Is the San Bernardino city BK the fault of Prop 13? Nope!

Richard Rider, Chairman, San Diego Tax Fighters Richard Rider, Chairman, San Diego Tax Fighters Leave a Comment

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In the article below on city bankruptcies, the LA TIMES gives the impression that San Bernardino’s BK is largely due to Prop 13. Not so.

I don’t have the city historical property tax figures, but doubtless they closely reflect San Bernardino COUNTY property tax.  Consider:

  • In 2005, the county property tax assessment roll (on which the property tax is levied) was $126.51 billion.
  • By 2008, it had soared to $181.83 billion.

http://www.sbcounty.gov/assessor/Archives/annualreport2008web.pdf

  • In 2012, it dropped back to $162.68 billion.

http://www.sbcounty.gov/assessor/Documents/20120629AssessmentRoll.pdf

Yes, from 2008 through 2012 the tax revenue dropped about 2.7% a year.  This last year it actually ROSE a modest 0.8%.

But consider the longer term.  From 2005 to 2012 the property tax rose an average 3.7% a year compounded.  That hardly constitutes a paucity of revenue.

The problem for San Bernardino is the problem found throughout the state.  When property tax revenues soared, spineless politicians gave unnecessary raises and pension increases to all the public employees, assuming the good times would never end (what I call “ratchet spending”).  Like all booms, this one eventually came to a halt.

Clearly, looking at the 2005-2012 time period, we’ve had no property tax revenue shortfall — quite the contrary.  Our current difficulties are the result of a SPENDING problem.

Every city and county in California has done this — only the degree of the problem varies.

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http://www.latimes.com/business/la-fi-bankrupt-cities-20120715,0,4490983.story

latimes.com

Bankruptcy choices highlight fiscal pain of cities nationwide

Even though bankruptcies are expected to stay rare, the financial woes of U.S. cities are widespread and show no sign of easing.

San BernardinoWhen San Bernardino’s City Council voted to authorize a bankruptcy filing, it said the city had just $150,000 in the bank and couldn’t make the next payroll. (Irfan Khan, Los Angeles Times / July 11, 2012)
by Ken Bensinger, Kim Christensen and Jessica Garrison, Los Angeles TimesJuly 15, 2012

The decision by three California cities to seek bankruptcy protection in the space of two weeks is unlikely to presage a wave of copycat filings. But it does underscore the mounting financial pressure facing local governments around the country.

Collapsing property values and entrenched unemployment have pushed cities and counties to the economic brink. Tax receipts in some locales have shrunk more than 20% over the last three years, and soaring pension costs exceed funding levels by as much as $3 trillion nationwide.

As the California cities of Stockton, Mammoth Lakes and, most recently, San Bernardino show, the temptation to flee to Bankruptcy Court is growing. Last year, four municipalities nationwide also applied for so-called Chapter 9 protection, including Jefferson County, Ala., which eclipsed Orange County as the largest such filing in U.S. history. Meanwhile, the Bay Area city of Vallejo emerged from its own reorganization.

All that has fed fears that American cities are lined up to fall like so many dominoes. But municipal bankruptcy filings are likely to remain rare for a variety of legal and political reasons.

What’s clear is that the fiscal pain experienced by U.S. cities is widespread and shows no sign of easing.

. . .

To read the full article, go to the URL. 

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