November 30, 2007

We told you so

We hate saying that but its true. We objected to this free for all spending way back in Nov 2006. Unfortunately elected officials are just like 16 year old girls with their first credit card. Of course as the savings rate in this country is negative 1% I guess we could say that politicians are just a reflection of the nations reckless spending habits which is now going to cost the taxpayers but also the savers. It really is too bad that government no longer responds to or works for the people. It only operates to serve and feed itself. I suggest county Chief Executive Officer Bill Fujioka take the first step and cut his nearly 400,000 yearly salary.

L.A. County awaits fiscal wallop
By Troy Anderson, Staff Writer
Article Last Updated: 11/28/2007 11:58:10 PM PST

Los Angeles County officials are bracing for a round of belt-tightening as property tax revenues fall short of expectations on drooping home values and the state prepares to cut off additional funds.

While soaring property values have poured millions into county coffers in recent years, officials say they expect revenues to increase just 2 percent to 5 percent next year - compared with 9 percent this year - as the real estate market cools.

At the same time, California's fiscal woes are worsening as Gov. Arnold Schwarzenegger has asked all state departments to prepare for 10 percent cuts amid a slowing economy and unexpected setbacks that have created a nearly $10 billion budget shortfall over the next two years.

While county Chief Executive Officer Bill Fujioka said he is optimistic, he is preparing a report on the potential effects on the county budget as the first property tax checks start rolling in Dec. 10.

"We aren't seeing any negatives in that area yet," Fujioka said. "As far as the state budget, it's early ... I've been talking to friends of mine in the Legislature and they are saying the problem is much worse than what is being publicly reported."

In the past five years, property tax revenues collected countywide have nearly doubled to $4.6 billion, helping to boost the county budget to $21.8 billion.

Flush with cash, the Board of Supervisors has approved hundreds of millions of dollars on everything from
pay raises, bonuses, pension and health-benefits improvements for the 100,000 county employees.

Hundreds of millions of dollars also have been spent to reopen jails, hire new sheriff's deputies, probation officers and social workers, and set aside about $100 million to address homelessness in the county.

Financial problems

Still, the county continues to face a variety of financial problems, including a health department deficit expected to hit as much as $854 million by 2010-11 and liabilities to pay for retirees' health-care costs estimated at $13 billion to $20 billion.

"My only observation is, the government will spend every dollar they are given and then some," said Jon Coupal, president of the Howard Jarvis Taxpayers Association.

"There is no discipline to save for the future. The warning signs with the subprime fallout have been there and yet the county and the city continue to spend like nothing is wrong - as if taxpayers have an endless supply of revenues for government needs."

The city of Los Angeles collects about $1 billion in property taxes each year, providing 20 percent of the general fund. So far this year, property tax revenues are still strong and the collection rate is 97 percent, finance specialist Rex Olliff said Wednesday.

"There's no reason to think there will be a big drop in property tax this year. It's (in) the 2008-09 budget that we'll start to see the effect of the real estate downturn," he said.

Collection rates are expected to fall as foreclosures rise. And the big boost in tax receipts generated by home sales and high new prices will slow.

But the cooling market already has had an effect on money generated by the real estate transfer tax, which is a fee charged when a property is sold.

Transfer tax receipts from November have dropped 35 percent compared to the same period last year.

"While the real estate decline has not played out fully in the city of Los Angeles, as it has in other surrounding markets, these latest numbers do not bode well for the city budget or local economy," said Controller Laura Chick.

As the housing market slumps in California, local governments are seeing declines in property tax and sales tax revenues, said Paul McIntosh, executive director of the California State Association of Counties.

"So most counties are starting to take a look at their budgets in the current year to see how they are faring," McIntosh said. "I haven't heard about anybody having to make any cuts, but they are certainly concerned about the next budget.

"And we expect the state to have a $10 billion deficit and look for ways to balance that. Counties are always cautious and concerned when that happens."

Despite a measure that bars California from raiding local coffers, it does allow the Legislature to borrow local governments' property tax revenues in times of need.

While Board of Supervisors Chairman Zev Yaroslavsky said he doesn't see that as likely, he said because the county is a pass-through agency for state and federal funds, any broad cuts could affect health, welfare and other services the county provides.

"The degree of seriousness will vary from county to county and city to city depending on how they have managed their budgets," Yaroslavsky said. "We are better positioned than, say, the city of Los Angeles, or other counties.

"But we will be impacted. If we have to dip into reserves, that will be an impact. If we have to defer capital spending, that's an impact. Those are things we'll do before making cuts."

Values dropping

Meanwhile, although the assessed values of properties in the county rose from $570 billion in 2000 to more than $1 trillion this year, the rate of increase is expected to significantly slow next year.

And as some people who recently bought homes watch the values drop, Assessor Rick Auerbach said he's seen a slight increase in the number of people appealing their assessed values.

Two years ago, 12,172 homeowners appealed their valuations - this year that's expected to hit 13,000 to 14,000.

Auerbach said he doesn't expect to see that increase significantly until 2008, when people get property tax bills reflecting the recent declines in housing prices.

The bills homeowners will receive next month reflect January 2007 assessments.

Meanwhile, the number of foreclosures as of Sept. 29 totaled about 8,800 - or 8 percent of reappraised transactions - nearly triple the 3,184 last year that accounted for 1.7 percent of transactions.

"My general impression is we're lower than most places because most places have had more development in the last couple of years and the areas with more development have had the newer loans, the problem loans, and so there is more chance of foreclosures," Auerbach said.

In an effort to properly assess the value of homes that may have dropped in price, Auerbach said his office will use computer modeling to determine homes that will need reductions for property tax purposes.

"Hopefully by the end of May, we'll be notifying taxpayers for their 2008 assessment if they deserve a reduction in value," Auerbach said.

"Obviously, for most people, a reduction in value means the actual value of the property has gone down in the last year. That's the bad news because, for most people, their home is their largest investment.

"The good news, at least in some small way, is that their property taxes will also go down."

Staff Writer Kerry Cavanaugh contributed to this report. 213-974-8985

Lakewood Accountability Action Group™ LAAG | | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

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