Lawmakers Reach Agreement on California Budget

[Parsad]

The Governator made it happen.  Cheers!

 

http://www.cnn.com/2009/POLITICS/07/20/california.budget.crisis/index.html

[Guest kawikaho]

Good to know.  Now that we just moved back to California from Seattle, it will be interesting to see how the budget cut feels like.  They've already closed down over 200 state parks.  I wonder if I'll see less cops on the road as well!  

 

Oh, haha, I just found out from some friends that the state has closed all public toilets and showers in the OC.  I guess that gives us free reign to poop in the ocean.  Gawd, you just gotta love this state!

[claphands22]

I can't help thinking this is a band-aid covering a bullet wound.  California still taxes real estate based on it's purchase price right? They still have the ballot initiative system that allows voters to get things without a to pay or them right?

 

I wish I knew more about the situation, it seems really interesting. I wonder what Munger has to say.

 

Jon Stewart did a funny special on it with John Hodgman. http://www.thedailyshow.com/watch/tue-june-9-2009/you-re-welcome---california-budget-crisis

[Guest kawikaho]

Well, this is a band-aid solution.  They meet next year to discuss budget solutions when the state runs more deficits. 

 

On a side note, wow, the prices of homes here have taken HUGE dives.  In Monterey, homes are now 40% the price they were a year ago.  There are some pretty good deals in Santa Cruz too.  Brand new homes on large lots and near the ocean going for 899k.  I'm sure you could get those down to 800k.

[nodnub]

hey kawahiko,

 

with respect to the $899K house on the water in Santa Cruz that you mentioned:  Do you know how much would that house or a comparable houses would rent out for right now?  How much are the property taxes?

[Guest kawikaho]

Property tax rates in Santa Cruz county is 1.08%, I believe.  In terms of the going market rate for rent, I have always been suspect of that data or usefulness of it when it applies to single family homes.  I believe it is quite hard to rent out a house to a family, and most of the times I've seen it done, the house was rented piecemeal to multiple seperate tenants.  Basically, to a bunch of roommates (or flatmates, however you want to call them).  In this instance, I think you would be able to rent each room for roughly 650/room (some more, or less, based on size, etc...).  So, $650x4 = $2600. 

 

I'm not a fan of using rental data to evaluate the value of a home's price.  It's kind of like comparing apples to oranges.  I like using current price/sq ft. of the lot and living area to historical price/sq ft. in the area to make that evaluation.

 

I think houses in parts of California still have further to go.  But, it's getting closer to the bottom, I believe.  Another year or so.

[nodnub]

thanks for the response.  I like the idea of comparing it to the historical price/sq.ft. in the area.  How far back do you look?  It would be interesting to see data for any area from 1900 onwards.

 

 

[Guest kawikaho]

I look at data at different 30 year time periods and prior to 2002 (this negates the bubble period).  I then look to see what the average annual appreciation is, and use that as a determinant to see if the current house prices line up.  Right now, we're still over priced, but we're getting there.

[Investmentacct]

I think prop 13 is widely known, but, thought to add few things about how property taxes are quoted in California:

 

Below paragraph is from November 2003 article Buffett wrote to Wall Street journal defending the advice he gave to Arnold about repealing Prop 13 in 2003 .  Link to the article: http://online.wsj.com/article/0,,SB106781932410265400,00.html :

 

"What I said in respect to property taxes was very specific. I gave him an example of three houses, two in Laguna Beach and one in Omaha. The first Laguna Beach house is a property that I bought in the early 1970s. It has a current market value of about $4 million and, because of the limitations embodied in Proposition 13, carried taxes of only $2,264 in 2003 vs. $2,241 in 2002. The second house, located just in back of the first, is one that I purchased in the mid-1990s. It has a market value of about $2 million and, simply because I bought it later than the first, carried taxes of $12,002 in 2003 vs. $11,877 in 2002. I pointed out to Joe that these figures mean that the tax rate on the second house -- same neighborhood, same owner, same ability to pay -- is roughly 10 times the rate on the first house.

 

I then referenced my house (bought in 1959) in Omaha, which I believe to be worth about $500,000 (though it's assessed at $690,000). Taxes on it were $14,401 in 2003 and $12,481 in 2002."

 

 

--> http://en.wikipedia.org/wiki/California_Proposition_13_(1978)

 

--> This document by UCSD prof.  explaining through different scenarios on the impacts of Prop 13.

http://weber.ucsd.edu/~miwhite/wasi-white-final.pdf

 

-->

http://www.latimes.com/news/opinion/la-oe-vasconcellos10-2009jul10,0,646349.story

 

[Hoodlum]

It look like a portion of the "deficit cuts" are just a transfer to the municipalities.  This could tip many towns/cities into bankruptcy assuming it is legal for the State to do this.

 

http://www.reuters.com/article/politicsNews/idUSTRE56K5JD20090721

 

The day-old pact among California leaders to close the state's $26.3 billion budget gap came under fire on Tuesday as county and city governments threatened to sue to block a plan to seize local tax revenues as part of the deal.

 

City and council officials vowed to seek a court order barring the proposed diversion of $2 billion from local redevelopment agencies and $1.7 billion in highway tax collections into state coffers to help close the budget deficit.

 

Opponents argue that such moves are illegal because the state is prohibited under its constitution from grabbing revenues raised at the local level or earmarked specifically for county and municipal purposes.

 

They cited a recent state appeals court ruling that a similar diversion of $740 million in local public transit funds last year was unconstitutional.

 

The Board of Supervisors for Los Angeles County, the state's most populous county, voted to file suit against both moves if the budget deal is enacted as agreed to on Monday by Governor Arnold Schwarzenegger, a Republican, and leaders of both parties in the state Legislature.

 

[benhacker]

Accrued Interest had a good review. 

 

http://accruedint.blogspot.com/2009/07/californias-budget-unfortunate-that-i.html

 

Ben

[Parsad]

IOU's stop September 4th.  Cheers!

 

http://money.cnn.com/2009/08/13/news/economy/california_to_end_iou_september_4/index.htm?cnn=yes

[Guest kawikaho]

Good to know.  Now that we just moved back to California from Seattle, it will be interesting to see how the budget cut feels like.  They've already closed down over 200 state parks.  I wonder if I'll see less cops on the road as well!  

 

Oh, haha, I just found out from some friends that the state has closed all public toilets and showers in the OC.  I guess that gives us free reign to poop in the ocean.  Gawd, you just gotta love this state!

 

holy crap was I mistaken here.  This is kind of humbling to see my intuition was just pure crap.  Ever since moving back to California, I've never seen so much cops on the road in the 10 years that I've lived here before.  It's like police gestapo!  Every day there are loads of cops pulling people over.  I was thinking,

"weren't they cutting back on the police force drastically?"  But now it makes sense: muni, city, state budgets are HURTING BAD.  They're just going to ticket the citizens till the cities and state sees black again!

 

Home prices still tanking.  Prices in Pacific Grove and Monterey now down to 50% since 2007.  There are distressed short sales going seeking 50% of last year's appraised values.

[smw397]

I've got two kids at UC Santa Cruz and over the last three years neither has been able to find a room in a house for less than $1000/month.  They both share rooms so it's only half that to them, but still...and we're not talking about very nice houses, though at least they're within striking distance of the beach and on the bus route to campus. 

[Guest kawikaho]

Really?  SC is usually one of the cheapest places to rent in the Bay Area, especially single rooms in a house.  I just found a bunch of nice 1BR apts for them for under $1000/month on Craigslist:

 

http://sfbay.craigslist.org/search/apa/scz?query=&catAbbreviation=apa&minAsk=min&maxAsk=1000&bedrooms=1&neighborhood=

 

Although, you have a point about places near UCSC: they are quite expensive.  That's weird, and I wonder why that is so.  I just found a 2br condo nearby going for $289k.  I'm sure you can negotiate down to $250k, and with a 20% down payment and 5.3% 30yr mortgage, your monthly payments come out to just over $1100.  That's not including the strata fees, though.  Not sure how much that would be.