San Bernardino Councilman Rikke Van Johnson explains municipal bankruptcy process at a town hall meeting last week. What role has the loss of redevelopment money played in the city's fiscal crisis?
The San Bernardino City Council is expected to vote tonight to declare a fiscal emergency, enabling the Inland Empire municipality to proceed directly to Chapter 9 bankruptcy without passing the 90-day state-mandated "Go" of mediation with its creditors. I've been reporting on how San Bernardino wound up with a fiscal crisis — and why other California cities may be staring down the same nightmare scenario.
But one thing that has city officials particularly enraged in San Bernardino is the loss of state redevelopment money. Last year, Gov. Jerry Brown and the state legislature took back money that had been going to redevelopment agencies to close the state's massive budget deficit. The total loss to cities? Around $6 billion.
The move — which was fought by the redevelopment agencies and got all the way to the California Supreme Court, where the new law was upheld — hit San Bernardino hard.
The UCLA Anderson Forecast, covering the fourth quarter of 2011 and looking forward through the fourth quarter of 2013, came out yesterday. KPCC's Brian Watt provided a report on air, and now I've had a chance to dig into at least some of the forecast. I'll start with the California section, presented by Anderson Forecast economist Jerry Nickelsburg.
You'll remember that in the previous Anderson Forecast, Nickelsburg explained that California has broken into two distinctive economic regions: a recovering coast and a stagnating inland zone. Here's how I put it in the post I wrote back in September:
Since the financial crisis, two California economies have emerged. On the coast, there's growth. Inland, there's near-stagnation. You can easily see this expressed in the Los Angeles region's unemployment numbers. LA is bad, at at 12.7 percent. But Riverside and San Bernadino counties are far worse, at 15.1 and 14.3, respectively.
The industries that are creating jobs in California are also disproportionately located on the coast. Inland, the blast wave of the the housing bust is still being felt, with industries like construction shedding jobs.
Kevork Djansezian/Getty Images
A bank foreclosure sale sign is posted in front of townhomes on August 12, 2010 in Los Angeles, California.
Home prices in the California cities are comparatively healthy despite the state's high unemployment rate, because the markets tracked by the index are close to key job centers such as Hollywood and Silicon Valley and are also near the ocean -- where overbuilding was relatively constrained. The index does not track prices in California's Central Valley or the Inland Empire, where housing is still weak.
For background, the unemployment rate in Cali is just south of 12 percent. The latest Case-Shiller index, which tracks housing prices in major cities, showed modest month-over-month declines from August to September 2011, in Los Angeles, San Diego, and San Francisco.
Modest, but still headed down. So price deflation in the California housing market continues. And nobody seems to know where the floor is, at least in the Case-Shiller cities.
The UCLA Anderson Forecast is out for the third quarter of 2011 and through 2013. The story for the country as a whole is an "L" shaped recovery from the Great Recession — which basically feels like no recovery at all. For California, the story is the same — except that the eventual recovery will probably be even more sluggish.
The national economy is limping along at near-stall-speed: barely growing, with a prediction for 0.9 percent GDP growth through early 2012; and creating jobs at far to low a rate to lower the employment rate below it's current 9.1 percent. In fact, the Anderson Forecast is predicting unemployment will go up in the short term, to 9.5 percent, before falling to a still-mortifying 8.6 through 2013.
You look at those numbers say "Oh, man, what are we gonna do?" Then you look at the California outlook and you get really depressed. Our growth rate is at 0.7 percent, and our unemployment rate stays in double-digits until 2014. Plus, the state is beginning to split into two distinct economic geographies, with the coastal regions mounting a modest recovery while the inland regions go from stall to, potentially, stagnation.