City of San Diego approaching bankruptcy

San Diego is just one of those cities that have had serious financial problems for a long time, but now the options are running out.

A private task force of prominent local business leaders formed by San Diego Mayor Jerry Sanders is recommending the city file for bankruptcy unless it undergoes a series of urgent and drastic fiscal reforms, according to a draft of the group's report.
...
For six weeks, the mayor and his deputies have insisted that the national and local economic recessions, not structural financial problems, are the primary drivers of the city's current $200 million deficit. In contrast, the draft states that "virtually all" of the deficit is structural, meaning the city is set up to spend more money than it takes in.
Next week, Sanders plans to release budget reduction proposals based on recommendations he received from all city departments, including police and fire. He has said he hopes to lower the deficit by $60 million -- an amount more than 1.5 times the entire library department's budget -- by January.

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This is another huge crisis.

Particularly those municipalities that rely heavily on real property taxes and this could be a problem that gets a lot worse in years to come.

Most real property tax is calculated based on an assessed value - not necessarily fair market value - and the assessed value is typically is lower than FMV. Plus with decline in FMV more people will file appeals for their assessed values because decrease in FMV. Lower assessed values will mean lower real property tax revenue for a while and if sales don't pick up there goes another source of revenue for municipalities.

Chicago is considering selling one airport and its water & sewer system.

RebelCapitalist.com - Financial Information for the Rest of Us.

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This is what I am talking about

from CR: CRE Owners Seeking Property Tax Relief

This is a huge hole in a city budget:

Collectively, those office towers, hotels, shopping centers and apartment buildings have an assessed value of $21.25 billion - but their owners say they're worth about half that amount. If those claims stand, that could wipe $115.78 million off the property taxes the city collects.

RebelCapitalist.com - Financial Information for the Rest of Us.

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Add to this the state and municipal pension funds

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I'm reading about pure mismanagement

and on top of it, it looks like we're going to get a health care "Reform" bill that is a pig fest to the health insurance industry and big pharma and additionally...what a surprise, stickin' it to the American people.

So, this is driving me nuts. We cannot get sane, simple, prudent, common sense management and policy. Can't seem to get it from the local, state or federal levels.

What's the answer here? Let the entire thing implode?

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It goes up, it goes down

Look, I am not for a minute unsympathetic to the folks who run our schools, keep our streets safe, and collect our garbage! But recent memory is of rising property taxes, and when we had the temerity to ask why, we were told that we could sell that hovel we bought for 85K some years earlier for half a million bucks. Yes, and we could always sleep under a bridge. If Moral Hazard has any meaning, our municipalities had a bad case of it -- encourage develooment, do "comparability" salary surveys so they could give themselves raises, and buy all kinds of cool new stuff. It felt like the house we thought we owned was actuially rented from the city and the county. Now the tide is going out and local governments have to manage (a new experience for some of them), and if my mortgage is under water, at least the municipal taxing authority is sharing the pain.
Which gets us to the point of what to do, or rather what not to do. Sell off the water and sewer systems? We paid for those things -- sell them off and you just get a one-time windfall and utility bills go up. So you kick the can down the road -- and our children pay the deferred costs. And, oh yes, the county and city will embed a "utilities tax" in the bill so we aren't really any better off, we've just managed to hide another tax.
Yes, states and localities are in a hell of a mess. And we have to solve the mess. But let's not opt for quick fixes that conceal the real cause of the problem -- political opportunism and an appetitte for a political rree lunch.
Frank T.

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Frank T.

My gripe

The assessor of SF, Phil Ting, wants to be allowed to reassess commercial property without the requirement of a sale. We have had Prop. 13 for 30 years and many commercial properties have been sitting without reassessment for 30 years. This type of dysfunction will sink us.

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Could it be?

Could it be that we are finding ways not to spend money we don't have? Here in Florida, the state constitution says "No Income Tax", thank you very much.For most of us, it means that all that us left (ex fees and at the pump gasoline tax) becomes real estate and sales taxes. People are appealing their inflated tax assessments -- despite their being lower than last year by 25%. Sales tax? To collect sales tax, you have to have sales -- I mean physical sales of things. No tax on services allowed. More and more, things can be purchased over the internet. I know people who have actually gone to Best Buy to look at a product like a computer, then gone home to order the same machine over the internet, saving themselves 7% on the sales tax (merchants offering free or nearly free shipping). At my bank, I don't pay service charges. On my two credit cards I never have balances carried over. Okay, so I "cheat" in this example by having an income that allows me to not borrow money. But if I never traveled and never made internet purchases, I would cut up my credit cards. And, oh yes, when I see an item I think is overpriced in a store, I either don't buy it OR I buy a lesser amount of it than I normally would (supermarkets are constantly adjusting prices up or down in response to demand and inventory, so I help them with their decision process). And yes, I am N = 1, and an outlier. But I'd bet you could find a (nonrandom) sample of thousands who have made this kind of adjustment, and thre are millions who would if they could. Why do people engage in this kind of behavior? First, it is highly rational for a subset of the population, albeit not supportive of government revenues or financial institutions. A second motive I would suggest is that those institutions are not trusted to serve public interests. Everytime I think such behavior might not be the "responsible thing to do," I think of A.I.G. and Goldman Sachs. There is one exception to this tight-fisted behavior -- the money I save on taxes I give to a food bank.
Cheap Charlie

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