San Diego County Faces Another Economic Crisis
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January 8, 2010 – San Diego County Treasurer Dan McAllister predicts collecting $50 million less in revenues because of declining property values. The editors discuss.
Related story: San Diego County Faces Another Economic Crisis
GLORIA PENNER (Host): Although there may be some signs that housing prices are now inching upward, the County is just now seeing a drop in property tax revenue from the decline in home values that began in 2007. So we put San Diego Treasurer Tax Collector Dan McAllister on the record and asked him what that decreased revenue means to San Diego. DAN McALLISTER (SD County Treasurer - Tax Collector): Well every year that we take in revenue, it’s divvied up between a vast number of places to go. Cities get revenue, redevelopment agencies get revenue, but probably the biggest recipient of revenues from property tax dollars in San Diego County, and throughout the state really, are our schools. And in fact about 43.3% of every dollar we bring in goes to our K-12 school systems. And they are the ones that are the biggest deficiency holders, if you will, and they suffer the most when there is a lapse in revenues. Such is the case this year. We project about $50 million less in revenues that will be taken in by taxes this year and we also see that that will continue on into next year. So that number will grow and it will impact schools as well as libraries and all the other services that many government agencies provide. PENNER: Joining me now to discuss the County’s economic outlook are John Warren, editor and publisher of San Diego Voice & Viewpoint, and Leslie Wolf Branscomb, editor of San Diego Uptown News. John, let me start with you. Lets talk about those millions lost and property taxes because of declining home prices. If we do see a recovery this year, will property taxes recover with better funding for those services that Dan McAllister says have suffered? JOHN WARREN (San Diego Voice & Viewpoint): Well one of the things working against that recovery is the fact that many homeowners have gone in to have their properties reassessed based upon the falling values of properties around them. And one of the questions they had was whether or not the reassessment would carry a penalty down the road. So you also have the foreclosure on the markets where the banks and other institutions holding papers are paying those taxes. But the tax rate will drop based upon the reassessment. And so we don’t see that as an instant turnaround recovery. That’s going to take a period of time. PENNER: That’s not good news, Leslie. So how prepared are County officials for another drop in tax revenues? LESLIE WOLF BRANSCOMB (San Diego Uptown News): Well, they're certainly going to have to take it in stride. I don’t think that they have a choice. As Dan McAllister pointed out in his earlier interview, it will take a number of years for everything to turn around even as tax revenues begin to inch up. The last thing to happen will be the income to the County. The economy may begin to recover this year. But because of those foreclosures, and because of the reassessments of the homes it will be several more years before we see the property values climb back up. PENNER: We start linking the dots. We see that foreclosures may be responsive to the jobless market as well. And so as Sharon’s report indicated, because of the major impact that joblessness has on the housing market, and right now our employment rate is at 10.3%. What signs are there that this will turn around this year? BRANSCOMB: We’ve heard economists and others saying that it is going to turn around, that it is already turning around, and blaming the media for being pessimistic in some circumstances. But I think in real life, most of us have not seen any uptick in the economy. I personally question the unemployment statistics. I think they are higher. I'm not sure they are still counting people who have given up looking or who have fallen off the unemployment rolls because their unemployment has run out. Personally I know probably a couple hundred people who are on unemployment. People who used to work at the Union-Tribune with me and are not finding jobs. If they have found jobs they're lower paying, maybe part-time work, and that doesn’t replace the job you used to have. It’s going to be some time. PENNER: Well, Mayor Sanders is sort of pushing for downtown construction projects, John. A city hall, a library, perhaps even a stadium. And he sees this as a job stimulus package and maybe this would improve the job picture. Would it? WARREN: Well I think, realistically, you have to look at where the jobs are in San Diego. We are service industry and we are biotech, we’re construction. Construction has gone away. The construction that he's talking about restoring is not going to be enough to make up for the whole gap that’s been created with the loss of all the jobs surrounding the construction industry. And service-wise, tourism is down. And so we will not have as many people. We have hotels laying off. We’re competing with Vegas in terms of room rates and room nights. And so I think he's grabbing a ray of sunshine as if that’s going to solve the problem but it’s not. It’s much greater than that. PENNER: What's going to solve the problem? I mean, give us a ray of hope! WARREN: Well, the only ray is that over a period of time, we have to rethink the economy in terms of where the jobs are and where they're coming from. San Diego has not been in a position of creating jobs outside of relying upon the existing industries. The tourism and biotech help make up for what lost with the defense contractors. But we have grown in terms of people and diversity, but not in terms of the market offering employment to go with that. PENNER: Well, job creation and job training were a major focus of Governor Arnold Schwarzenegger’s ‘State of the State’ speech on Wednesday. Here’s what he said about that. GOVERNOR ARNOLD SCHWARZENEGGER: First, you will receive a $500 million jobs package that we estimate could train up to 140,000 workers and help create 100,000 jobs. Second, you will receive a measure to streamline the permitting of construction jobs that already have a completed environmental report. And third, to stimulate other construction jobs, you will receive a proposal for homebuyers tax credits of up to $10,000 for the purchase of new or existing homes. (Applause) And fourth, since we want California to be the dynamo of green technology, I ask you to pass our proposal exempting the purchase of green-tech manufacturing equipment from the sales tax. That too means jobs. (Applause) PENNER: So, Leslie, that sounds pretty good. But the state first has to figure out where to get $20 billion that is the current shortfall. What chance does the governor have to $500 million dollars for his program when he's already threatening more cuts? BRANSCOMB: Well, while this speech sounds very good at the outset and he said all the right things that people want to hear right now, it just doesn’t seem like the money is there. Now in this particular $500 million job creation program, he was talking about us using a state fund that currently has a surplus. But that’s still taking money from one pot and putting it in another. It really is just shuffling it around. It isn’t creating any more money. And even if he does come up with the funding for this, I remain skeptical that 100,000 jobs will be created. Just throwing money at a program doesn’t necessarily force employers to hire more people if they can't afford to do so in this economy. PENNER: Well last year alone, John, the state lost 621,000 jobs and unemployment was at 12%. So is this a gesture, this proposal? Or a real step forward? WARREN: Well it’s an idea looking for some hope. But really it comes from the 70’s when we had the Conference of Employment Training Act, where we created jobs and we put monies into cities like San Diego and those things created jobs. You're talking about $500 million for 144,000 or 100,000 jobs in a place with probably a 16% unemployment rate. Because, as Leslie said, the 12% is not a real reflection. And so it’s just a suggestion. It’s a ray of hope, but I don’t think they know how to even start putting it together. PENNER: Do you agree with John? Or do you think maybe the governor’s job creation and training program can make a difference in San Diego where we’ve lost 50,000 jobs in every sector except government. BRANSCOMB: Well, the hopeful part of this is the proposal to train 140,000 workers. A lot of what's happening with people who have been laid off or lost their jobs is they need to be retrained in new technology that currently exists that may not have when they were first hired 20 some years ago. However, the creation of the jobs is still in question when the package only talks about giving employers a $3,000 reward, if you will, if they train and hire a new employee and keep them for nine months. That’s not much of an incentive. That wont pay anybody’s salary. PENNER: I think the governor, however, must have made some people happy, John, when he talked about drawing a line to protect education funding and that he will be sure that prisons – he's going to have a constitutional amendment saying that he wont allow prisons to outspend higher education. Realistic? Or said for effect? WARREN: Well, I think this is all just for effect. First of all, the whole concept of changing the balance between prison and education expenditures tied to the idea of outsourcing in terms of private industry the prison population. That means a loss of jobs in terms of the prison guards. That lobbyist is the strongest in the state. They're going to fight against it, its not going to happen. But this is the same governor that took money from all areas of education to balance his budget. And now he wants to go out as a savior and defender of that which he already destroyed. So I think it’s a lot of talk. There's nothing on the table that suggests he's able to put back any of those dollars. The constitutional amendment is going to run into opposition. You can't permanently put something in place that changes the percentages for two entities within a state government without any idea of how they’re going to be affected in the future. PENNER: A lot of talk? I don't know, I’m going to give him the benefit of the doubt and ask you if perhaps this speech is a blueprint for the future, or maybe an attempt to develop his legacy? What was it? BRANSCOMB: A lot of it was returning to ideas that he's had in the past that he has not been able to enact since he's been governor. He's been trying to bring some of those things to the forefront again. And you can't blame him for that. He wants to try to stick to the original policies. He's always talked about prisons and about tax reforms and things like that. Although, I share your concern about his sudden worry about the schools. Well he is the one who took the money away from the schools in the first point and I think perhaps he doesn’t want to go down in history as the person who ruined public education in California. So this might be an opportunity for him to extend an olive branch if anybody this will really happen. And personally I don’t. A constitutional amendment is a far greater thing than a mere piece of legislation. It’s nearly impossible to enact, and that means we’re talking about something that will be in place technically forever. It doesn’t seem likely. PENNER: Well thank you very much Leslie Wolf Branscomb and John Warren.