HomeMy WebLinkAboutAgenda Report - October 19, 2011 Public CommentsContinued October 19,2011
Adopted Resolution No. 2011-163 rescinding Resolution 93-30, thereby eliminating the Personal
Computer Purchase Plan.
C-14 Adopt Resolution Updating the Policies and Procedures for Customer Credit Security
Prouram in Accordance with the Fair& Accurate Credit Transactions Act of 2003 (CM)
Adopted Resolution No. 2011-164 updating the policies and proceduresfor Customer Credit
Security Program in accordancewith the Fair &Accurate Credit TransactionsAct of 2003.
C-15 Adopt ResolutionApprovina Impact Mitigation Fee ProaramAnnual Report for Fiscal Year
2010/11 (PW)
Adopted Resolution No. 2011-165 approving Impact Mitigation Fee ProgramAnnual Reportfor
Fiscal Year 2010/11.
C-16 Receive Report Reaardina Communications Pertainina to Assembly Bills 438. 646, 1027,
1220. and 1344: Senate Bills 244. 293.469, 734 and 922: and the Energy Efficiencyand
Conservation Block Grant Proaram(CLI)
Received report regarding communications pertainingto Assembly Bills 438, 646, 1027, 1220,
and 1344; Senate Bills 244,293,469,734 and 922; and the Energy Efficiency and Conservation
Block Grant Program.
C-17 Set Public Hearina for November 2, 2011, to ConsiderAdoption of a Resolution Settina the
San Joaauin County Multi -Species Habitat Conservation and Open Space Plan
Development Fees for 2012 (CD)
Set public hearing for November 2, 2011, to consider adoption of a resolution setting the
San Joaquin County Multi -Species Habitat Conservation and Open Space Plan Development
Fees for 2012.
D. Comments by the Public on Non-Aaenda Items
THE TIME ALLOWED PER NON -AGENDA ITEM FOR COMMENTS MADE BY THE
PUBLIC IS LIMITED TO FIVE MINUTES. The Citv Council cannot deliberate or take anv
action on a non-aaenda item unlessthere is factual evidence presented to the City Council
indicatina that the subject brouaht up by the public does fall into one of the exceptions
under Government Code Section 54954.2 in that (a) there is an emergency situation. or (bl
the need to take action on the item arose subsequent to the aaenda's being posted.
Unless the City Council is presented with this factual evidence. the City Council will refer
the matterfor review and placementon a future Citv Council agenda.
Francisco Trujillo, representing the Community Partnershipfor Families, invited the City Council
and publicto the "Celebration on Central" event to be held at Joe Serna School on November20,
2011.
Tom Ruemmlerspoke in regard to his concerns about the challenges associated with the market
10001or and economy and related studies.
Brett Morgan introduced himself as the newjudge in Department 15 of the San Joaquin Superior
court.
Anthony Zagaroli spoke in regard to his concerns about the change in the utility biIIsthat reflect
due upon receipt in lieu of a specific date.
Why is the U.S. in this economic crisis?
A major ROOT cause of this declining economy is over -taxation and over regulation of new
construction by government which has escalated home prices to unaffordable levels. Below is a
detailed explanation of the unforeseen detrimental ramifications of huge fees & regulations on new
construction, what has happened to the economy, and logical low cost solutions which could greatly
accelerate economic recovery in the U.S.
AN EXAMPLE OF OVER TAXATION & REGULATION FOR STOCKTON, CALIFORNIA
Stockton is one of California's "affordable housing cities" and the epicenter of the housing crisis.
Stockton's building permit fees increased about 300% between 2002 and 2010 and totaled about
$65,000 in 2010 for a 2000 sq. ft. home. There is another $60,000 of additional costs associated with
well-intentioned, but not well thought -through regulatory requirements. Governmental -induced costs
exacerbated inflation. In 2002 a new 2000 sq. ft. home cost $255,000; in 2006 it cost $440,000 (of
which approximately $125,000 are over -the -top regulatory fees). Fees and regulations resulted in
housing becoming unaffordable under the "old sound" borrowing requirements. Unfortunately
government and private lenders responded to the unaffordability of homes by lowering borrowing
requirements so people could buy homes to fulfill "the American Dream". Lower borrowing
requirements resulted in many bad loans.
LENDING BLUNDER
Soaring new home prices drove up existing home values. All housing became less affordable,
especially to first time home buyers. Because federal government encourages the American dream of
home ownership, borrowing requirements were reduced. There is a belief better communities are
achieved with pride of ownership, resulting in reduced expense for police services. Borrowing
standards were greatly reduced and home ownership increased from 67% to 69%; yes, only a
difference of 2%. Subprime loans which were in existence for many years started being used more
frequently. Borrowing qualifications and requirements on subprime loans were substantially reduced.
In order to get under qualified clients to qualify, some loan officers committed fraud and then collected
their commissions.
CALIFORNIA LEAD THE U.S. INTO THE NATIONAL FINANCIAL CRISIS
25% of all bad home loans are from California. The bad loans were bundled with other loans to form
loan packages sold by Wall Street. Some loans in the packages went bad. Bad loan packages resulted
in the potential collapse of financial institutions and AIG who insured the packages.
GOVERNMENT TREATED THE SYMPTOMS AND NOT THE CAUSE
The U S. Government attempted to stop a financial collapse by bailing out AIG, Fannie Mae and
banks. Government tried to stimulate the housing economy with the $8,000 home purchase tax credit.
The government bailouts benefit a few people, but are costly for all taxpayers and merely treat the
symptoms and did not fix the ROOT cause of the financial and housing crisis.
It was local and state government's over taxation and regulation that made housing unaffordable in the
first place. Passing federal legislation to limit fees and regulations to no more than 3% of the costs
of a new home would eliminate the ROOT cause. This legislation will not add to federal costs, is
easy to enact and administer - and benefits society and all states equally.
When new homes become affordable,] obs will be created resulting in stimulating the economy.
Affordable housing will result in a sustainable housing economy and lead the U.S. out of the financial
crisis.
Both political parties should be able to wrap their arms around legislation that limits fees and
regulation to 3% of the cost of anew home. This legislation will stimulatej obs. The proposed federal
legislation will force state and local governments to use tax dollars more effectively. It will force them
to find alternative revenue sources that spread taxes more evenly across society. As a result, a larger
number of tax payers means lower taxes for each individual. Lower taxes are more palatable.
Hopefully politicians that do not back this logical solution for the housing and financial crisis will be
voted out of office.
Details of the solution are explained below.
SOLUTIONS ARE EASILY IDENTIFIED IF YOU SOLVE THE PROBLEM BACKWARDS
WHAT CAN THE AVERAGE PERSON COMFORTABLY AFFORD?
In order to have a sustainable economy, an average household income must be able to comfortably
afford a house using the old lending standards and a 7.5% interest rate. The mean household income in
Stockton California is about $52,000. This income allows them to comfortably own a $150,000 home
with 20% down. They would have a $120,000 fixed rate loan and would be paying 24% of their
income for their principle, interest, taxes and insurance — their PITI payment.
WHAT A NEW HOME NEEDS TO SELL FOR: LESS THAN $176,000
A new home can sell for $176,000 if it can demand a 15% premium over an existing home.
A contractor can NOT build a $176,000 home if it costs $50,000 to $100,000 for permits and
regulations. In other states, fees and regulations are under $4,000 and contactors can and do build the
average house for under $176,000 Fees in California need to be under $4,000 to compete with
other sates and to achieve a sustainable economy.
THE RESULTS OF OVER TAXATION AND REGULATION INCLUDE THE FOLLOWING:
"LEVERAGE EFFECT" THE HUGE UNFORSEEN DETFUMENTAL EFFECT
Governmental officials did not foresee the leverage effect of placing $125,000 of fees and regulations
on new homes. A 15% profit on the additional $125,000 of costs increased new home prices by
$144,000. There are 77 existing homes for every new home built. For every 1,000 homes built, there
are 77,000 existing home equities that had increased totaling 11 billion dollars of equity. Many
existing homeowners used their homes like piggy banks and tapped this equity. Many people used
subprime loans to refinance. Records reveal the majority of subprime loans were refinances. Many
borrowers defaulted and walked from their loans after they "sold" their house to the lending
institution. Foreclosures devastated the value of neighboring homes. Over 11 billion dollars of
additional buying power (demand) was created in Stockton and resulted in the unintended consequence
of inflation, escalating housing prices even higher during boom times.
TAXES AND FEES ARE PALATBLE IF SPREAD ACROSS SOCIETY
There are approximately 77 existing homes for every new home built (a 1.3% expansion rate). A better
approach would be taxing all homeowners $1623. This would collect the same amount of dollars as
taxing the new home buyer $125,000. Since many of the regulations do more harm than good, the
government would only need to collect about $400 in additional taxes on all houses (existing and new)
to cover worthwhile expenses. Four hundred dollars is palatable; $125,000 is not. One hundred and
twenty five thousand dollars ($125,000) greatly alters the free market system that the United States
economy is based upon. History has shown that government decisions can greatly affect a free market
economy.
WHY WERE FEES PLACED ON CONSTRUCTIONIN CALIFORNIA?
Fees escalated on the incorrect assumption that California's Prop 13 (which limited property tax
increases to 2% per year) reduced government's income. Government used Nexus reports to justify
fees on new construction. The 2010-2011 Stockton Nexus report, states "Sincethepassage of
Proposition 13, property tax revenues have been insufficientfor capitalfunding ... " "... Given these
funding difficulties, the City requires new development to payfees tofund thefacilities necessary to
accommodate growth. "
ANALYSIS REVEAL PROP 13 WAS NOT THE PROBLEM
If the property taxes collected in San Diego County in 2010 are divided by the property taxes collected
in 1977 (the year before Prop 13), it is discovered that $7.20 is collected now for every dollar back
then. Adjusting the dollar by 85% population growth and by 260% inflation reveals that we should be
only collecting $4.80. Instead we are collecting $7.20 —this is 1.5 times what we need to collect. The
foregoing figures should be further adjusted because worker productivity increases should result in
fewer tax dollars needed. A mere 1 %productivity increase per year reveals that we only need to
collect $3.60. However, government is collecting $7.20 in property taxes, plus exorbitant impact
fees.
WHERE DID THE MONEY GO?
In the 1970's, governmental employees wages were lower than the private sector but they had good
guaranteed retirement and benefit programs. Currently I would highly recommend employment in the
governmental sector (especially the local government sector) because of the generous wage and benefit
packages as opposed to the private sector.
REGULATIONS —WELL INTENTIONED BUT NOT THOUGHT THROUGH
An example of "focused thinking" and not considering the unforeseen consequences of regulations is
reflected in the attached pictures of a rainwater treatment tank that is installed in a subdivision of 303
homes on 77 acres in Stockton, California. The cost of this tank was about 2 million dollars. The
rainwater treatment tank which is made from lots of steel and concrete is 400 feet long, 16 feet wide, 8
feet tall and is buried about 20 feet underground.
The tank caused more environmental harm than good. Rainwater tanks have the potential to be huge
methane bombs as organic materials, such as leaves, decay. Other flammables such as solvents, diesel
fuel, oil and leaks from natural gas lines, can accumulate in the tank. The tanks are breeding ponds for
the mosquitoes carrying the West Nile Virus. Other significant negative environmental effects of these
tanks include the air pollution from the methane gas produced by decaying matter in the tank, sediment
haul off, hydrocarbons burned to dig the hole and install the tank. Also, include the pollution from the
production of the steel, concrete, and materials used for tank construction and transportation of those
materials to the j ob site. Annually $50,000 in extra taxes are collected from the 303 homeowners to
maintain the tank. Additional taxes need to be collected to poison the water for mosquito prevention.
If future development projects in the United States are required to have rain water treatment facilities.
Over the next 100 years, billions of dollars will be spent and less than 1 /100 of a percent of the
rainwater runoff will be treated. The decontamination of the rainwater runoff will be negligible for the
billions of dollars that will be spent. There are less expensive alternatives which can help the
environment.
The initial cost of the rain water tank, ongoing taxes and environmental harm isjust one example of
"not thought through" government regulations that add to building costs. There are numerous other
regulations that are not needed and counterproductive. If drastic changes don't occur to eliminate
unnecessary regulations and dramatically reduce building permit fees and red tape, the future of the
American economy will be affected for many many years.
There are many more "not thought through" government initiated programs that are mainly paid for by
new construction. Examples are buying up developmental rights to leave land undeveloped and other
regulations to protect the environment. These programs benefit everyone, but instead of spreading the
cost over society and thus reducing the tax to a palatable figure, government placed the cost on one
entity, the new home buyer. The costs of mitigation measure that benefits all should not be added to
new constructionbecause it makes housing more unaffordable and adds to the ROOT cause of the
housing crisis.
Government seems oblivious or unsympathetic to the fact that these costs accumulate and eventually
overwhelm the new home buyer. Government did not understand that new construction pays its fair
share. There are sales taxes on materials. Construction wages paid result in sales taxes when their
families shop. A $300,000 home generates in excess of $18,000 in extra sales tax and another $330
from a. 11 % transfer tax. Some cities impose transfer taxes that exceeded I%. Furthermore,
construction activity significantly decreases unemployment costs. In perspective, the $18,000 in extra
taxes generated by a $300,000 home may be more than the state and federal taxes paid by individuals
who purchase the new homes.
TAXES ON PROPERTY ARE DETRIMENTAL
Sales taxes and income taxes have a direct relationship to a person's ability to pay. Taxing
property is a very poor choice because property taxes do not have a relationship to a person's
ability to pay and greatly distress and burden the young, old (retired) and average income
earner. Furthermore, since construction is a major part of the economic engine, government
should stimulate, not overtax, this sector of the economy.
A conflict of interest exists for lobbyists, environmentalists, government employees and the elected
officials who voted to place huge costs on new construction. Community development departments
increased in size and their budgets swelled during flush times. More money was available for
government employee wages, benefits, and retirement programs. An even greater conflict of interest
was their homes increasing $115,000 in value for every $100,000 of fees and regulations. The extra
$15,000 represents the builder's profit on the $100,000 in extra costs.
Existing homeowners falsely believed they greatly benefited from the rising value of their home. Most
homeowners did not realize the rapid price increases were in a large part due to fees and regulations.
They borrowed against their increased equity and bought rental homes to get in on the rapid price
increases. This led to the frenzied spiral of over -inflated home prices. However, even without the
recession, the huge increase in equity in the existing homes evaporated when home owners had to lend
their children money so their children could qualify and buy the higher priced homes.
SOLUTIONS
1. The key to a rejuvenated economy is addressing the major ROOT cause of the recession. One
solution could be utilizing interstate commerce laws and passing federal legislation limiting total
building permit fees and auxiliary costs to no more than 3 percent of construction costs. Passing such
legislation will cost the federal government little, unlike the other bailouts the federal government has
already authorized, such as the one time new homeowner's tax credit of $8,000 as previously
discussed. That $8,000 tax credit benefited a select few at the cost of everyone. Passing legislation, as
suggested, would help more people afford homes, be easier to administer, and greatly reduce the
discrepancies in permit costs between cities, counties and states.
2. Another part of the solution is to pass legislation requiring studies of the unintended consequences
of the mitigation measures recommended in the initial environmental impact reports, and that the
proposed mitigation measures be: 1) reasonable; 2) the most cost effective solutions 4) to access their
economic impact 4) and paid for by all (all who benefit). Environmentalists do not want to do more
harm to the environment and should not be opposed to the legislation suggested.
3) Have a positive economic impact
4) Paid for by all (all who benefit). Environmentalists do not want to do more harm to the environment
and should not be opposed to the legislation suggested.
California already collects some of the highest income, sales and property taxes in the United States.
Additional taxes on new construction are not needed and should not be relied on because they have
huge detrimental leverage effect and other effects that are the ROOT cause of the economic crisis.
5. More effective use of tax dollars is needed. The majority of tax dollars is spent on education.
Schools have a terrible business plan. The United States spends more than other nations on education
but we test near the bottom.
6. We could easily cut education expenses in half and also raise test scores. I encourage you to go to
Khanacadem,r which is a free educational web site backed by the Melinda and Bill Gates
foundation. I suggest you and all parents view the Sal on the Khan Academy @ TED video at the
Khanacademv.or web site that describes why this education technique is successful. Los Altos
School District has had great success using this site.
7. If half of the dollars spent on education (or prisons) could be used for paying off the debt and doing
comprehensive reevaluations of all existing governmental programs, we could get out of this financial
crisis.
These suggestions will increase governmental income as construction resumes. More sales tax would
be generated from building materials and from income taxes realized from j obs created. The
governmental expense of unemployment will be greatly reduced. The expense of specialized stimulus
packages will be eliminated.
The government has a relatively short window of time to rectify the problem of overtaxing one entity
(new homes). If legislation reduced the price of a new home built in 2010 from $350,000 to $225,000
by reducing the taxes, fees and over regulations on construction, it would be seemingly unfair to those
people who bought the $350,000 homes. However, the recession has already reduced the value of the
recently purchased $350,000 houses to $200,000 and thus it will not affect these people.
Construction is a major economic engine. We have all witnessed the negative result of pushing the cost
of housing beyond the grasp of the common citizen, the far-reaching effect on the entire economy and
especially on those communities that overtaxed new construction. Many communities that did not
overtax new construction did not have rapid inflation of home prices and thus home prices did not
greatly decrease in this recession. The suggested legislation will not alter these markets. Our
legislators must ACT now and if they don't, we must ACT now and vote them out of office.
A grass root organization called ACT (Alliance for Controlling Taxes) has been establishedby a
group of citizens to educate politicians and the general population concerning the unforeseen
consequences of prior fees and regulations placed on housing. ACT intends to suggest solutions to
stabilize and stimulate our failing economy. ACT welcomes all who would like to actively research
and advocate for sound solutions which may improve not only the local but the national economy.
ACT will be funding the publication of the foregoing educational information in major newspapers,
explaining why the U.S. is in the current recession and what citizens can do to counteract the
continuing decline.
If you would like to j oin in this effort or to donate financially, contact ACT today. ACT
anticipates support from Businesses and people from all walks of life, since nearly everyone is affected
by this economic crisis. Your participation and or donation directly helps you. Also, people with a
variety of skills are being sought to help with website development, identifying creative means of
informing the public and access to public officials who have the ability to make the necessary changes.
Contact us at ACTforTaxChange @ gmail.com, or call 254-522-8669 (2545 ACT NOW). Send
donations to ACT, 2818 Golden Eagle Drive, Stockton, CA 95209
A Suggestion Made To ACT. ACT Welcomes Your Opinions & Suggestions
The mortgage crisis is created by what? People who cannot afford their mortgage payments. So we
force them out of their homes. Banks go under, property values of nearby homes plummet, j obs are
lost, and the American people get stuck with an $800 billion bailout.
Why not let these people stay in their homes, and let them continue making whatever payments they
were able to afford in the beginning? Yet, nobody should get a free lunch. The government (a.k.a. US
taxpayers) can pay the difference of the mortgage, and take partial equity on the value of the house. In
other words, if the Fed pays $1000 of the mortgage payment, the Fed gets $1000 of equity and collects
that equity when the home sells. The banks will not have bad loans. Banks will become liquid again
because there will be less defaults. The housing market becomes stable again because the glut of short
sales and foreclosures disappears. Our own property values will increase because there won't be "Short
Sale" and "Foreclosure" signs everywhere. When the houses are eventually sold, American taxpayers
reap the rewards of shared equity, leading to the possibility of reducing taxes in the future.
Sufficient laws must be in place preventing any bank or agency from making the kinds of loans that
are unsustainable — the kind that got us where we are today.
Tom Ruemmler
TRuemmler(a),hotrnai 1. com
209 478-5382
An expensive 400 foot long, 16 foot wide, 8 foot tall storm drainage tank. $50,000/year of taxes are
collected from 303 houses to maintain the tank. Inside the tank are 3 foot tall dams about every 20 feet.
The dams create many ponds. Fine dirt settles in the ponds. After many years, the sludge is removed,
trucked to a site and dried. It is then trucked to a landfill. Billions of dollars will be spent on rainwater
treatment, but very little water will be treated. Calculations reveal little if any improvement will be
seen in the streams. The well intended Clean Water Act's implementation was not thought -through.
Unintended consequences include air pollution and green houses gasses from the hydrocarbons burnt
to manufacture, install the tank and haul off the sludge. The tanks can become huge bombs as a result
of gases accumulating in the tank from the fermenting of organic matter such as leaves, or spillage of
flammables, or from leaks in natural gas lines. The tanks are breeding pools for mosquitoes that can
carry the West Nile Virus