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Monday, October 25, 2021

Good policies can have unintended consequences


The difficulty in making a decision as an elected official is the tension between one party versus the other. There may be religious positions on both sides. One solution may be good and obvious but it may also be to the detriment of others. Some have won, some have lost.

I am sure that approving the exchange of freeways connecting the Boyle Heights area of ​​Los Angeles in the 1940s must have been painful. Transportation Demands Many will have to move away from their homes to make way for this project. I’m sure the wind on this difficult passage for growth was dense with excitement.

Other decisions at the local level are more subtle. In a bid to help people tackle housing costs, the city of Santa Ana has just implemented rent controls. In a constituency, it has had a negative impact on apartment owners in terms of helping tenants. This can force the owners of older apartment buildings to convert units into condominium when they decide to take cash. The historian of rent control has historically had negative unintended consequences. But the fighting tenant tension prevails.

The city of Costa Mesa is considering several proposals that will create winners and losers. One is that public building projects require project labor contracts. This requires building contractors who belong to the union. Unfortunately, experience has shown that in the case of municipal projects, the price is much higher than in Union stores than in open stores. There are winners and losers in this case, but the decision will be subsidized by taxpayers through higher taxes or lower projects.

Providing affordable housing for city workers can be a perfect “feel good” opportunity. Costa Mesa is considering converting a 250-unit apartment complex near South Coast Plaza into low-income worker housing. This will provide the opportunity to rent the market below, but to make the acquisition pencil, the government must reduce some costs. The real property tax is being lost, because the newly formed ownership will be exempt from this expense.

Under Proposition 13, real estate owners provide an annual inflation adjustment of 1 percent of the acquisition price, and 2 percent per year. The $ 170 million project will provide 1. 1.7 million per year. Roughly, the tax is allocated to counties (6%), cities (11%), Newport-Mesa Unified School District (NMUSD) (63%) and other districts (20%).

The cost of the apartment complex is currently $ 82.5 million, which means the city will drop 4 124,000 annually and NMUSD will reduce it by about 8 328,000 per year, according to city staff. But the মূল্য 170 million sale price would double that amount.

Trying to accommodate staff is a nice gesture, but the school district will be negatively affected. If both municipalities continue to float in cash, it will not be such a confusion. The Federal Relief Fund has provided NMUSD with some cushions for the historically cashless district. Losing about 50 750,000 per year will be felt in its budget and its balance sheet is below the Orange County rankings. But Costa Messa has the worst balance sheets in Orange County and California. No one is in a position to be overly generous.

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As the proposal stands, the city of Costa Mesa will be the landlord, thus bearing all the costs and benefits of managing a large real estate project. However, it is usually dangerous for municipalities to deviate from their core mission.

From a broader perspective, real estate prices are at an all-time high and interest rates are at an all-time low. It is speculation to believe that there will be additional praise in the future. If the units are empty or the normal maintenance requirements exceed the estimate of this old facility, the city will have to sink into its very thin reserves to make this investment pencil.

In an attempt to get more information, I tried to attend a public finance committee meeting through Zoom. Unfortunately, I was informed that I could not sign in. What a sad comment about a city that prides itself on transparency.

With such a unique proposition, with minimal reversal and lots of negative exposure, much more would be lost. City. School district. Residents who may have to cut more funds, first through a possible future sales tax increase and then through a potential parcel tax.

The only winners will be the current owners of the apartment complex and those who are coordinating the financing. As a former County Supervisor and a member of the Executive Board of the California State Association of Counties (CSAC), I would like to express that I fully appreciate that the California Statewide Communities Development Authority will be a for-profit subsidiary of CSAC. But I am a resident of the city of Costa Mesa and very concerned about its current financial shape and financial aspects.

Coming out on top of the market would be a sweet deal for current owners. Being able to sell property to a buyer at or near the top of the market is known in this industry as the “big thief theory”. And that’s something to avoid, because a well-planned tug-of-war, but mistakenly the transaction will go on year after year.


John Murlach is a former Orange County supervisor who recently served as a state senator. He had previously spent 12 years as Orange County treasurer-tax collector and brought the county out of bankruptcy.


This News Originally From – The Epoch Times

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