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Supervisor Brad Mitzelfelt

Locals ‘Mount Up’ for Economic Recovery

As the latest budget stalemate continues, IOUs and BBB credit ratings are popular topics of conversation in California. In fact, while waiting for a table in the bar of my favorite local restaurant Friday night, nearly everyone I talked to asked what I know about those state issues and what I think is going to happen.

I said I don’t know. But one thing I do know is that in February, all of the Democrats and a few Republicans figured higher government revenues would result from the largest state tax increase in U.S. history. And four months later, Controller John Chiang announced that tax receipts were $1 billion lower than projected. Chiang was quoted in the Los Angeles Times as saying, “[the legislature] must craft a new budget that recognizes California’s recovery has yet to begin.”

State Treasurer Bill Lockyer announced on CNBC on July 6 that California “should be able to pay its IOUs back in October.” Note the word “should,” coming from a guy who has a fiduciary duty to instill maximum confidence in California’s creditworthiness. One bond-rating service even lowered California’s bond rating to near-junk status as a result of its inability to produce a working budget that honors its debt obligations.

And the State still seems likely to further defer, or raid or borrow billions from cities and counties.

On the federal level, the Cavalry is nowhere to be found. The economic stimulus package passed in the same month as the tax increases only provides 15% of the $787 billion toward infrastructure projects, which provide true economic stimulus. Even so, very little of the 15% earmarked for infrastructure has been distributed at the local level for infrastructure. The money that has gone out is focused on supporting unemployment benefits and social service shortfalls. Basically, the money is evaporating into nothing.

So without help forthcoming from the Cavalry at the state or federal level, it’s up to us — as my cousin the former truck driver might say — a bunch of “local yokels and county Mounties,” whose innovation is and will continue to be essential to minimize the impacts of the recession on the people of California.

Last week, the Building Industry Association of Southern California, Baldy View Chapter, hosted an economic session that was attended by city managers and local elected officials from throughout San Bernardino County. One of the panelists, Inland Empire economist John Husing, Ph.D., said that construction, and significantly residential construction and housing-related activities — being one of the largest private economic engines in the Inland Empire — will be a key industry to recover if the recession is going to end prior to the year 2013. Driving this engine during 2003 through 2005, he noted, were more than 80,000 new residents coming in annually, while this slowed to 30,000 in 2007 and 5,000 in 2008. We also have the second-worst unemployment rate, at 12.8 percent, in the nation, next to Detroit, which depresses every other economic indicator.

Husing suggested that cities and counties do what some jurisdictions have begun to do: Whatever possible to remove the glut of foreclosures caused largely by the subprime and other mortgage fiascos while helping get stagnant projects moving in new construction. Husing estimated that in order to generate a healthy and sustainable housing sector, prices for new construction would have to get down to 2002 levels, to where 69 percent of households can afford a new home. Despite the jobs-housing imbalance in the County, Southern California has a chronic housing shortage and San Bernardino County is still the natural place to build it.

One way to help stimulate that activity is for jurisdictions to temporarily reduce, delay or eliminate development fees and other costs, such as bonding requirements, regulatory restrictions and exactions, while extending the life of approved entitlements. Rancho Cucamonga and Ontario were credited for their recent innovative and successful moves to stimulate new construction in their cities.

Husing was quick to point out that focusing on generating jobs and taxable sales by bringing in new businesses and industries and retaining the ones already here remain just as important as ever. The two strategies are not mutually exclusive. Attendee Councilman Mike Rothschild from Victorville noted his city’s two job-creating milestones just this week: The hiring of 200 employees for its new Dr. Pepper bottling plant, and the graduation of the first class of newly minted FAA-certified Airframe and Powerplant mechanics from its new School of Aviation Technology at Southern California Logistics Airport.

At the County level, in addition to supporting efforts such as bringing the Dr. Pepper plant and the aviation mechanics school to Victorville, San Bernardino remains one of the few large counties that doesn’t charge “impact fees.” These fees, while important for building infrastructure to support new residences, businesses and industries, are also expensive and can make development less economically feasible. The Board of Supervisors is in fact delaying implementation of the fees until the economy recovers.

And then there are things the county is uniquely able to do.

The Inland Empire Economic Recovery Corporation, co-founded by Supervisor Paul Biane and myself, is a non-profit public-private partnership between the Counties of San Bernardino and Riverside and their cities, along with private investors interested in helping the housing sector recover as quickly as possible.

Inland Empire cities can use some of their housing funds, such as their Redevelopment 20% set-aside funds (NSP funds aren’t allowed), to leverage their expenditures up to five-fold with private investor dollars simply by partnering with the IEERC. They can do so up to three times a year. These funds, which are required to be spent on low- to moderate-income housing anyway, go into local rehabilitation, rehab and resale to owner-occupants within their jurisdictions, and are paid back to the jurisdiction every four months. All of the work is done by local contractors, adding to the local economic stimulus generated by the sale of foreclosed homes. For more information, visit

In addition to the IEERC is Proposition 90, which allows counties, by ordinance, to allow residents aged 55 and over and disabled persons from other counties to purchase a home in a Prop. 90 county and still maintain their previous property tax levels, if lower.

This incentive attracts buyers of new and resale homes within the Prop. 90 county. And while the county technically would lose that tax revenue, at the same time property values are being assessed significantly lower (over 15 percent on average in my district), it’s well worth it when one considers the whole economic picture. It is common sense to attempt to fill vacant and deteriorating foreclosed homes at whatever property tax rate the county can get. Vacant homes are known to increase crime and drive down neighboring property values.

Retiring Baby Boomers are the richest and most populous generation this country has seen. These are the same people who drove the Nation’s economy for the past thirty years, who own the retirement pensions and savings. It is difficult to argue that if people moving to a particular bring with them a life savings and retirement benefits it would not result in that area benefitting, especially if it decreases the amount of vacant, foreclosed and/or rental homes in the area.

A year ago, I proposed that the Board of Supervisors authorize Prop. 90 benefits for a trial period of a few years. And while Supervisor Gary Ovitt co-sponsored my request, I was unable to get three votes to make it law. Since that time, Supervisor Neil Derry was elected to represent the Third District. I am hopeful that in the coming weeks as I bring this issue back to the board, with continued support from Gary Ovitt and hopefully new support from Neil Derry, the outcome will be different.

These initiatives will not solve all of our economic problems or lead to recovery. But it is important for us to “mount up” and do whatever we can at the local level to help shorten the downturn.