Republicans have resisted Democrats’ preferred approach, but California’s business lobby has pressed both parties to embrace new taxes and fees. “Last week, business organizations such as the California Chamber of Commerce and the Silicon Valley Leadership Group said any deal should seek to raise at least $6 billion annually by raising gas and diesel taxes and increasing vehicle registration and license fees,” the San Jose Mercury News reported.

Part of the rationale for increasing fees, instead of simply dialing up gas taxes, has centered around the growing popularity of hybrid and electric vehicles in California — and the state’s interest in squeezing revenue out of every car on the road. “We have these Teslas that are being sold and they don’t pay any gas tax,” complained state Sen. Jim Beall, D-San Jose, as CBS Sacramento noted.

Gas in California has remained higher on average than out-of-state, thanks to cap-and-trade fees and the state’s unique environmental rules about the blends of gasoline that must be sold. Current state taxes include an excise tax of 39 cents, between 30 and 42 cents in sales tax, and 10 cents for the cap-and-trade levy, as Watchdog Arena observed.

Brown stays secretive

At a recent news conference that left some observers hungry for detail scratching their heads, Brown refused to hint at a revenue source for the improvements. “I’m not going to say where the revenue’s going to come from, how we’re going to get it,” he said. “We’ll get it done, but I’m not going to put all my cards on the table this morning,” Brown said, according to ABC 7 News.

Brown was joined at the appearance by Assembly Speaker Toni Atkins, D-San Diego, who signaled separately that negotiations would be tough. “It will be a bumpy road, but our constituents expect us to work together and figure something out,” she told the San Francisco Chronicle.

To date, the governor has not let slip whether he would support or oppose a tax hike to make up the difference.

Photo Credit: HUD.gov

Rent control is on the march in California, addressing years of leases that have increased to as much as 43 percent over the national average for a one-bedroom apartment.

In the last year, rent has increased 6.5 percent in the state.

Is Rent Control the Answer?

The answer for local politicians is rent control; 16 cities now have such policies, but it had been 30 years since the last time any municipality enacted such a thing until Richmond did so August 6.

The state is one of the most expensive for both buying and renting, and more cities across the U.S., mostly on the coasts, are dealing with rent increases that are taking up to a third of some tenants’ annual salary.

In Richmond, rents have jumped an estimated 30 percent since 2011. To cover the administrative costs of the new rent control program, which begins Sept. 4, a fee will be imposed on all owners of rental properties.

But a review of reports and testimony surrounding a bill pending in the statehouse indicates that fees levied on developers is how we got to the ever-rising rents in the first place.

“Pay to Play”

The first report, which now reads as a road map to rent hike disaster, was released in August 2001 by the state Department of Housing and Community Development. Titled “Pay to play,” the report dug into the residential development fees that are now being noted as the primary cause of rent increases:

“California’s high residential development fees significantly contribute to its high housing costs and prices,” the report stated. “Among our sample of California jurisdictions, fees account for an average of 10 percent of the median price of new single-family homes. Fees account for a lower share of housing prices in more expensive housing markets and a higher share in less expensive markets.”

The report also included a simulation, calculating what would happen if development fees were cut. Using Santa Clara County as an example, a 50 percent reduction in development fees at a 45-unit apartment building would take down monthly rent by 4 percentage points, still allowing for a 10 percent return.

It’s hard for a lot of the public to be sympathetic to developers; over the years they’ve been portrayed as desecrators of open woodlands and the ruin of tradition. At the same time, without them, housing would be a mess. And stopping them, even worse.

Plethora of Fees

There are a dozen fees that can be leveled on developers. They include environmental documentation fees, school mitigation fees and something called a plan check fee, which involves a review of a planned building or development. In Long Beach, that can cost up to “85 percent of Building Permit fee per plan check, but not less than $112.58,” according to city documents. In Roseville, a plan check can involve as many as seven city departments for a multi-family project. If time is money, and it is for most developers, that can be a costly delay.

State Sen. Janet Nguyen, R- Garden Grove, introduced Senate Bill 341 in February that would, in part, address the state’s outsized development fees by requiring a periodic assessment of the various fees being charged by municipalities on developers.

Nguyen said in a May hearing of the Senate Standing Committee on Appropriations that the average local development fee in the state is over $22,000 as opposed to $6,000 in other states. And when adjusted for cost of living, California’s property tax rate is the highest in the U.S.

She noted that the last evaluation of the various development fees was done in 1998, “and it is time to update these numbers to find out what effect these fees have on current housing prices.”

But of course there’s a cost to the proposed periodic assessments; a Department of Finance representative said it would be around $300,000 each time.

If passed, Nguyen’s legislation would make California one of the rare states with a regular assessment of developer fees, said Clancy Mullen, vice president of Austin, Texas-based Duncan Associates, which advises municipalities on impact fees.

“Unless there is a push in a legislature to clamp down, these are not looked at with any regularity in states,” said Mullen, whose group compiled a 2012 survey on developer fees in the U.S. “States may pass an enabling act then tweak it from time to time, but there is no regular review. This would be a first.”

But the fact that the teams see no trouble in coming up with $850 million apiece seems likely to make San Diego and Oakland voters more opposed to subsidizing billionaire team owners than ever. So does the fact that Walton family member Stan Kroenke, who owns the eager-to-move St. Louis Rams, is preparing to build a $1 billion-plus stadium of his own in Inglewood without public dollars — and with the blessing of city officials who are putting the project on a fast track, bypassing environmental laws.

The deal accepted by Santa Clara County voters in 2010 limiting the subsidies for the 49ers’ new $1.2 billion Levi’s Stadium seemed a good deal at the time; the highest estimate of direct subsidies for the project CalWatchdog.com could find is $156 million. After what’s happened in recent years, that deal doesn’t look so good anymore.

Live sports are gold for TV networks

That’s because the economics of sports have changed since the 49ers’ deal was negotiated. Whether they move or not, the Chargers and Raiders have much less to back up their argument that they would face a “competitive disadvantage” by going without the subsidies that pro teams have traditionally demanded for new stadiums and arenas. They understand that franchise ownership is more beneficial than ever in an era in which live sports are the most consistent way to build a big real-time audience on TV and online.

For the 2014 season, TV networks paid more than $5.5 billion to the NFL. After some league and player pension expenses are paid, the rest of the TV money and other revenue is divvied up among the 32 teams. The $188 million each team got in 2014 was up at least 20 percent from 2013.  Teams are likely to get even more money in coming years. In October, when DirecTV renewed its contract with the NFL, it increased its annual payment from $1 billion to $1.5 billion.

The National Basketball Association and Major League Baseball are enjoying similar huge gains in TV rights payments. Teams in those sports benefit both from national TV fees and local deals with cable companies.

Cable TV bills swell due to sports fees

This double revenue stream explains why the Dodgers sold for a record $2.15 billion in 2012 and the Clippers sold for a record $2 billion in 2014.

Only franchises in the New York City metropolitan area are likely to do better than the 20-year, $3 billion deal the Lakers struck with Time Warner Cable in 2011 to build two regional cable TV networks around the team; and the 25-year, $8.5 billion deal the Dodgers signed with Time Warner in 2013 to set up a dedicated cable channel built on the team’s preseason and regular-season games.

These TV costs, of course, are passed along to consumers via sky-high cable TV bills — something Californians already complain about. When residents put two and two together and realize that pro sports are already hitting their pocketbooks in their cable bills, they may be even less enthusiastic about conveying money to billionaire team owners to help build stadiums.

For these reasons and more, Levi’s Stadium could be the last publicly subsidized pro sports stadium in California.

“Prop. 26 is divided into two parts. One part addresses state fees and the other addresses local fees. Although the two parts overlap substantially, there are also significant differences. This article focuses exclusively on the part addressing local fees.

“Prop. 26 is a constitutional amendment that introduces, for the first time, a definition of what constitutes a local tax: … any levy, charge or exaction of any kind imposed by a local government …

“Therefore, almost any requirement imposed by a local government that results in the local government receiving revenues is a local tax. This means that the local government would need to obtain a majority approval of the voters if the revenues are to be used for general governmental purposes, or a two-thirds voter approval if the revenues are to be used for a particular purpose. In contrast, a fee may be adopted by a majority vote of the city council.”

The intent was to end as much as possible shenanigans in which taxes were labeled fees and passed or adopted without the level of support necessary to enact higher taxes under Prop. 13 and other state laws. But what’s going on now in Contra Costa County shows a possible way that Prop. 26 can be gamed by the government officials who lust after higher revenue by any means necessary.

Fee doubles — new mandates blamed

This is from Contra Costa Times columnist Tom Barnidge:

“Rocco Biale got a surprise in the mail recently. The county health permit invoice for his Walnut Creek restaurant, Rocco’s Ristorante Pizzeria, was $1,813 — nearly twice as much as the year before.

“‘I wondered if it was a typographical error,’ he said. ‘I went back and looked up last year’s bill: It was $957.’

“Chris Frumenti, owner of Mangia Ristorante Pizzeria in Lafayette, got similar news, his fee jumping from $800 to $1,648. …

“The Contra Costa Environmental Health division didn’t stop at pizza joints. Zack Scott, who owns Walnut Creek eatery Havana, said his fees also doubled.”

How is this possible in the post-Prop. 26 era? Because of this exception written into the law, as cited by the League of California Cities:

“The Licenses and Permits Exception provides that the following are not taxes: a fee imposed for issuing licenses and permits; and the costs of administrative enforcement of licenses and permits. Common examples include health and safety permits, building licenses, police background checks and permits for regulated businesses (such as massage establishments, card rooms, taxicabs and tow-truck operators). …  the fee imposed must not exceed the city’s reasonable costs. If the fee does exceed the reasonable costs, then it is not eligible for any of these exceptions and would be a tax subject to voter approval.”

Play for revenue disguised as bureaucratic requirement

Back to what’s going on in Contra Costa:

“It turns out there’s a rational explanation — an explanation, anyway — for why Environmental Health Director Marilyn Underwood asked the board to increase fees.

“Since taking her post three years ago, one of her directives has been to get the department’s books in order — it previously operated at an annual deficit of some $750,000. She also must comply with the U.S. Food and Drug Administration’s recently updated food code calling for more thorough inspections. According to provisions of California’s Proposition 26, her agency can charge fees equal to the reasonable cost of enforcement administration.”

What a scam. If you really think the cost of food inspections to Contra Costa County more than doubled, I’ve got a subdivision in Lake Elsinore you might be interested in. This was a revenue play — not a considered and principled use of a Prop. 26 exception.

If anyone doesn’t think that that lots of government agencies will try to use this approach to get around Prop. 26, they haven’t been watching how California politicians act when it comes to other folks’ money.

The Contra Costa case is a harbinger of what’s to come.

To address this growing problem, the state’s Special Funds were the subject of a hearing last week in the Legislature, which I attended. The 500-plus special funds have been routinely raided over the last several years to “balance” the state budget. The now-preferred budget gimmick is to shift “special funds” into the general fund in order to call the budget “balanced.”

The Senate Budget Committee conducted the oversight hearing to review this practice, but only covered what amounted to less than 0.5 percent  of the $4.6 billion in special funds that have been raided over the last several years.

Recent history

From 2007 to 2012, California had a $10.4 billion decline in its general fund, but a corresponding increase of $13.15 billion in its “special funds,” CalWatchdog.com’s Wayne Lusvardi reported in May 2012.

Last year, State Controller John Chiang reported California was patching its budget together by borrowing $4.3 billion from special funds accounts.

A few days later, the secret $54 million special parks fund was revealed.

Then-state Finance Director Ana Matosantos reported that the borrowing from special funds had ballooned to more than five times the borrowing amount since June 2008.

“Where are these dollars?” asked Senate Budget Committee Chairman Mark Leno, D-San Francisco. Leno said it was a “big problem” that the special funds “clearly have not been getting enough attention.”

Where are we today?

Gov. Jerry Brown’s last budget proposed to make only a partial repayment to the special funds accounts. The $566.4 million repayment would have been merely a drop in the bucket of the $4.6 billion owed to more than 80 California special funds. But even that amount was deferred when the actual budget was passed in June.

In April, Senate Budget and Fiscal Review Committee Vice Chairman Sen. Bill Emmerson, R-Redlands, sent Leno a letter requesting the full committee investigate the astonishing  growth of special funds, as well as the significant growth of borrowing these funds. Joining Emmerson in the letter were state Sens. Joel Anderson, R-San Diego; Jim Nielsen, R-Gerber; Tom Berryhill, R-Twaine Harte; and Mark Wyland, R-Escondido. They requested the investigation of special funds specifically from 2007 to 2012.

“The Governor’s Budget proposes to repay $566.4 million in 2013-14, with full repayment by the end of 2016-17,” the lawmakers said. “However, his proposed delay of over $1 billion of previously scheduled payments calls into question his commitment to that timetable, and the fact that over $4 billion of excess Special Fund revenues were available to backfill General Fund budget deficits, strongly suggests that fee payers have either been grossly overcharged, or have not been receiving the services for which they have paid, or both.”

But it was months before the hearing was scheduled, and only a minute portion of the debt was covered.

Budget background

Special Revenue Funds are an “account established by a government for a specific project,” such as gas taxes for transportation and highway maintenance, park user fees, and the like.

State agencies separately report information concerning special funds to the Department of Finance, but use differing accounting methods.

According to the Legislative Analyst’s Office, “Multiyear loans of special fund balances to the General Fund—in order 
to help balance the state’s annual General Fund budget—have grown from $749 million at the end of 2007-08 to $4.3 billion now (including additional loans in the 2012-13 state budget package). In addition, in 2012-13, up to $16 billion of special fund and other funds’ cash resources are likely to be used to ensure that the state can make General Fund payments on time.”

When the economy tanked in 2007-08, thousands of businesses closed, unemployment went sky-high — and fee payers got hosed paying for the increases in special fund accounts.

“In California’s budgetary accounting system, over 500 special funds receive specified fee and tax revenues to support particular public programs,” the state Legislative Analyst’s Office explained in a 2012 report. “The administration forecasts that special funds will generate about $38 billion of revenue in 2012-13, averaging around $70 million for each special fund.”

But the governor, the Department of Finance, and legislative leaders have helped themselves to the special fund monies for use in the general fund, in order to claim they have a balanced budget. They claim the funds are being paid back, but as the senators noted in their letter, these repayments are regularly delayed.

“Republicans formally requested an oversight hearing several months ago and we were assured by the Chair that the committee would review ‘a majority of fee-based funds,'” Emmerson said in a statement after the hearing. “Unfortunately, we only looked at $18 million in repayments, which is a fraction of the $4.6 billion owed to fee payers. There are 27 funds scheduled to receive repayments this year yet we are discussing only seven. What about the other 20?”

“My colleagues and I are also concerned that these special funds were able to grow to more than $4 billion calling into question whether fee payers have been grossly overcharged or have not been receiving the services for which they have paid, or both,” said Emmerson. “Moreover, these fees should be for services directly benefiting the payers and should not be spent on unrelated General Fund programs.”

Republicans have called for more oversight hearings to address many of the other special fund loans, including:

$611.8 million from the Unemployment Compensation Disability Fund

$480 million from the Motor Vehicle Account

$350 million from the State Court Facilities Construction Fund

$328 million from the Highway Users Tax Account

$285 million from the State Highway Account

$171.7 million from the California Beverage Container Recycling Fund

$133 million from the Off-Highway Vehicle Trust Fund

$95 million from the Hospital Building Fund

$11.5 million Dealer Record of Sale

By Katy Grimes

The U.S. economy lost more than 1.4 million jobs between December and January. But it’s almost impossible to find any reports in the mainstream media about this.

Instead, the media primarily have reported on reduced federal spending, as if that is enough of a balancing act. But the government has no choice but to make cuts as the United States now runs deficits of more than $1 trillion. It cannot continue.

Much of the media have been ignoring the truth about the economy, cherry-picking some factoids and telling outright falsehoods.

Shrinking labor force

According to the Bureau of Labor Statistics, the percentage of the U.S. labor force “that is employed” has continually fallen since 2006.

But it gets worse.

The number of Americans “not in the labor force” more than tripled during Barack Obama’s first term in office. This number is particularly interesting because it is larger than the increase in the number of Americans “not in the labor force” during the entire decade of 1980-1990.

The mainstream media have been giddy reporting 157,000 jobs were added to the U.S. economy in January. But it’s the “non-seasonally adjusted” numbers — the number of Americans with a job — which actually decreased by 1,446,000 between December and January, according to Michael Snyder, an economist, attorney and author of the Economic Collapse blog. These numbers are even more important.

The Bureau of Labor Statistics reports that the labor participation number has been in a free fall since 2006:

2006: 63.1 percent employed

2007: 63.0

2008: 62.2

2009: 59.3

2010: 58.5

2011: 58.4

In January, only 57.9 percent of the civilian labor force was employed.

What does this mean?

“A 1954 Studebaker Lark has more momentum than this economy!” said CNBC’s financial expert, Rick Santelli. He noted in December that the labor force participation rate has dropped significantly since Obama was elected. According to the Bureau of Labor Statistics, this means the number of Americans age 16 or older who decided not to work or even to seek a job increased by 8,332,000 to a record 88,839,000 in President Barack Obama’s first term.

“The people who run the country — on both sides of the aisle — they love to get elected and they also love to fib about the statistics in any way they can,” Santelli said. “Once again, I think my common phrase these days is: Shame on all of them.”

“Before Obama took office, the labor force participation rate had not been as low as 63.6 percent since 1981, the year President Ronald Reagan took over from President Jimmy Carter,” a time of deep recession, CNS News reported. Santelli noted in January the total debt that our children are currently charged with is $3.5 million per baby born today. Santelli is right. Instead of just listening to the media hype and spin, look at the numbers.

According to the BLS, in 2007 more than 146 million Americans were employed.  Today, that number has dropped to 141.6 million, even though our population has grown by about 15 million.

What recovery?

State, local and federal governments, together with the help of the media, report that we are in a “recovery.” They insist unemployment is lower than it was a couple of years ago.

But the truth is the continuing drop in the labor force. And during Obama’s first term the number of Americans on food stamps increased by an average of about 11,000 per day. These statistics go hand in hand.

“When Obama was inaugurated in January 2009, the number of Supplemental Assistance Nutrition Program (SNAP) recipients was 31,939,110. By October 2012, the latest month reported, they had jumped to 47,525,329,” CNS News reported. “That means the food stamp program grew by approximately 11,133 recipients per day from January 2009 to October 2012.” SNAP is formerly known as the Food Stamp program.

CNS News also reported, “[F]ederal spending on SNAP has increased every fiscal year that Obama has been in office. In FY 2009—when SNAP was still known as the ‘Food Stamp’ program—the government spent $55.6 billion. According to an April 2012 report from the Congressional Budget Office, SNAP enrollment increased by 70 percent between 2007 and 2011.”

The Obama administration, California Gov. Jerry Brown and the media have been misleading about unemployment, welfare expansion, government entitlements and the true condition of our economy. But they appear to be closely protected by much of the media.

California’s poverty rate of 23.5 percent is the highest in the nation — much higher than the national average of 16.1 percent, according to the U.S. Census Bureau.

Killing off small business

Millions of small businesses are on the verge of extinction. Yet local, state and federal bureaucrats and politicians just continue to heap more taxes and fees on them, more rules and more regulations. Just since November when President Barack Obama was re-elected, the federal government has issued hundreds of new regulations.

“Get your boot off of my neck!” says one small business owner I know every time she is forced to pay another tax increase of additional license cost or fee.

A recent Gallup poll found 61 percent of all small business owners in America are worried about the potential cost of healthcare because of Obamacare. A shocking 30 percent of all small business owners in America say they are not only not hiring, but they fear that they will go out of business within the next 12 months.

“More U.S. small-business owners say they let more employees go than they hired on average over the past 12 months, for a net hiring index of -10 in January, according to the Wells Fargo/Gallup Small Business Index,” Gallup Economy reported on Jan. 31.

Texas Governor Rick Perry recently called for returning “excess tax money” to taxpayers in his state, while California small businesses lost jobs as their taxes rose.

Yet according to the National Federation of Small Business California, small businesses account for more than 97 percent of all jobs in California.

What better way to destroy the economy than to kill off small businesses?

Spin and hype

Even bad economic news is hyped by the media as though it is good news.

In response to the news that the economy “contracted” by -0.1 percent in the final quarter of last year, Democrats touted the claim of Paul Ashworth, chief U.S. economist for Capital Economics, that it’s “the best-looking contraction in U.S. GDP you’ll ever see. The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging.”

Breitbart’s John Nolte summed up the spin:

* “Politico saw the jobs numbers as something that ‘could soothe some of the renewed economic anxiety in Washington.’

* “The AP saw the jobs numbers as proof the ‘U.S. job market is proving sturdier than expected” and “mostly encouraging.’

* “CBS News wants to assure all of us that the ‘[l]atest job numbers signal economic recovery.’

* “Yahoo News says, “Don’t Be Fooled by the GDP Report: The Economy Is Gaining Strength.'”

List of bad news

Nolte made a list of the bad news far too many Americans face:

* “What you’re seeing from the media is shamelessly dishonest propaganda.

* “Poverty is increasing.

* “Gas prices have almost doubled.

* “The price of health care premiums has exploded and will only explode more (but-but-but Obama said…!)

* “Poor and middle-class incomes are falling.

* “One-in-five Americans are on food stamps.

* “The non-partisan GAO says Obama’s exploding deficit is unsustainable.

* “Eight million people are looking for work.

* “Our labor force has shrunk to 30-year levels (170,000 more dropped out last month).

* “Chronic unemployment hasn’t been this bad since before World War II.

* “The long-term unemployment rate is more than 14 percent. And if the labor force was merely the same size today as it was the day Obama took office, today’s unemployment rate would be closer to 11 percent.”

When’s the last time the media talked about any of that?