Local News RoundUp
The Local News RoundUp is the League's daily news clipping service of articles related to California cities and local government.
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June 26, 2017
What citizen taxpayers should know about the California budget (Orange County Register)
California voters are pretty good at figuring out what is going in the state capital when it hits them directly. For example, recent polling shows that citizen awareness of the $5.2 billion annual gas and car tax is very high and, incidentally, very negative. But the same can’t be said when it comes to the more complicated and arcane actions of our state politicians such as the annual California state budget process. While Californians are painfully aware that taxes are very high (they’ve been watching their friends and neighbors moving out of state at record pace) they typically have little comprehension of where their tax dollars go. That’s not surprising since California ranks dead last in budget transparency according to a recent study by U.S. News & World Report. Nonetheless, here are the main takeaways that every California taxpayer should know. First, the budget is huge – over $125 billion in general fund spending – by far the largest budget in California history. Since the recovery began after the great recession, taxpayers have infused California’s General Fund with $41 billion and special funds by $28 billion. That translates into a 63 percent increase since 2010. And property owners have done their part as well. With real estate values fully recovered (and then some) property tax revenues are up 72 percent. This is where our schools get the lion’s share of their money.
CAP AND TRADE
California's climate debate heats up behind closed doors as Gov. Brown pushes to extend cap and trade (Los Angeles Times)
The end of annual budget negotiations usually brings a sense of calm to the Capitol, but behind the scenes Gov. Jerry Brown has intensified his efforts to reach a deal with lobbyists and lawmakers on a blueprint for California’s future climate change policies. An agreement to extend the state's landmark cap-and-trade program, which requires companies to buy permits to release greenhouse gas emissions, may not be possible before the end of next week — the governor’s original goal for resolving its fate. However, Brown’s advisers believe they can seal the deal in July, and negotiations escalated this month after a previous effort stalled in the Assembly. The governor’s office has hosted a steady stream of meetings this week with advocates from environmental and industry groups, as well as various factions of legislators. Brown made a rare visit to the offices of Assembly Speaker Anthony Rendon (D-Paramount) and Senate leader Kevin de Léon (D-Los Angeles) in an attempt to overcome their reluctance to push the issue on the heels of another contentious vote to raise the state’s gas tax. At the same time, legislators, particularly those in the Assembly, have held their own confabs to stake out negotiating positions. Even some Republicans are involved, working with moderate Democrats on a series of business-friendly priorities such as using state funding to help the agriculture industry reduce emissions with cleaner equipment. Meanwhile, a progressive cadre of Democrats have pushed the governor to address the state’s affordable housing shortage.
SENATE BILL 649
Smart cities will move right along with 5G (Capitol Weekly)
“Smart cities” refers to the concept of using technology to bring together physical aspects of cities, from cars and street lights to the buildings and residents, and integrating them through data, analytics, and communication. It has become such a significant topic that it will be a centerpiece of next year’s world-renowned Consumer Electronics Show (CES). Smart cities will soon take a major leap forward — thanks to a groundbreaking technology, 5G, or the 5th generation wireless network. California has a long history of embracing advanced technologies to make cities safer, greener, and more prosperous. 5G is anticipated to be 100 times faster than the current 4G network, which many of our devices utilize today, and 5G will dramatically reduce the time it takes to share information. Implementing the 5G network will require the deployment of thousands of small, discreet wireless antennas, known as small cells, in cities. While California has already achieved near ubiquitous wireless broadband, this new infrastructure will usher in unprecedented levels of wireless speed, coverage, and network capabilities. To advance the deployment of small cell technologies, Senate Bill 649, is making its way through the state Capitol. Buoyed with the overwhelming support from policymakers, technology leaders, and the community stakeholders, this legislation simplifies the often time-consuming local permitting process for small cells. It also prevents excessive fees, which can delay technology deployment in our cities.
Marin bill SB106 shows how housing crisis was created (San Francisco Chronicle)
For anyone who has contemplated California’s devastating housing shortage and wondered how the state got in this mess, here’s one short answer: Senate Bill 106. Of course, this single unfortunate piece of legislation is not responsible for a crisis rooted in decades of bad state and local government decisions. But the bill, which would exempt Marin County from housing density standards that apply to the rest of the Bay Area for more than 10 years, does embody the sort of parochial policymaking that has been ruinous for the state’s greater good. Pushed by Assemblyman Marc Levine, a Marin County Democrat who secured a similar development dispensation for the state’s wealthiest county in 2014, the bill would extend the exemption, currently scheduled to expire in 2023, to 2028. It would continue to classify the county, including its largest cities, San Rafael and Novato, as suburban, excusing it from the high-density housing developments prescribed for metropolitan areas. The Legislature’s ruling Democrats introduced the exemption, as the Los Angeles Times reported, as part of a budget trailer bill addressing a wide variety of unrelated issues and escaping the level of public scrutiny applied to most legislation. Now before the state Senate, it was passed by the Assembly this week without a single Democratic or Bay Area lawmaker voting against it. David Chiu, D-San Francisco, who abstained, was the lone member from the housing-starved region who did not vote for the bill.
Cities in Marin County
How do we address the housing crisis: one incremental step at a time (Fox & Hounds)
Productively addressing California’s housing crisis will require a long slog, not a magic bullet. The effective policies are politically treacherous, while the easy victories already have been chalked up. A broad consensus of nonpartisan policy experts and think tanks point to regulatory and litigation reform, particularly of the California Environmental Quality Act (CEQA), as the highest value policy change that can lead to quicker and less expensive production of needed housing in both infill and suburban locations. But as Governors from Pete Wilson to Jerry Brown have learned, attempting to reform CEQA is a painstaking and mostly unsuccessful venture. Subsidies for affordable housing have been somewhat more successful, with both taxpayer-supported general obligation bonds and tax exempt financing used to create below market housing opportunities. Local governments also use their police power to require inclusionary zoning as a condition of project approval. While these subsidies and mandates have produced some affordable housing, they are highly inefficient. The nonpartisan Legislative Analyst found that “the scale of these programs—even if greatly increased—could not meet the magnitude of new housing required,” and that “extending housing assistance to low-income Californians who currently do not receive it … would require an annual funding commitment in the low tens of billions of dollars.”
Developer offers $1 million to city for two senior affordable housing projects (Benito Link)
Developer will pay $1 million to assist CHISPA senior low-income project for 49 units on Line Street as well as his own senior project of 68 low-income housing units south of Hazel Hawkins Hospital. In a classic “bird-in-the-hand-versus-two-in-the-bush” scenario, the Hollister City Council on June 19 passed a resolution that will essentially deposit $1 million into the city’s coffers now instead of an non-guaranteed $1.4 million sometime in the distant future. After Mayor Ignacio Velazquez recused himself because of his business association with CHISPA, the remaining four council members voted 3-1 to pass the resolution to modify the city’s in-lieu program that would allow the Silver Oaks Senior Community project between Valley View Road and Airline Highway to pay a minimum of $500,000 to the city's Affordable Housing Program Fund. The developer would pay an additional $500,000 for the tax credit application on behalf of the CHISPA project of 49 extremely-low income senior apartments on Line Street.
Why developer can’t find buyers for Whittier affordable housing project (Whittier Daily News)
As the Los Angeles area struggles amid an affordable housing crisis, the developer of a new affordable housing project in the Uptown area is having problems finding buyers. The developer, Pasadena-based Heritage Housing Partners, blames that on the city’s restrictive rules on income. Heritage Housing began its marketing effort for Guilford Court a year ago but so far have found only seven qualified buyers for nine units in their condominium project at the southeast corner of Comstock Avenue and Penn Street. Some of those buyers are expected to move in next week. The homes would in most cases seem like a bargain. Buyers can choose between a two- or three-bedroom condominium for $269,000 or $301,400, respectively; the actual the market price would be more like $500,000, said Charles Loveman, Heritage Housing executive director, The prices are lower because the city subsidized the project with $2.3 million in housing money. The land — valued at $1.8 million — was given to the company for free. Nine of the 11 units in the condominium project at the southeast corner of Comstock Avenue and Penn Street are being sold at affordable prices. The project includes the historic Guilford Hall that was moved in March of this year from Whittier College. The latter is being sold at market rates as two separate units.
How high can Southern California home prices go? A lot, experts say (Orange County Register)
All hair stylist Erin Bond wants is a decent two-bedroom condo in Orange County, preferably in Huntington Beach. But all she can afford is $400,000 to $420,000. In a county where the median price of a condo in May was almost $500,000, she’s not sure there’s anything in her price range she can live with. “It’s pretty disappointing,” said Bond, 35. “You can’t even buy anything that low. I mean, there are things out there, but they’re not nice.” So Bond’s plan is to wait until the market goes down again. And if it doesn’t, “I would continue to rent.” A lot of homebuyers are facing Bond’s conundrum. For 62 straight months, Southern California home prices have gone in one direction. Up. Five years ago, you could snatch up a median-priced condo in Orange and Los Angeles counties for about $280,000, 76 percent less than today’s prices. A median-priced house cost $323,000 in L.A. County five years ago and $495,000 in O.C., about $260,000 less than today’s prices in both counties. That was then. What should a buyer do now? Will prices keep rising? Or as Bond thinks — along with some real estate agents — are prices close to the top?
Cities in the Orange and Los Angeles County Divisions
Is Orange County housing in a new bubble? Here are 2 divergent views (Orange County Register)
Orange County’s recent history of ever-rising home prices, now amid a modest cooling of the local economy, brings out fears the local real estate market is getting overheated once again. You know, “bubble” talk. In some ways, an asset bubble is in the eye of the beholder. There is no formal definition of when any market reaches the bubble stage – but it’s typically when an asset’s value outstrips the underlying economic fundamentals behind ownership. For local housing, the big question is when do obvious affordability challenges become a huge economic risk to the entire market? And what becomes of home values once the economic mismatch is exposed? Two recent reports on the regional economy from well-known analysts have very different ideas about the housing market’s sanity. Jim Doti and the economists at Chapman University think Orange County housing is in bubble territory with a big “but” … they see no signs of any immediate bursting. Meanwhile, Mark Schniepp from the California Forecast sees no bubble. Yet. Now, the two gurus do agree on a critical issue: a lack of supply. There’s a razor-thin inventory of homes to buy and those few residences listed for sale still sell swiftly. So these seller-friendly conditions have led Chapman to forecast a 6.4 percent jump in Orange County home selling prices this year.
Cities in the Orange County Division
Oakland commits $14 million to buy residential hotel to house homeless residents (East Bay Times)
As private developers snatch up downtown Oakland’s remaining single-room occupancy hotels, the city has decided it wants to preserve one, if not two for transitional housing. To help house the city’s growing homeless population, the city of Oakland plans to use some of the $500 million in bond money approved by voters in November to purchase at least one of the downtown properties — which have historically provided to provide rooms for the city’s most vulnerable residents. “We have a crisis today in the growing number of people on the street so we need to look at existing buildings, especially abandoned hotels,” said Councilmember Rebecca Kaplan, who pushed for the funding. “We haven’t had services to keep up with rising homeless situation.” A city-owned center of housing, drug treatment and job placement would come at a pivotal time for Oakland. The homeless population has increased in numbers and visibility, with tents lining downtown streets and fanning out across nearly all neighborhoods of the city. Multiple fires have broken out at encampments this spring. A recent survey by EveryOne Home, a community-based organization to end homelessness, estimated more than 1,900 people live without shelter in Oakland. Under the city’s plan, $14 million of Measure KK would be used to purchase a hotel. Kaplan estimates the building could serve a few hundred people a year, who would eventually be placed in permanent housing. Money left over from purchasing the building would be put toward renovations, she said.
San Diego homeless crisis turns a corner, maybe (San Diego Union Tribune)
History may show that San Diego’s homeless crisis, at long last, reached a turning point for the better in June 2017. There are reasons to doubt this, but let’s explore the optimistic case first. Last week, a private group dropped a policy bombshell into a symposium on homelessness hosted by University of San Diego and attended by public officials, academics, business and nonprofit leaders. For an ongoing cost to taxpayers of just $17 a day per person, the city could provide emergency housing and social services to anywhere between 250 and 5,000 people or more, using the same type of high-strength tents that San Diego politicians abandoned in 2015. The cost analysis was presented by Dan Shea, a chain restaurant operator who, along with Peter Seidler, managing partner of the Padres baseball team, formed a group of business leaders last year to find local solutions to homelessness.
Year after homeless project began, struggle for solutions continues (San Francisco Chronicle)
A year ago this week, The Chronicle’s newsroom attempted something new in American journalism: We partnered with 80 other media outlets to create the SF Homeless Project, a groundbreaking effort to organize intense, coordinated coverage of the homelessness crisis. We sought to cut through the political noise and add to the public discourse by providing fact-based, empirical data alongside poignant stories of poverty, addiction and frustration with the status quo. Our aim was to fulfill one of the most righteous goals of journalism: to make the community smarter about the choices before it and keep pressure on those elected to govern us. In the year since, SF Homeless Project partners have produced more than 500 articles, videos, TV and radio spots, and photo essays. Shelters were rushed into opening. More than $130 million has been raised by philanthropists, including a $30 million family homelessness initiative led by Salesforce founder Marc Benioff and the nonprofit Tipping Point Community’s $100 million push to halve San Francisco’s chronic homeless population in five years. Several ballot initiatives were put before voters. The media project has been emulated in cities around the world. Now it’s time for us to assess in more detail how much — and how little — has been accomplished during the past 12 months. This year, the SF Homeless Project’s coordinated day of coverage is June 28. The Chronicle, KQED and some other organizations will continue the reporting throughout the week. Similarly, outlets in Seattle and elsewhere plan to participate in the effort.
Road tripping? Here are rules for traveling with marijuana (Daily Bulletin)
The July 4 weekend will kick off the first summer travel season since California voted to join seven other states in legalizing marijuana for all adults. What’s more, there are now 30 states where medical marijuana is allowed, with a couple more close to coming on board. So, as vacationers prepare to hit the road, many have a simple question: How can we legally mix travel and weed? “We have been getting lots of calls about this issue recently,” said Nico Melendez, spokesman for the Transportation Security Administration. In California, the rules for traveling with cannabis are evolving. And conflicts between state and federal marijuana laws — and how those rules are enforced among the various states or even at one airport vs. another — are causing confusion. For recreational consumers of cannabis, the simple answer is to leave weed at home and, if desired, to unwind with a cocktail. But for medical patients who aren’t able to take along specific strains or cannabis products they use daily to combat symptoms of an illness or chronic pain, summer travel could be anything but simple. Here’s a closer look at what the law says, how the rules are actually playing out, and what experts recommend you need to do to stay safe and legal.
How 5 O.C. cities are working to pull down the rising cost of a pension ‘mess’ (Los Angeles Times)
Local cities are set to dedicate millions of dollars more per year on top of already-determined payments to try to bring down unfunded employee pension liabilities that are running up to seven times higher than a decade ago. With California’s pension crisis clearly defined, cities are beginning to budget for even larger payments to the state retirement system to keep ahead of interest. Newport Beach has committed to paying roughly $9 million more a year through 2038, and it’s exploring setting aside money in a trust. Without taking action, the city’s projected unfunded pension liability for the new fiscal year starting July 1 would balloon to $353 million, compared with $46 million 10 years ago. Costa Mesa will add $500,000 a year, Fountain Valley and Huntington Beach about $1 million each. Costa Mesa’s unfunded liability is projected at $246 million for fiscal 2017-18, up from an estimated $46 million 10 years ago. In Huntington Beach, the latest number is $363 million; a decade ago, it was $79 million. The reason depends on whom you ask. According to the California Public Employees’ Retirement System, or CalPERS, about 62% of its income is the result of earnings from investing employer and employee contributions in stocks, bonds and real estate.
Cities in the Orange County Division
Why Redlands is preparing for an increase in pension contributions (Redlands Daily Facts)
Even as it’s bracing for pension increases that will challenge the budget, the city expects to add to its payroll in the coming fiscal year. When it approved the budget earlier this month, the Redlands City Council OK’d hiring eight additional full-time employees in 2017-18, though officials say all of the positions may not be filled. This is happening one year before increases in public employee pension contributions kick in for cities across the state. It is still unknown how much more the city will have to pay, however. So, according to Mayor Paul Foster, officials are being cautious when it comes to bringing on new employees. The California Public Employees Retirement System is lowering its expectations on investment returns, which means public agencies like Redlands will be faced with higher contribution costs in the near future. In December, the CalPERS Board of Administration voted to lower its assumed rate of return from 7.5 percent to 7 percent over the next three years. For public agencies and schools, this begins July 1, 2018. The reason for the change is to ensure the long-term sustainability of the fund, according to PERS officials. The rate reduction will result in an average employer rate increase of about 1 to 3 percent in annual costs for active members in miscellaneous retirement plans, and 2 to 5 percent increase for most safety plans, according to CalPERS. Employers will also see a 30 to 40 percent increase in their current unfunded accrued liability payments, which is meant to help pay down unfunded liabilities over 20 years and bring the fund to fully funded status over the long term, according to CalPERS.
Meaningful pension reform needed (Orange County Register)
Lately, there has been a lot of talk, but not much action, about reforming California’s troubled public pension system. The California Public Employees Retirement System has come under fire for posting poor investment performance results. Further troubling is the new Governmental Accounting Standards Board Statement 68 rule requiring public agencies to post their unfunded pension liabilities to their balance sheets. Civic Openness in Negotiations transparency ordinances adopted by many cities like Huntington Beach have added to make the public aware of the financial challenges we face. These challenges are not always caused by us locally. Pension reform ideas have included converting from defined benefit to defined contribution plans. This means exiting CalPERS and moving into a 401(k), just like most of the private sector. For municipalities like Huntington Beach, we are contractually bound to CalPERS and to exit CalPERS would require paying out all retirement obligations to make CalPERS pensions whole. Then, a switch to a 401(k) could be made. The downside is that it would cost the city of Huntington Beach just over $1 billion. City councils and county supervisors are charged with contractual negotiations for salary and benefit increases between the municipalities they serve and the public employee unions. These negotiations usually take place between professional labor negotiators following the direction of your local elected representatives. Negotiations are oftentimes contentious and protracted as both sides see each other in less than a favorable light. Simply put, labor wants more and municipalities have less to offer. For the city of Huntington Beach, we have less to offer as we are contractually obligated to make up for the lower than expected returns from CalPERS investments. At our May 1, 2017 mid year budget update for fiscal year 2016/2017, we learned that this additional shortage is estimated at between $4.5 million and $6 million per year.
Why can’t they build more homes where the jobs are? (Bloomberg)
In a logical world, builders would rush to put up homes in the U.S. regions adding jobs at the fastest pace. In reality, it's not so simple. San Francisco's metropolitan area added 373,000 net new jobs in the last five years—but issued permits for only 58,000 units of new housing. The lack of new construction has exacerbated housing costs in the Bay Area, making the San Francisco metro among the cruelest markets in the U.S. Over the same period, Houston added 346,000 jobs and permitted 260,000 new dwellings, five times as many units per new job as San Francisco. You can see the imbalance in this chart, based on one that Lawrence Yun, chief economist for the National Association of Realtors, uses to explain the shortage of for-sale homes across the country. For each metro, it compares net new jobs created from 2012 to 2016 with the number of new housing units authorized over the same period. Historically, one new housing unit for every two jobs created is considered normal, Yun said. California, where job growth has been strong and local control of zoning decisions makes it notoriously difficult to build, is home to many of the cities where construction most lags behind hiring. Six California metros are among those with the slowest pace of home-building compared to job growth.