expansion of it's role as a secondary target.  Thus, no stone is left unturned when seeking tax revenue increases.  This often results in happy employees who can retire at age 50 or 55 with guaranteed incomes and health care for life and pushes serious consequences further out into the future for future generations to deal with.  It burdens taxpayers with additional transference of income and promises of even more burdens in the future.  Only on extremely rare occasions does a public entity actually fail and end up with a "do over" like Vallejo did, because it's easier to cry poor and go after new or increased sources of tax revenues.

Silver Contributor
kinectimal
Posts: 442
Registered: ‎12-18-2011
0

Re: The 'state' of California

[ Edited ]

We have a budget shortfall in Oakland but I think it's mostly due to the depressed state of the economy and decreased tax revenue.   They've cut back on services and threatened to close some libraries.  Now I think there's an $80 parcel tax increase measure on the ballot which will probably fail.

 

I'm not that familiar with what happened to Vallejo but I'm pretty sure this is completely different.  There are enough ridiculous programs still happening that tell me we are nowhere near on the verge of bankruptcy.

Platinum Trusted Contributor
tjh
Posts: 4,978
Registered: ‎01-09-2010
0

Re: The 'state' of California


sakidd12 wrote:

 There are enough ridiculous programs still happening that tell me we are nowhere near on the verge of bankruptcy.



You don't understand.  As a longer term insider I can honestly tell you, government's spending priorities are not congruous with John Q. Public's wishes.  In fact, I will be attending an important meeting later today where we will be discussing the expenditure of $68 Billion dollars on transportation and housing infrastructure in the Bay Area over the next twentyfive years.  And, I guarantee you, not one member of the public will be there.

 

How could this be?

 

Well:

 

1) There is nobody minding the store and,

2) There are large piles of money ("funds") available which,

3) Attracts advocates, like moths to the flame for various causes that have learned how to manipulate this system to their           advantage and,

4) Politicians ultimately approve the "consensus" recommendations from the staff level body(ies).

 

This is how boondoggles like high speed rail see daylight in the first place. 

 

Need I say more?

 

Those of you who participate in this real estate forum and are interested in the future of housing in the Bay Area should be very interested in this governmental plan.  You might want to start by taking a look at this 28 page overview released last year:

 

http://www.onebayarea.org/pdf/IVS_Overview.pdf

 

or:

 

http://www.onebayarea.org/workshops/virtual.htm

 

The RBA plays a prominent role in the planning goals outlined there.

 

And, in a nutshell, Vallejo was forced to declare bankruptcy due to an inability to pay for retiree benefits they have commited to over the years for police and firefighters. Bankruptcy is the one tool that public entities have that allow them to reopen and renogitate excessively generous public employee contracts.  Look for similar actions by other jurisdictions in the future.  They have overpromised and overspent and the bills are coming due. 

 

This is very much like the housing bubble popping.  And similarly fostered by forcing public entities to accurately record their liabilities (GASB 45) on their books.  Remember the "mark to market" debacle for lenders?  It's too bad that the regulators eased up on that or the housing market would have cleared out sooner and we'd all have something more interesting to debate.

 

http://en.wikipedia.org/wiki/Mark-to-market_accounting

 

http://online.wsj.com/article/SB123867739560682309.html

 

Just for reference:  Mark to market is a two way street.  Part of what led to private equity take overs of companies with major real estate assets such as retailers and grocery chains takeover targets twentyfive years ago was their carrying all of their real property at cost on their books, while the then current FMV was much higher and not reflected on their balance sheets at all.  But, it was usually disclosed in the footnotes.  Like a flipper with a house, buying those companies at their business value and breaking them up and selling of those real estate assets at FMV could be quite profitable.

Trusted Contributor
ownerer
Posts: 178
Registered: ‎05-17-2011
0

Re: The 'state' of California

OneBayArea will result in price increases for resale SFRs on mid-large lots (which is what most people want to buy these days). So as an SFR owner, I say go ahead with OneBayArea. Build 30 story condos along ECR, why do I care. Just keep them away from my block.
Platinum Trusted Contributor
tjh
Posts: 4,978
Registered: ‎01-09-2010
0

Re: The 'state' of California

ownerer:

 

I'm with you....and thousands of other BA residents who think they are going to escape this planning boondoggle.  NIMBYsm is alive and well here.

 

Doesn't "one Bay Area" sound like a euphemistic title right out of Brave New World...or maybe the communist manifesto? :smileywink:

 

It makes me think of the scene in Dr. Zhivago where the Stalinist comes to divvy up the Zhivago household and one of them exclaims, "only two square meters per person allowed comrade" - or some such edict involving the draconian rationing of housing space based on the Stalinist idea of "fairness" and "equality".

 

We can blame the public's ill informed acceptance of AB32 and SB375 for the emergence of the "OneBayArea" plan.  It's the jurisdictional response to those "feel good" state laws.  We can improve anything with governmental planning and control. :smileyfrustrated: